Yahoo: Deal for iPhone Not Strictly a Hallucination

Yahoo Mobile Search on IPhoneYahoo has taken a drubbing in the media lately, with pundits opining it will soon be sold off for parts. So a recent conference call with Macquarie Equities Research raised eyebrows because of the bullishness of Yahoo SVP Shashi Seth – in particular with regard to mobile search. ClickZ followed up with Vivek Sharma, VP of search products, to ask what aces Yahoo has up its sleeve. Sharma gave a preview of new products launching in Q4 and Q1 2012 — and explained why he doesn’t need to smoke something to believe that Yahoo could do an iPhone deal.

ClickZ: When it comes to mobile advertising, what’s handled by Yahoo and what by Microsoft’s AdCenter?

Vivek Sharma: Ad delivery for mobile is done very similarly to the web; we use the same back end, served by Microsoft AdCenter. We sell to premium advertisers and they take care of the self-serve option.

CZ: Both Yahoo and Microsoft have the ability to target by analyzing users’ behavior as they interact with content and services. Can you bring this profile information to bear on targeting mobile ads?

VS: On the web, options for targeting ads are based on the interest graph, geotargeting and the social graph. This is not as advanced on mobile, but a lot of effort is going in the same direction. It’s not a question of technical capabilities; those are exactly the same. But the form factor and size of the screen on a smart phone is very different. For the same query on, you would get a variety of ad formats. But you don’t have the chance for more than one or two ads, period, on a phone if you want to give valuable content to the user. In mobile, you have to look at what makes most sense and what the configuration of the page should look like.

CZ: What are Yahoo’s plans for delivering rich media ads to mobile devices?

VS: On the PC, even before we did the transition to Microsoft search, we had Rich Ads in Search, an ad format rich in audiovisual and more engaging. As part of the migration to AdCenter, we asked Microsoft to put it in the marketplace, as well. We’ve been experimenting with Rich Ads in Search in mobile over last couple of months, done a few internal tests, and the results look exciting. Now, we’re trying to formalize what it should look like onscreen.

CZ: You’re aiming to more than double your mobile search share in the United States, from around 10 percent to 25 or even 30 percent in the next 18 months. How?

VS: Our core strategy has four elements: product quality; integration of our own non-search offerings on smart phones; more distribution through relationships with carriers; and increased monetization. Let’s take those one at a time.

Our basic product offering to the user is good content in search results. We focus on what the presentation should look like, what the layout should look like. We’re also adding products from the PC side. For example, Search Direct will launch in Q4 on mobile. Yahoo will be the only search provider which will have Search Direct [on mobile]. In Q1 on the tablet, we will launch search that combines the SERPs experience with what users expect to be the browsing experience on the tablet. We will integrate browsing with search.

CZ: Can you describe this more?

VS: I know it’s hard to imagine, but I can’t share any more.

CZ: Fair enough. So, next is integration of mobile search with your non-search properties.

VS: More than 50 million mobile users come to Yahoo properties each month. We integrate Yahoo Finance, News, Sports and the homepage on a mobile site. If the search box is integrated into those properties, it gives us a huge opportunity to increase our search base.

As far as distribution through relationships with carriers, people underestimate how much trust carriers have in us. We are not an OEM, we don’t want to get into the operating system, and we have relationships with more than 100 leading carriers worldwide. We have search plus content plus mail plus media. We essentially become the default search provider for them. We can tell carriers, “In addition to search, we can also offer you mail and content. That resonates with carriers.

Finally, on top of improvements to RPS [revenue per search], we also continue to make front-end changes on our landing search result pages. Rich Ads in Search is something we will continue to do more of and improve the monetization of. The day we are at parity with Google on the RPM side, we would love to go to Apple and say, “Why won’t you have Yahoo search as a default?”

CZ: But what about Microsoft powering Yahoo Mobile Search? Wouldn’t that be a deal breaker for Apple?

VS: I can’t comment on that. But we can always go to any OEM or carrier and say, “Here is the product we are offering, and on a pricing level, this is what it means, and on the user experience level, this is how it competes.” For an Apple deal, it would not be just the search portion. There is also content we can provide, and there could also be other apps which they may already have, like Yahoo Finance and Weather.

CZ: Would you offer to deliver search results from another provider besides Microsoft for Apple?

VS: Today when we go to AT&T or another carrier, they know that the backend is done by a third party. But it depends on the overall bundle you offer. There is so much to Yahoo beyond one search service.

CZ: Could you unbundle the rest of the content from search?

VS: There are cases where some of our colleagues on the media side have done deals with only Finance, for example. We have found that there is a cost in doing business with four parties when you can do it with one.

CZ: In the battle between Google, Apple and Yahoo in mobile, what are Yahoo’s aces?

VS: Our product strategy of providing users with answers instead of links is the thing that differentiates us both from the carrier and user perspectives. Our strategy is not to find a faster way to get to a link. Search is a companion, not a destination; people want you to tell them the answer there and then, in fact, before they’ve asked the question. This product philosophy gives us an edge.

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