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Yahoo (ticker: YHOO) sent an email 20 minutes ago to web publishers interested in its upcoming contextual advertising products. (They'll compete with Google's AdSense for Publishers.) Here's the full text of the email followed by a quick comment:


Yahoo's email:

Dear xxx,

As you know, Yahoo! is testing a new platform that will be the basis for several new publisher-focused products, which we will begin introducing soon. In the meantime, we thought you might be interested in taking the Y!Q Challenge: Show the world an innovative use of Y!Q Beta, our contextual search technology, on one of your web sites and you could win $5,000!

Y!Q, introduced earlier this year, is the first product of its kind that analyzes the content of a Web page and provides contextually relevant search results at the moment of search inspiration. As a webmaster, you can integrate Y!Q into your site and create a more engaging experience by providing your visitors with related search results directly on your website pages. Y!Q allows users to learn more about related topics without interruption and without having to leave your site.

For more information about the content or to enter to win, please visit the Y!Q Challenge

Thanks,

Yahoo! Publisher Team
email:  publisher-info@yahoo-inc.com
web:  http://publisher.yahoo.com/

Quick comment:
Publishers are yearning for a contextual ad product from Yahoo for a simple reason: competition should lead to faster improvements in ad serving technology, and will likely pressure Google to pay a higher percentage of ad revenues to its publisher partners. But Yahoo's taking its time in getting this product out.

Yahoo's success depends on two factors:

  1. How profitable will its ad services be for publishers (and advertisers)?
  2. How easy will it be for publishers (and advertisers) to sign up for the service, implement the code and get paid?

Google's performance in (2) has been outstanding: sign up is near-instantaneous, the tools Google offers are useful and straightforward, and Google recently implemented direct deposit for payments, which is viewed by small publishers as crucial. But Google is vulnerable in (1), because while Google has introduced products that should increase publishers' ad revenues (image ads, link units and CPM-based ads) it has also been taking an increasing percentage of ad revenue for itself.

How successful will Yahoo's contextual search be? It may be neat, but there's currently no way for publishers to make money from it. A $5,000 prize for best implementation won't be enough to get the mass of small web publishers to change their web pages to incorporate this functionality.

Yahoo's challenge is simple: it needs to show web publishers that it can make them more money than Google can. And this doesn't do that.

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Source: Yahoo readies publisher tools to compete with Google (YHOO, GOOG)