Yahoo on the Defensive on Social Networking, Video and You Tube

Includes: AABA, GOOG
by: David Jackson

Yahoo (YHOO) has taken a beating from commentators as News Corp's (NASDAQ:NWS) MySpace continues to grow rapidly, Google snagged (if you can call a $1.65 billion price tag "snagged") You Tube, and Yahoo itself has so far failed to close the acquisition of Facebook. In what was probably a defensive move in response to criticisms, Yahoo CEO Terry Semel outlined his company's video strategy on last night's conference call. Excerpt:

So now, let me talk about how we view video. We are an early competitor in video, and we expect to be a very large player. Our goal is to make video as ubiquitous as text throughout the Yahoo! network. In order to accomplish this, we are executing on a number of priorities:

  1. We have built one of the leading video technology infrastructures, which enables us to deliver higher performance and better quality video throughout Yahoo!;
  2. We focused on establishing high quality user-generated content. To that end, we recently announced the acquisition of Jumpcut, which has a suite of online video editing capabilities. The integration of these tools will make Yahoo! an even better place for people to create, share, and discover great video online;
  3. We are moving quickly to forge partnerships with video producers. We have done more than a dozen to date, including the local news partnership we announced yesterday with CBS News, as well as the recently announced innovative partnership with Current TV;
  4. We are producing our own contextual relevant video within our leading verticals, such as sports, news, and now entertainment; finally
  5. With our superior ability to target audiences and advertisers, we are well-positioned to monetize video as its importance to advertisers grows.

It is early. We are off to a good start with one of the largest video audiences of more than 40 million unique monthly viewers, and we are going to continue to make this a key focus area over the long haul.

...Moving forward, we are going to be laser-focused on these three core things:

  1. Close the gap in monetization of search;
  2. Widen our lead in graphical advertising; and
  3. Seize the opportunity in social media, video, and mobile.

And later in the Q&A:

Jeetil Patel - Deutsche Bank Securities

Two questions. First of all, just as you look forward and you talked about the advertising inventory, but can you give us a sense of maybe what more inventory in the marketplace, from the likes of MySpace or YouTube, could have? Is that something that you look at and say how do we adjust pricing, or what kind of impact do you envision from more inventory coming on from those types of companies in the category?...

Daniel L. Rosensweig

I will talk about the inventory glut. It has definitely been a huge change. You can see from the page views of a lot of the social media sites that exist today. That is going to change the market dynamics. What we hope is that it is going to bring in whole new categories of advertisers who have been focused mostly on the search side to be able to bring them to the other side of the kinds of advertising that is capable.

From our standpoint, we want to be able to take advantage of that marketplace. We think we can continue to build our premium environments by continuing to have the highest rate of growth, the highest targeting, most engaged audiences. But there are many new players and there are alternatives in the market, so what we have to do is continue to adjust and evolve to take advantage of those and to build packaging that marketers cannot get elsewhere.

From our standpoint, we are going to move ahead as the market leader and better position ourselves to take advantage of this new inventory and this new market opportunity. We have products like Answers. We have products like Flickr that are not yet really monetized right now. But we have assets that nobody else has and we plan to leverage those assets, so those assets are not only the quality of our audience, which I think is debatable in some of these other environments, but our targeting capability of not only the environments that they are in, but our profiles of being able to know who they are and that is why our large registered audience base, which continues to grow, is becoming so important.

That user data about who they are and what they have done, and to be able to put ads in different formats and different kinds of buying capabilities into the contextually relevant environment. Of course, we do have we believe the world’s best sales team, who has the best relationships to be able to help shepherd the large marketers into this marketplace.

I think there is going to be a glut for a while. I think there will be a transition for a while, but I think in the end, our assets and our leadership will ultimately help us take the greatest amount of advantage of that opportunity.

For more, see the entire conference call transcript (free). A full list of the most recent conference call transcripts on Seeking Alpha is here.