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More efforts from Yahoo to show signs of life, particularly in the advertising market

Yahoo Inc. is trying to do what one might have expected it to do long ago -- solidify plans to create a single ad system, competitive with advertising leader Google.  Of course the logistics of such an effort are daunting but the company has little choice.  It is struggling under its own "Sword of Damocles"-- Microsoft CEO Steve Ballmer's threat that if the company doesn't accept its buyout offer within three weeks, it will attempt to depose Yahoo's board and management

In a power play, Yahoo's top brass rebuffed Ballmer's threat, again demanding a higher price.  The move has left the company desperate to  convince its own investors that it can beat Microsoft's offer with new growth.

A deal with competitor Google is out of the question, according to sources.  So for Yahoo, it must struggle to fulfill the reverse of the popular adage "if you can't beat them join them"; it can't join forces with Google, so it must try to beat Google against all odds and against a ticking clock.  Yahoo believes the crux of this effort will be its new management programs and its new advertising system.

With the new system advertisers and Web publishers will finally be able to buy and sell web ads including graphical banners, through a single system, across Yahoo and its partner sites.  The new system features standardized means of targeting ads at groups of consumers.  Google's ascent to dominance was largely fueled by such targeted ads.  Consumer information gathering is one of the hottest fields, with everyone from ISPs to search engines trawling for information relating to a consumer's lifestyle, whether the consumer likes it or not.

Microsoft and Google already have similar systems, with Google being the more successful.  Google's system was greatly helped by the acquisition of advertising giant DoubleClick last year.  Yahoo acquired a number of advertising firms, but has failed to integrate them together into a single cohesive effort until now.  It calls its new cohesive platform AMP.

AMP will be released, according to Yahoo, in Q3 2008 -- at first just for use by newspaper companies, one of its biggest advertising partners.  Later in the year it will be extended to additional Web publishers, advertisers, agencies and online-ad networks.  Besides display type ads, Yahoo hopes to implement search, mobile and video ads into the platform's offerings.

In the new system Web publishers can manage the advertisements on their sites and can sell ads on behalf of the program's participants, in exchange for a small commission.  Advertisers can buy ads on many sites, targeted using standardized geographic information, demographic info, and other targeting information.  Rachel Happe, a research manager at IDC in Framingham, Mass., says the move is big whether Yahoo is acquired or not.  Says Happe, "That's huge in terms of reducing friction in the marketplace.  If Microsoft buys Yahoo, they would be foolish to dismantle this."

Many analysts are concerned Yahoo will struggle to deliver AMP, previously known as Project Apex, on time.  Yahoo's previous largest effort, Project Panama, was finally released and currently has greatly improved Yahoo's search ad revenue, however the delays in its released were extremely costly and part of why the company has lost so much ground so quickly to Google.

Michael Walrath, a Yahoo senior vice president, acknowledged that AMP is an even larger challenge, and will be tough to deliver.  He states, "It's a larger undertaking than Panama was," but continues that Yahoo is "very confident" that the release date will be met.

While some are concerned that the possible Microsoft acquisition could scrap or delay the promising program, most are not very concerned.  Says Jay Smith, president of Yahoo partner Cox Newspapers Inc., a division of Cox Enterprises Inc, "Will there be bumps in the process? Sure there will be.  But based on what I've seen of Yahoo to this point, I think we'll get by those bumps."

Mr. Smith revealed that Yahoo has 500 to 700 engineers, about 4 to 5 percent of its total workforce, working on the project a figure that Yahoo has declined to reveal.

The effort is certainly a promising one, but one has to wonder -- is it too little too late for struggling Yahoo?




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