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On January 10, Yahoo launched a product called Network Distribution, which is intended to generate better performance for search advertisers by letting them choose to run ads only on owned-and-operated Yahoo sites (O&O), affiliate third-party partners on Yahoo’s network, or a combination of both.
Google has had tools like this available for years.
How is ND doing?
According to advertisers we spoke with, the new ND service is:
- Driving modest ROI increases for advertisers
- Causing advertisers to spend a little more on Yahoo owned-and-operated (O&O) properties than on Yahoo’s affiliates, but
- NOT causing advertisers to transfer search spending from Google (though a few small tweaks could change this to some degree).
The product has only been available for a few weeks. But it is has been praised as a way for the company to boost its search advertising revenue.
Based on this early feedback, we think ND might drive modest incremental search revenue for Yahoo, but not much.
INITIAL USE IS SHOWING HIGHER CTR IN SOME CASES
According to Performics account manager Jeff Licciardi, some clients have seen higher click-through-rates (CTR) on Yahoo’s O&O sites versus their partner programs. We heard similar accounts from most of the advertisers we spoke with.
For now, this is not enough to cause Performics to steer a large amount of dollars away from Yahoo’s partners since it is waiting on conversion data (information on what the users do when they click through) before drawing any large, actionable conclusions.
However, if advertisers continue to experience higher ROI it, this could modestly boost Yahoo’s search revenue by bringing more advertisers to its service.
BUT SOME ADVERTISERS ARE WAITING ON MORE IMPROVEMENTS BEFORE PAYING UP
Some advertisers pointed to differences between Yahoo ND and Google’s competing product that would cause them to hold back on meaningfully spending more on Yahoo’s ND. These were:
- With Google, individual affiliates that are attractive to advertisers can be targeted by simply checking them from a list of available affiliates. With Yahoo all the individual affiliates are automatically selected in the interface and advertisers must UNCHECK those affiliates they do not want to reach (basically the opposite process). With hundreds of partners on Yahoo’s network, this is a time-consuming process that most advertisers we spoke with did not want to spend the time on.
- Advertisers can search for individual sites on the Google affiliate network using a number of specific criteria, but they cannot search for specific sites with Yahoo ND.
These differences make it more difficult for Yahoo to get advertisers to increasingly use its more lucrative O&O sites. Still, the necessary improvements are not overly difficult to implement so Yahoo can fairly easily remedy this situation.
In addition, advertisers we spoke with said if the technology were better, they would bid more aggressively on the individual affiliates that performed well. This suggests that improvements in ND could lead to increases in yield on Yahoo affiliates as well as on its O&O sites.
Here is a video of how the new service works:
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