The Advertising Slump: Reports of Yahoo’s Demise are Greatly Exaggerated

EDITOR’S NOTE: This week’s tip is actually a reprint of a opinion written by the Editor-in-Chief of Internet trade publication, The Industry Standard. When I read it, I felt that it expressed many of the same feelings I have, particularly when he refers to the diminishing effects of ALL advertising vehicles. I think the Internet is getting a particularly bum rap because of all the out-of-control hype that surrounds it. That doesn’t mean that it’s not a valid medium and nor that it shouldn’t be integrated into marketing plans. It has its time and place, too.

One other thing (I love the ability to share my views that being the publisher affords me): when this great house of cards started to crumble, some folks got a lot of laughs out thinking that “young, rich upstarts were now getting their just desserts.” Things did get bad, quite ugly in fact, and many people have lost and continue to lose their jobs. This is a jarring fact of reality, but I’d like us to all take a moment to pause and reflect on what’s really important in life: your health and your family. Yes, losing one’s job or even a business can be entirely crushing, but many people have come back from the brink of financial ruin. What you can’t replace are the most precious gifts of all: life and love.

Sorry to be sentimental here, but it was really important for me to say that. I hope you didn’t mind.

Because I want to present this reprint uninterrupted, I’m going to lead off with our first advertiser. I appreciate your support of our sponsors.

Reprinted by permission of The Industry Standard: (from March 9, 2001)

For the dwindling ranks of Internet industry enthusiasts, there could hardly have been a worse piece of news than Yahoo’s announcement last week of a big earnings shortfall and a CEO search. Yahoo, after all, is not only one of the Net’s signature brands, it’s also a company that has been viewed as extremely well-managed, and it’s been turning healthy profits. If Yahoo now “struggles to survive,” as the San Jose Mercury News put it in a front-page headline, then it really must be all over.

Now I have never, ever been accused of being a Pollyanna, and Yahoo’s announcement is certainly not very comforting for companies that are building businesses on the Net. But I have to say that the Merc’s apocalyptic characterization of the situation - and the Silicon Valley newspaper was hardly alone in the doom and gloom - is more than a little hysterical.

Consider the following: Just one day before the Yahoo announcement, the Mercury News itself said it would be laying off people as a result of the severe downturn in advertising. Dow Jones did the same and revealed that advertising at its flagship, the Wall Street Journal, was down about 30 percent from a year ago - a bigger decline than the one at Yahoo. In fact, virtually all advertising-supported businesses are reporting a sharp deterioration in results. A few, notably AOL TimeWarner, have not issued warnings yet, but it’s only a matter of time.

Consider, on top of that, the simple fact that Yahoo remains a new company in a new industry and thus could be expected to have much more volatile and unpredictable results than century-old newspapers. When I first became aware of Yahoo in 1994, founders Jerry Yang and David Filo were still insisting that they would never corrupt the Net with something so crass as advertising. Today, after the carnage, Yahoo has a market cap in the $10 billion range and expects first-quarter revenue of $170 million to $180 million. That’s a poor performance only in relation to extraordinary expectations.

The subtext in all the negativity surrounding Yahoo is that online advertising just isn’t working, and therefore this is the beginning of the end. It’s true, as we detail in our special report, that online advertising has not yet lived up to its promise. Mainstream advertisers and their agencies, disappointed with early results, are not persuaded that the Web is a viable medium. TV and print remain the kings.

Yet the fact is that all media are becoming relatively less effective as advertising vehicles. Network television draws nowhere near the audience it did a decade or two ago. Major newspapers and magazines struggle to keep their circulations stable; growth, for most, is an impossible dream. Direct-mail response rates continue to fall. The dynamic is simple: More media choices are making audiences more fragmented, and more advertising messages are making people numb.

It may be true that the active, “leaning forward” nature of the Net makes it less attractive than television for traditional brand advertising. But this, in itself, doesn’t mean very much. It also may be true that the ability to carefully target messages on the Net, and to generate instant response, has not been the silver bullet that many expected. But people have been at this for only a few years, and it’s going to take some time to figure out what works.

I never understood how anyone could have thought Yahoo was worth more than $100 billion, which it was during the Net stock boom. And neither can I understand why people would now think it’s going out of business. Perspective is everything, and in the grand sweep of media history, the Net’s prospects still look pretty good.

This article may be also found online at The Industry Standard .

 back to top