Yahoo!, Interclick, and Targeted Advertising On the Web
Yahoo!, Inc. has been searching for a better advertisement solution for its search engine. It has seen a steady decline in the use of its advertisement services in recent years, largely due to the increasing popularity of Google from both a consumer and business standpoint and Yahoo!’s inferior technologies. Following an example set by Google, most of whose yearly revenue comes from paid advertisements, Yahoo! has decided to focus on targeted advertising as the main mechanism for driving ad revenue back up.
Yahoo! recently purchased a company called Interclick for $270 million, which does just this: based upon an individual’s online behaviour, a certain kind of advertisement was shown to the user. This purchase will allow Yahoo! to use Interclick’s technologies to serve the targeted ads to visitors on Yahoo!’s sites. Yahoo! will also acquire Interclick’s many clients, giving Yahoo! a nice influx of recurring income.
So what’s all the hubbub about? Well, targeted advertising makes for a much more successful campaign. Consider our discussion regarding payment models for online advertisements. Often, business will pay for each click on its advertisement on a search engine’s website. This becomes useless for both businesses and the search engine when the advertisements are served to the user at random. However, through clever usage of today’s technology, it is possible to track a user’s behaviour on many sites, report it back to the search engine, and serve up ads that are targeted to the individual user’s behaviour. Given that the ads are tailored to each individual user, this tends to increase the CTR (click-through rate), which is directly connected to the amount the search engine charges the company. The greater the number of clicks, the greater the income.
Yahoo!, given its current financial difficulties, will certainly find targeted advertisements to be beneficial to its financial circumstances.
Source: Yahoo Acquires Interclick for $270 Million to Gain Ad Tools – The Washington Post