It was inevitable, as the move from buying placements to buying audience infiltrates display ad campaigns. Yesterday, Yahoo reconfirmed in its quarterly results that programmatic media has changed its business forever.
The statement echoes comments made by The New York Times a few months ago, in which the publisher seemed to pin some of its display ad pain on programmatic. At the time, CFO James Follo cited a "shift toward ad exchanges, real-time bidding and all the programmatic buying channels that allow advertisers to buy audiences at scale."
Now Yahoo faces a similar crisis, long in the coming.
For many large publishers, direct-sold inventory cannot support the CPMs of the past – especially if your content is relatively undifferentiated. Yahoo is not Turner; it does not have a strong, traditional media brand (though Yahoo has tried with ABC) to consistently bring its online content to life and create unique opportunities for advertisers.
On the other hand, Yahoo remains a "scale" king with much-maligned IAB display ad placements that are perfectly suited for automated ads. Reach and frequency remain key for any direct marketer or agency buyer and, programmatically speaking, if you're buying online, you'll be buying Yahoo unless you tell your favorite demand-side platform not to – at which point the DSP may fire you. Yahoo inventory remains programmatic "gold," but that doesn't make up for the higher margin, direct-sold display business which Yahoo and many large publishers have lost.
On the earnings call yesterday, Yahoo CEO Marissa Mayer noted the gap between mobile CPMs and what Yahoo is used to in PC-based display. Given Yahoo's ability to have the user log into a mobile Yahoo portal, mobile addressability could turn the company's mobile CPMs in the right direction as advertisers try to reach users flocking to cookieless mobile. First-party data – through the login – will be an answer.
Nevertheless, it's not going to be five display ads on a page, or three – it might just be one. Mobile is forcing a publisher scarcity strategy related to a mix of screen size, user attention span and advertising's inherent interruptive qualities. Native ads, good luck.
Yahoo is going to get smaller – revenue, employees, impact. CEO Mayer's plan will be to continue using (her words) "best of breed" partners to help squeeze ad tech-related revenues out of the old way of doing things, while she and her team figure out a new way through a mobile product of some kind.
Does Yahoo just turn into Flipboard eventually?
One thing Mayer has not talked about are plans on the content side. As technology becomes increasingly commoditized, building stronger content plays could help Yahoo differentiate itself.
Yahoo could build or acquire cool new tech, and maybe they'll get extremely lucky and build the next Facebook, but building great new content could be the way to go. Say Media, Buzzfeed and several others might hold pieces for that puzzle. And then, maybe it's time for the Yahoo paywall strategy. But there's still more housecleaning to do at Yahoo before all that.