Do you want to know what are the major source of income that made yahoo! one of the biggest multinational giants in the industry today? Well, here is the answer: Internet advertising.
In 2003, Yahoo! a leading search engine at the time, tookover one of the pioneer and most successful companies in the internet advertising field, ‘Overture’. Overture, previously known as GoTo.com provides internet advertising services based on pay per click advertising model. It used to direct traffic to websites, in which advertisers pay the publisher (typically a website owner) when the ad is clicked.
History before ‘Yahoo Acquisition’
But before that let us go back to the history of Overture. Earlier known as GoTo.com, Overture was an idealab spin-off, a business incubator based in Pasadena California, in 1997. In February 1998, GoTo.com offered advertisers the option of bidding to appear at the top of results in response to specific searches at the new paid search engine launched by them, TED8. The bid amount was paid by the advertiser to GoTo.com every time a searcher clicked on a link to the advertiser’s website. This was the first successful pay per click model. In June, 1998, GoTo.com announced its backfill deal with Inktomi, another search engine. It begun to backfill its paid listings with the search results of Inktomi but the search engine was still unfriendly to many advertisers as due to no self serve platform. In june 1999, GoTo.com launched toolset to let advertisers take control, from rep based system it went to a self serve system where advertisers could access to keywords and real time bidding. Today, this toolset is known as the DTC or direct traffic center.
In 1999, GoTo.com went public and in October 2001, it changed its name to Overture Services. In the same year, on November 20, Overture teamed up with Yahoo! Services. Yahoo began to feature the paid Overture listings on Yahoo search results. This is where the milestone for Yahoo! Search Marketing is laid. Though this partnership, Yahoo monetized hundreds of millions of web searches made each day on their site. Subsequently Overture became a substantial profit driver for portals like Yahoo.
Next Overture went to acquire AllTheWeb and Alta Vista for developing its own search technology. In 2003, Overture was taken over by one of its biggest customer Yahoo! for $2.2 billion in stock and cash. As the general trend with all the Yahoo take overs, Overture was renamed to Yahoo! Search Marketing. The exception to this is in Japan and Korea where the local businesses continue to use the Overture brand.
Services and advertising policy
Currently, Yahoo! Search Marketing is providing advertising services based on iteration named panama(released in 2007) which replaced the old advertising policy followed by Overture. The exact formula is not revealed by Yahoo! but the basic principle behind the formula is somewhat like this:
BID * QUALITY SCORE = AD RANK
Here, the quality score is based on factors like the ad’s click-through-rate (CTR), relevance of advertisement and quality of landing page.
Yahoo! Search Marketing is also involved in providing features like Geotagging, Ad testing, campaign scheduling, campaign budgeting and Rich internet application (RIA) – an application for managing Yahoo Search Marketing campaigns.
Patent and Company War!
During this time Yahoo! and previously Overture has also been involved in some of the corporate rows like patent infringement proceedings against FindWhat.com and Google. The lawsuit for patent infringement was due to AdWords, a Google internet marketing service which was somewhat using patented tactic used by Overture. The lawsuit was settled with google issuing 2.7 million shares of common stock to Yahoo!.
Yahoo! also faced severe relationship bitterness with the its former partner Claria (formerly Gator Corporation) over introduction of Yahoo Toolbar which allowed users to remove adware and spyware from their systems. This toolbar affected the operation of Claria’s softwares. As of the press release of Claria in March 2006, it clearly states of no relationship with Yahoo! and about its exit from adware business.
Hope now you understand how yahoo turned up to be such a big company and also the importance of internet marketing. According to a survey, the number one listing of a search result gets 68% of searchers and almost 40% clicks. So now you get the effect of internet advertising.