"Build, buy, or partner" Terry Semel

Sandra Ward is to be commended for her excellent Barron's cover story on Terry Semel's Yahoo! (Yahoo!'s Edge, sub req - here). Great take away for those working in ad supported measured media. My take later on these excerpts...

• Yahoo! is second in paid search to Google, first in non-search Internet ads (banners and videos).
• "Yahoo!'s revenue is climbing by 30% to 40% a year, and next year, by most estimates, cash flow should jump 60%, to $2.5 billion."
• "Yahoo! is a multidimensional experience built around communities and content, while Google is primarily a place to find something."
• "Yahoo! projects 2006 revenue of $4.6 billion to $4.85 billion, excluding marketing commissions, up more than 30% from last year."
• "IMPRESSIVELY, YAHOO! REPORTED A 24% increase in the number of its Web pages viewed worldwide during the first quarter, to a total to 3.8 billion a day. Revenue-per-page view grew by 10%. Marketing-services revenue, which reflects advertising revenue and excludes fee-based revenue, increased 35% as a result, above the industry average of 30%, and that trend is expected to continue."
• "Yahoo! boasted 400 million unique users in the first quarter, a 27% jump from the year-earlier period. It has a bigger audience of people at work and at home combined than any other media brand on the 'Net."
• "At Ford Motor, for instance, online ads now account for 20% of marketing spending, up from 5% or 8% a few years ago. And the car maker has boosted its spending on Yahoo! by about 60%, to include ads on lifestyle pages such as Yahoo! Entertainment and on the Yahoo! home page, rather than just the auto section, says Ford Car Communications Manager Linda Perry-Lube. Ford is also spending more on search advertising, benefiting both Yahoo! and Google."
• "AT THE MOMENT, ONLINE ADVERTISING represents only 4.7% of the estimated $276 billion spent annually on all advertising in the U.S., but that's expected to increase to 7.4%, or $22.3 billion, by 2009, according to eMarketer, an online market-research firm. More importantly, spending on displays ads will rise 27% this year, to $5.4 billion, as big consumer-products companies make broader use of the medium."
• "Another advantage for Yahoo!: Its management team has deep roots in "old media," making them more attuned to the needs of traditional advertisers as they shift more of their budgets online. CEO Semel joined the company five years ago, after 24 years at Warner Bros."
• "Randy Befumo of Legg Mason considers Yahoo! "a very rare asset" because it is one of only four companies that generate more than $1 billion a year in advertising revenues. Yahoo!, he notes, with $4 billion in revenues, is half the size of media giant Time Warner, but is growing three times as fast.
• '"Terry Semel grew Warner Brothers' cash flow 15 times," says Haverty. "Margins are not the way to build shareholder wealth in media companies -- you need to reinvest."'
• "The beauty of paid search for advertisers is its effectiveness and easy-to-track response rate. Consider that direct-mail advertising costs $2 per mailing on average, and a good response rate is 2% to 3%. The average search click, by contrast, costs 45 to 50 cents and the "click-through-rate" is 13%. Those numbers naturally have drawn advertisers and led to rapid growth in the category. That, along with high margins, is the beauty of paid search for Internet search engines."
• "Yahoo! also is taking aim at the mobile delivery of its services, partnering with Motorola for example to install Yahoo! Ready applications on Motorola's mobile devices, allowing users to access e-mail and other favorite sites. This takes advantage of the fact that the market for mobile devices is growing more than twice as fast as that for personal computers. In less-developed nations, mobile phones often represent the only access to the Web."
• '"The Internet is fundamentally ...about making your experience more relevant," says Semel.'

Bonus: One of the most talked about interviews of the month. On May 11th, the New Yorker writer Ken Auletta interviewed Terry Semel, the chairman and C.E.O. of Yahoo!, at a breakfast sponsored by the Newhouse School and The New Yorker. A video of their conversation may be found here

Love the latest Yahoo! redesign. Not a single wasted pixel - the page works as few others do. Check out the Yahoo! main page design from 1994 up to the latest redesign, via CNET, here

The "old media" company that get's it - Fox (so too does Umair Haque)...

"Fox's acquisition thesis is a bit more complicated - but predicated on a much deeper understanding of the new media value chain. Fox invests in domains which are hypersocial (discontinuous shifts in social connectivity) or hypercultural (discontinuous shifts in cultural specificity): sports, karaoke, music.

Further, Fox invests at the edge of the new value chain: at the interface with consumers. Further, Fox invests in the three roughly distinct models which live there - which are what we talk about at bubblegen a huge amount: markets, networks, and communities.

Why? Because Fox understands the deep economics of new media. Value capture in the new media value chain is a function of market power. And market power is a function of attention. And attention is allocated most efficiently by markets, networks and communities."

Umair makes a very good case, a fine read (Discovering the Wrong Future) here

Nuts about Southwest. The good folks at Southwest Airlines are blogging here - Bravo! Word around the Love campfire is getting your "A" will be history once the new reservation platform debuts with seating assignments.

CBS moves into second place. For the first week since August 2001, CBS Evening News beats ABC last week. CBS has gained 280,000 viewers while NBC has lost 680,000, ABC losing 940,000. Congrats and cheers to the Eye team.