Yahoo admits to problems with Microsoft’s adCenter platform

By Tom Warren, on 20th Apr 11 5:42 pm with 6 Comments

Yahoo CEO Carol Bartz has admitted that technical difficulties with Microsoft’s adCenter platform were mainly to blame for a shortfall in revenue from the Microsoft-Yahoo search alliance.

Bartz made her comments during Yahoo’s Q1 FY2011 earnings call with analysts. A transcript of Bartz’s remarks can be found below:

“adCenter isn’t yet producing the returns per search (RPS) we hoped for and are confident as possible. Advertisers are seeing strong ROI (return on investment), but technical limitations in the current adCenter platform mean the click volumes just isn’t there yet. We had expected RPS to be neutral by midyear, it’s now evident that it will take Microsoft longer to achieve that goal. We expect that to happen by year-end. In the meantime, the RPS guaranty helps protect our revenue and our view of the long-term potential of the marketplace remains unchanged.

“We are working very close with Microsoft on this. They understand the issues and they’re hard at work on systems architecture, science models and better features and functions in adCenter. They have an aggressive roadmap to bring those to the marketplace.”

Microsoft and Yahoo signed a 10 year agreement in June 2009 to make Microsoft’s Bing search engine the exclusive algorithmic search and paid search platform for Yahoo sites. The agreement ended Microsoft’s talks with Yahoo, which lasted nearly two years. During the talks Microsoft evaluated a takeover bid, and nearly miss out on a deal when Yahoo attempted to partner with Google. The Yahoo-Google partnership failed due to regulatory concerns. Bartz remarks come just a week before Microsoft is due to announce its third-quarter 2011 financial results.

ZDNet’s Mary Jo Foley questioned Microsoft about Bartz remarks and received the following response:

“We are working very closely with Yahoo on bridging the RPS gap, and have an aggressive roadmap of enhancements designed to improve three key areas: monetization, relevance and advertiser-facing tools. We continue to see progress and are encouraged by the positive results we’ve seen in advertiser ROI, query share and click-through metrics. Recent reports by third-parties point to this positive momentum (Efficient Frontiers and Marin). Each search platform has unique capabilities; we are working closely with some advertisers and channels to help them adapt to adCenter’s evolving platform and marketplace. Additionally, in the past six months, we have successfully migrated tens of thousands of advertisers and their campaigns into the combined Yahoo!/Bing marketplace in the U.S., which was a massive combined effort.

“We remain optimistic about the long-term potential of the combined search marketplace and are working collaboratively with Yahoo to identify real-time insights and create optimizations strategies for our customers and partners.”

  • GP007

    I don’t think anyone expected the transition , backend wise, to bare fruit in under one year. On the bright side Bing is growing and I don’t think Yahoo is doing bad either, though they’re marketshare seems to be stuck at 15-16% for now.

  • teusje
    yahoo doesn’t seem to have much things :)

  • Mark

    Not good. Given how much money MS is losing on Bing, getting adCenter’s RPS competitive is critical. But according to Bartz, it’s not even up to where Panama was at before the partnership began. Meaning it probably really sucks compared to leaders like Google.

    But I don’t see Bartz doing a great job growing Yahoo’s search share or taking point on selling advertising for the combined partnership. So she’s quick to blame but slow to take accountability.

    • Joe05

      Actually Google fanboy Danny Sullivan had a very well done analysis on what the real problem is and it’s not Microsofts, what the article comes down to is that Yahoo’s revenue was failing before Microsoft came in as a partner and that Yahoos own Panama add platform was underperforming to begin with.

      I don’t have the link but it’s worth a read.

    • Mark

      Thanks for the heads up. Here’s the link:

      It definitely does a good job of pointing out the holes in Yahoo’s overall story. But it stops short of giving adCenter a pass. I don’t think Bartz would make a public statement like “adCenter’s RPS is below where both Yahoo and MS expected it to be” unless that’s in fact true. She’d have to worry about MS correcting the record and making her look like a idiot. But MS hasn’t said a word…

  • Mark

    You might want to check this out. I found it in the comments on Danny’s article. It attempts to answer why adCenter’s RPS may be weaker. Some of that is good and relates to stricter relevance. But a lot is bad and may be linked to poor monetization on broader queries.