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Yahoo Battles Social Networks for Dollars

The Web continues its explosive growth, but old-school companies struggle with revenue
October 19, 2006

Yahoo’s CEO, Terry Semel, had some bad corporate news on Tuesday. The Internet giant saw a 37 percent drop in net income for the third quarter. While the company’s overall revenue numbers continue to climb, a softening ad market and a reevaluation of “stock-based compensation” caused the shortfall.

Needless to say, Semel wasn’t happy with the numbers–a sentiment that others in the Web business have echoed over the past several quarters, particularly as advertisers begin to court a younger audience on social-networking sites such as MySpace and Facebook. To combat the changing marketplace, companies–including Yahoo–have released new advertising tools that may help boost the market.

Yahoo announced that Project Panama, an ad-serving tool that will be integrated across Yahoo’s platform, will be ready for prime time early next year. Semel said that Yahoo will begin working with advertisers, helping them upgrade to the new system throughout the coming months.

However, Yahoo and its brethren may face a stiffer-than-expected fight from social-networking sites, which are beginning to expand their audience reach. TechWeb has a story about niche-oriented social-networking sites–such as those targeting single mothers–finding a wide audience base. If that happens, general platforms such as Yahoo may increasingly face competition for dollars from much smaller competitors, as well as from search giant Google.

In the end, though, a well-coordinated sales force may be able to trump the mom-and-pop-styled startups. That’s the thinking behind Factiva SalesWorks’ new software application, which overlays sales information on Google Earth, allowing organizations to plot out their strategies on a street-by-street basis.

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Illustration by Rose Wong

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