Semel outlines Yahoo plans for catching Google

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Yahoo needs to find new ways of boosting the revenues it generates from existing users as it seeks to make more use of a large global audience, Terry Semel, chairman and chief executive, said on Wednesday.

Speaking at the internet company’s annual analyst day in San Francisco, Mr Semel laid out plans to tap into Yahoo’s more than 400m users to feed the “content” on the company’s services and “change the way we see search”.

His comments came as Yahoo outlined plans to draw on its users’ personal preferences and knowledge in an attempt to build a search service capable of leapfrogging Google. By using a variety of techniques, from encouraging users to “tag” information they find useful on the web to getting them to answer questions from other users directly, Yahoo hopes to make its search results more relevant and so reverse the slip in its share of the global search market.

Mr Semel, a movie industry executive who joined Yahoo in 2001 at a low point after the dotcom bust, said a large part of the company’s focus over the next five years would be to find ways to generate more revenue from the online audience it has amassed.

“We see many opportunities ahead and need better monetisation,” he said.

In the first quarter of this year Yahoo generated 29 cents for each daily page view, up from 25 cents the year before and double the level of 2003. Despite that, Yahoo’s success in generating revenues from internet search, the fastest growing part of the online advertising business, has fallen behind that of Google. According to Mark Mahaney, internet analyst at Citigroup, Google generated 29 per cent more than Yahoo from each search its users carried out in the first quarter of this year, making the improvement in search monetisation Yahoo’s most important immediate challenge.

The company on Wednesday outlined details of Project Panama, its plan to narrow the gap with Google, including using new tests of relevance to make sure it displays ads to the users most likely to click on them. Until now Yahoo has displayed ads based solely on which advertisers have been willing to pay the most, but since it is only paid when a user clicks the ad, this has led to lower revenues.

Yahoo’s attempt to draw on its audience to improve its search services reflects a clear difference from Google’s strategy, which has focused on improving the company’s core algorithms, according to analysts.

“There’s a bifurcation of strategy,” said Allen Weiner, an analyst at Gartner. “These are diverging paths.”

Yahoo has already started to display individual users’ answers to search questions alongside the results returned in traditional fashion by its algorithmic search engine, giving a hint of how it could eventually merge “social” techniques with its existing technological approach, said Mr Weiner.

The company also outlined plans to tap into more user-generated content to feed its online services, reflecting a shift in emphasis away from producing programming of its own. “We really believe that community and personalisation are going to be the key differentiator for us,” said Lloyd Braun, head of the company’s media division.

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