Bronte Media

It usually takes a few echos in the blogosphere before I become annoyed enough to write a post. In this case, it’s the herd mentality that stemmed from the delay of Panama. So Yahoo is now worth 20% less (or more than $10billion) yesterday than it was on Tuesday before the results were announced, right? Err not.

The New York Times did a good job rounding up the displeasure yesterday.

Share prices do not reflect the present but rather future expectations of a company. So if Yahoo makes 40% less than Google per search, and changing the display of your ads so that they are ordered on yield (click-through x cost-per-click) instead of simlpy cost-per-click in the future will almost erase the gap (fuck the there-are-19-million-Phd’s-working-at-Google theory of monetization, 80% of the gap is due to that one simple fact), they can fix that in the future, right?

Now, let’s not be sympathetic towards Yahoo either. Even MSN has beaten them to the punch with AdCenter for search. Yes, MSN.

Safa, although quoted in the Times along with others, actually put out a report yesterday yelling at people that the unrefined oil, consumer usage of Yahoo, was still fundamentally fine. A little battered (Henry Blodget rightly pointed out the sequential flatness) but still fundamentally sound.

Spending from the big 200 advertisers on Yahoo was up 35-40% year over year on display. How can a stock be punished so harshly when the benefit (yield versus cpc on search) is still in the future, albeit a few months later? Unless you are using a discount rate of 19438350954%, the numbers on the valuation don’t add up. The stock market is crazy part XXXXVII.

But back to the title of my post and my conspiracy theory. Ben Edelman has been single handidly cleaning up the online advertising industry. Seriously, the guy is doing some of the most noble and consequential research today. He’s exposing networks of ad distributors and in many cases all roads lead to Yahoo. There was an excellent story on Direct Revenue in Business Week a little while ago that demonstrated what a sugar daddy to the spyware industry Yahoo was.

Yahoo doesn’t sign up Direct Revenue, but Yahoo’s distributor, who has a distributor, does. Kind of like the Kevin Bacon of text ads, sooner or later a Spyware service ends up showing Yahoo’s search ads.

But change is afoot and consolidation rife. 180 solutions acquired Hotbar in the quarter. Claria wants to sell the business altogether and everyone is ‘cleaning up their act’.

I just wonder if this was the quarter when Yahoo finally cut the chord with its chequered past (via Overture I might add). On the call, management said they had discontinued many ad relationships that they had deemed ineffective and low quality but refused to elaborate. That’s what first triggered the thought: Since MSN has all but cut off the ad distribution in the quarter, did they throw out all the bath water (read: Spyware) at the same time?

Just saying…