Yahoo! Sees Fusion of Search, Display

NEW YORK Yahoo!’s reorganization of its sales structure earlier this week is a clear example, agency executives said, of how search and display advertising are playing off each other.

Yahoo! on Sunday announced the reorganization of its sales force, combining its search and display ad sales teams, which have remained separate in the nearly four years since Yahoo! bought paid search specialist Overture. To lead the new team, Yahoo! chose former Overture executive David Karnstedt, who previously led North American search sales. (Former chief sales officer Wenda Harris Millard left the company to join Martha Stewart Living Omnimedia.)

The reorganization comes as Yahoo! looks to turn the corner on a tumultuous year marked by executive changes, investor disenchantment and eroding market share to Internet ad leader Google. Even with its stronger position selling the type of display ads favored by brands, Yahoo!’s internal organization made it difficult to work with, according to agency executives.

“It’s been a major competitive disadvantage,” said Bryan Wiener, CEO of digital agency 360i in New York. “Unlike Google, where you can have an integrated buy from a human and technology standpoint, with Yahoo! you were dealing with two separate organizations and platforms for buying and optimizing media.”

Karnstedt, 41, readily admits the dual sales structure made it more difficult for clients to run integrated search-display campaigns.

“Oftentimes we’re calling on the same people, but bringing different products,” he said. “Now we’re calling on the same people with a suite of products.”

Over the past year, Yahoo! made an effort to meet this need by having select teams call on clients together. At the same time, its own research showed how search campaigns were affected by display advertising and vice versa. The new organization will reflect that, Karnstedt said.

“I think they’ve missed an opportunity not combining the two earlier because there are some real benefits,” said Jim Warner, evp at Avenue A/Razorfish, a part of aQuantive, which Yahoo! competitor Microsoft is in the process of acquiring.

The sales reorganization is part of a general management overhaul that’s been in the works at Yahoo! for months. Earlier this year, then-CEO Terry Semel changed its management structure to move Yahoo! away from concentrating on products. Instead, it is divided into three units: audience, advertisers and technology. A raft of executive departures has commenced, including chief operating officer Dan Rosensweig, Semel, technology chief Farzad Nazem and Millard.

In replacing Millard, Karnstedt will have big shoes to fill, Warner said, noting her role not just representing Yahoo! but the entire online advertising space.

“Wenda is sort of one of a kind,” he said. “Anyone following her would find it challenging because of her industry presence and relationships.”

One area of concern showing favorable returns is Yahoo!’s new search advertising platform, Panama, which Wiener said has put Yahoo! technology on par with Google and Microsoft. What it doesn’t have, however, is the volume of searches Google attracts. (Last month, more than 50 percent of all searches were done via Google, while about 25 percent were done through Yahoo!, according to comScore.) What’s more, in announcing the reorganization, Yahoo! executives said display advertising revenue was lower than anticipated for the quarter.

“That’s not a platform issue but a consumer issue,” Wiener said.