Yahoo! Entertainment and Lifestyle General Manager Karin Gilford will explain at Digital Media Summit on Monday how Yahoo! TV grabbed 3 million more unique visitors in April than arch rival AOL Television in April.

Gilford said in a brief chat that Yahoo! climbed to the top of the online television category by focusing on launches of original online shows and working closely with cable networks to promote their programs.

"We’re in a world where everybody has a library of movie trailers, TV shows and full-length movies online," Gilford said.  "How do you rise above the crowd?"

Gilford will give Yahoo’s answer to that question on Monday in a fireside chat with Hollywood Reporter Deputy Editor Andrew Wallenstein.

See Also

• Digital Media Summit

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Analysts are already pontificating about the prospects for Microsoft launching a new Yahoo bid if the search giant’s stock continues to plunge.

But I wonder if history will judge the real story of the failed bid to be the end of Microsoft’s last, best attempt to remain the dominant force in modern computing.

Google as clearly donned that mantle, as the Internet — not the operating system — becomes the central feature of most people’s computing experience.

Yahoo’s cozying up to Google reminds me of a kid hiding behind his Dad and telling the neighborhood bully, "Back off or he’ll whup you!"

I was struck by software pioneer Mitchell Kapor’s comparison today of Microsoft to IBM, weakened in the 1980s and early 1990s by its antitrust woes and the shift of the mainframe to personal computers.

“I.B.M. came out of those years still large and enormously important to its customers, but I.B.M. was displaced by Microsoft,” Kapor told New York Times reporter Steve Lohr. “I.B.M. was no longer the defining company.” 

Microsoft is far too important a company to be driven out of business — at least in the forseeable future. But is Microsoft the 21st century’s IBM?

See Also

• Microsoft’s Failed Yahoo Bid Risks Online Growth

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While it’s easy to see what AOL gets out of a potential merger with Yahoo!, it’s harder to see what Yahoo! gets.

Digital Cities/AOL’s own former managing editor, after all, recently called the challenge of reviving AOL — 20 million of whose users have fled since 2002 — akin to "making a Marc Jacobs purse out of a sow’s ear."

AOL seems sadly lost in the broadband age. The very thing that powered its initial rise to prominence — its $9.99 dial-up service — has now become a liability in negotiations with potential suitors. Its own search capabilities are touted as "enhanced by Google".

Were Yahoo! to combine with AOL, it may choose to grab AOL’s remaining 10 million members and its workable sub-brands,

and, taking its cue from Time Warner’s Life Magazine, allow AOL to gently fade into the history books.

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Microsoft’s $44.6 billion bid for Yahoo! is as much about its software business as its Internet business.

Microsoft is ill-prepared to counteract Google’s assault on its Office monopoly.. Instead of fighting Microsoft in the PC software market, Google has taken word processing, spreadsheets and calendars to the web – creating a free, ad-supported, collaborative service-as-software  business that threatens Microsoft’s  bread-and-butter.

At the same time, Google’s search strategy has essentially made it the Internet’s operating system. You go to Google to search. But you stay for the other cool applications. Just like you get all kinds of great extras like Internet Explorer and Media Player when you install Windows.

Google’s software-as-service approach – nascent as it is – bears an ironic similarity to Microsoft’s own clandestine assault on IBM, DEC and other big iron companies in the 1980s.  The giants were slow to retool their seemingly dominant  mainframe businesses to account for the rising profile of PCs. IBM virtually handed Microsoft a monopoly for MS-DOS and paved the way for cheap PC clones that threatened its survival.

Now Microsoft is watching from the sidelines while Google pulls a similar ploy.  As broadband penetrates everywhere, Google is betting that consumers will favor options that reflect the  ethos of the Web – free and community-based. Why install Office if you can get the same functionality from an always-on, super-fast connection that lets you collaborate with your friends and colleagues?

Microsoft’s own attempts to cash in on the Internet have been relatively feeble thus far. Its search business only commands a roughly 6% market share, compared  with about 77% for Google and 17% for Yahoo. Small wonder that it’s bidding for Yahoo!  It has little choice.

The software-as-service  business model has interesting implications for the entertainment business. What are DVDs , CDs and games if not software?  As consumers become more comfortable with low or no-cost server-based applications, might they become more open to video-on-demand and streaming music? It’s a question that has important implications for Time Warner, which which faces the specter of growing irrelevance for AOL in a search universe dominated by Google and Microsoft.

Microsoft  still has plenty of life. Profits are bountiful. No software competitors seriously threaten Office’s dominance. But then, IBM dominated computers in the 1980s, too.

See Also

• Ballmer Makes Big Bet to Get to ‘Next Level’

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Consolidation in the ad network space is a necessary next step

This has been a harrowing six months in the digitial ad space, with DoubleClick, aQuantive, Tacoda, RightMedia, 24/7, all getting gobbled. With today’s announcement that Yahoo! is buying behavioral targeting network BLueLithium for $300 million, it is clear that for now the big play online is to guarantee reach. Some have argued that the big players like Microsoft, Yahoo and Google are buying up technology in these acquisitions and positioning themselves for a coming day when ad targeting, expecially behavioral targeting, really kicks in. But Yahoo already has a behavioral engine that is highly evolved, and AOL already has Ad.com. For the time being, what these companies are after is reach, being able to create massive audiences that for now attract big brand advertising from TV. In the future this scale will translate into more viable behavioral and other programs. My old friend Denise Garcia, analyst at A.G. Edwards, has an excellent post today on the state of online media that explores some of these issues. Also, Web advertising veteran Jay Sears at ContextWeb gives an extensive analysis of where this points the online ad business generally.

But I think this is about aggregating audiences right now. BlueLithium is one of the largest networks in the U.S. Yahoo, like AOL and Microsoft, need to reach out beyond the traffic they pull into their portals with content. They need to offer their clients campaigns with more direct response applications (i.e. BlueLithium) and with greater targeting capabilities. As major media bring more of their wares online (Hulu.com, MySpaceTV, etc.) they also will need online the kind of mass reach for their promotions they are used to on TV. These deals are designed to give such clients that kind of massive inventory.

But as the Web finally evolves towards more sophisticated targeting, the reach and technology that a BlueLithium or Tacoda bring to the table become more important. Targeting audiences according to their past online behaviors is very effective, but it does not scale well. As you parse audiences into behavioral segments like recent auto content viewers in the 34-45 demo the slice of addressable eyeballs plummets. Only massive reach can render enough scale in these targets to make campaigns worthwhile to media buyers. By 2010 and 2011 perhaps, this will start making a big difference. At that point, portals like AOL and Yahoo, perhaps even Google, will become profiling engines. As people peruse their content, the protals will record their behaviors and then apply those profiles to targeted advertising the companies servie out across the network as users go out onto the general Web. For now, however, the new game is very much like the old game… attracting the masses.   

See Also

• BlueLithium

Posted under Michael's Blog

For the umpteenth time we hear that local ad spending online will ramp up

I have been covering the Web since aobut 1996, and so far as I can tell the local interactive ad market has been in a constant state of "preparing to explode." From the first days newspapers and classifieds sections made their online debut, analysts touted this massive amount of local ad money that mom and pop shops and plumbers and psychics were spending on Yellow Page and newspaper listing, local radio and TV spots. Once this multi-billion dollar largesse started pouring online — whoa Nellie, watch out. I cannot begin to count the number of schemes I covered for getting these small businesses online, building them Web sites and gettign their ad dollars into Yahoo Local and YellowPages.com, etc. etc.

Yesterday eMarketer issued its new report on local online ad spending, and it predicted that now, finally, really, no kidding this time, we will see the money start to flow. The $2.9 billion spent this year will grow to $7.8 billion in 2011 says ace analyst Dave Hallerman. Yes, it is tough to get a plumber to advertise online, even though by some estimates over 25% of search traffic is for local services. Local ad spending represents one of the biggest disconnects between actual content usage and media buying. Content online often is local, but advertising isn’t.

In general the local mapping and directory services have been supported by national franchisess like the Office Depots and Best Buys who have local stores but national media buyers. Penetrating that small to medium local business market has been the Achilles Heel of online advertising. What is different now? According to Hallerman, who has forgotten more about digital advertising than I know, "a number of factors are set to accelerate growth in the market: the wealth of small and midsize companies potentially available as online advertisers, the increased use of local Internet sites and services by individuals and the development of local online ad networks connected with local media, such as newspapers."

Well, maybe. Ultimately, the major national advertisers only came online when the suits who bought media themselves came online. My experience covering the first Web bubble was that media and advertising only "got" the Web’s marketing power when the Web finally got to them. Only when the guys in the executive wing of major media and packaged goods manufacturers spent much of their own days connected to the Web did they start putting money here. My bet is the same will hold true for local business. When their own companies are more connected. When their communications with their client base and their partners finally becomes fully Web-centric, then these companies will start looking ot Google AdSense, to YellowPages.com, and to their newspaper ad rep.

Posted under Michael's Blog

Most of you are probably too young to remember when Terry Semel and Robert Daly were co-presidents of Warner Bros., running the studio through perhaps the longest winning streak in Hollywood history.

Yes, running Yahoo! is a second vocation for Daly.  Unlike Google chiefs Sergei Brin and Lawrence Page, who cut their business teeth on search engine technology at Stanford.

Daly’s Hollywood contacts and savvy undoubtedly played a big role in Yahoo and Viacom’s joint announcement today that Yahoo would be the exclusive provider of search ads at MTV.com, Nickelodeon.com and other Viacom sites.

If you wonder how Yahoo! will survive Google’s onslaught, that’s it in a nutshell.  Yahoo is a media company.  Google is a fancy search engine.

The famously incestuous world of Hollywood doesn’t do well with outsiders — whether they’re named Google or Microsoft.  Look for a lot more Hollywood deals in Yahoo’s future.

See Also

• Yahoo Provides Search Ads for Viacom web sites
• Terry Semel Bio

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