Yahoo reinvigorates Web advertising search battle (Reuters)

SAN FRANCISCO (Reuters) - Yahoo Inc. (Nasdaq: - ) is set to introduce onMonday a long-delayed upgrade to its Web search advertisingsystem, setting the stage for a face off with Web search leaderGoogle Inc. later this year.

The diversified Internet media company is looking toencourage both new and existing corporate advertisers to startworking with its rebuilt search marketing system in preparationfor full introduction during the third quarter of 2006.

The highly anticipated redesign is the first big overhaulof the search advertising system since GoTo.com pioneered paidsearch advertising eight years ago. Yahoo paid $1.6 billion tobuy the successor to GoTo, called Overture Systems, in 2003.

"Understanding how ads actually work together is what weare introducing with the new system," said Steve Mitgang,Yahoo's senior vice president of advertising. "The current coreplatform for YSM (Yahoo Search Marketing) has run its course."

The system is a software-based marketing console to helpcorporate advertisers and advertising agency buyers understandhow to target relevant advertising to Web users based on thekeyword search terms consumers use to find information on Websites.

Advertisers can instantly calculate the cost of acquiringnew customers using Yahoo's data and analytic system. Buyerscan also test for the most effective ads and make rapidchanges.

But the highly competitive online ad market is not standingstill. Ad agencies and sophisticated buyers hungry forcustomers say they are agnostic over which system they use.

Ad systems from Google and Yahoo, along with lesser playersMicrosoft Corp., MIVA Inc. and LookSmart Ltd. all giveadvertisers the ability to run ads triggered when Web siteusers search for popular keywords on a site.

"With this release, Yahoo catches up to Google from atechnology standpoint," said Paul Kelley, 27, an ad buyingspecialist with Carat Fusion agency in San Francisco.

"It's something the industry has been waiting on a longtime."

Samir Patel, 28, the founder and CEO of SearchForce, a paidsearch marketing consultant, said Yahoo's software fixes basicusability problems that have given Google big advantages in themarket in recent years. This may lure more small businesses tobecome active paid-search advertisers with Yahoo, he said.

The Yahoo ad system also offers geographical targetingbased on databases of geographical terms it acquired when itbought London-based WhereonEarth last year. Thus Yahoo caninfer when Web searchers mean Soho, London or Soho, New York.

Eventually, the system will also allow advertisers to buyads across Yahoo, Google, Microsoft and other systems, allowingfor comprehensive budgeting, something Google already offers.

Mitgang said the system will be rolled out in phases inorder to lessen disruption to Yahoo's base of hundreds ofthousands of customers, who need time to optimize the system tomaximize the number of customers their ads may attract.

The first phase, which begins on Monday, is to deliver thecore upgraded data and analytics platform. The second phasebegins in the third quarter, when the full marketing campaignapplication becomes available to advertisers.

Google, which jump-started growth in the pay-per-clicksearch ad market, has seen its market share continue to surgethanks to continued innovation and international growth.

Google has been growing its search business at 80 percent,while Yahoo is growing at half that rate, at around 36 percent,when counting both online display advertising such as bannerads along with search advertising.

By revamping its system, Yahoo is seeking to ensure it canmove more quickly to compete in emerging areas of the onlineadvertising market, such as the integration of text andgraphical ads and click-to-call Web phone customer services.

Future versions will give advertisers the ability to moreprecisely target Web advertisements based on demographicfactors or online behavior, Mitgang said.

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