Aol Yahoo Reach Advertising

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TheMediaBriefing Experts' Blog, Yahoo!, AOL, Digital Media

Is there a direct correlation between increasing reach and increasing revenue? The prevailing assumption in digital publishing is that more readers = more revenue and the last decade has seen ever more creative ways to attract clicks.

AOL and Yahoo are two formerly mighty internet giants with business models based on selling display ads on a huge scale. Does it work for them?

Yahoo is the much bigger of the two companies in terms of revenue (taken from 2011 full-year results) and total global user base (from comScore's May report via VentureBeat).

AOL & Yahoo users and revenues total, display and search

(Click here for a bigger view)

Yet when you look at revenue per user - AOL is actually doing significantly better - almost three dollars per user better. While Yahoo makes approximately $7.1 a year for every user visiting one of its sites on a monthly basis - AOL makes more than £10. AOL is even further ahead when you just look at display revenue per user. 

Yahoo! & AOL - Total and display ad revenue per user

(Click here for a bigger view)

AOL is also doing better in terms of revenue generated per employee (approximate employee numbers on AOL from here and Yahoo! from here).

Revenue per employee Yahoo! and AOL in $s

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Of course neither firm is on an upward trajectory - with revenues either stagnating or declining. The CEOs of both companies - each a former Google executive - have put emphasis on different strategies to change company fortunes.

AOL boss Tim Armstrong talks constantly about turning AOL into a content company - and has bought sites such as The Huffington Post and Techcrunch to add to projects such as hyper-local network Patch and various content-farm style operations.

Marissa Mayer - who only joined Yahoo in June - plans to "double down" on search and display advertising, seemingly reversing her predecessor's interest in going down an AOL-style content route.

But while Armstrong and Mayer are trying to define their companies in different ways - they share a common priority: improving advertising technology.

In May, Armstrong said traditional, narrow-minded display ads were not a growth area and AOL would be focusing on more sophisticated ads such as its Project Devil format. Last month Mayer ended speculation that Yahoo might sell off some adtech assets. On the contrary, Michael Barret, the boss of Yahoo's ad exchange, Right Media, is on record as saying Yahoo wants to remain a "primary player" in the space.

What does this show? That increasing users is not necessarily the most efficient way to increase revenues even when your business is based on mass advertising. Your time might be better spent getting your ad technology right rather than chasing ever greater user numbers. 


Patrick adds: In essence the trends here show that a headline unique monthly users figure is diminishing in importance and it's high time it lost its place as the primary marker of success for both consumer and B2B publishers.

There is no guarantee - and surely all digital publishers know this - that increasing users figures and loyalty means increase revenue. Agencies and brands like big numbers and measure their ROI by putting a message in front of the largest number of people. You can hardly blame publishers for following suit.

But the move towards programmatic trading and real-time bidding is changing this - publishers ability to harness and monetise data is key. RTB represents about 12 percent of all UK inventory sold. I look forward to seeing how quickly this space changes in the next three years.

On 16 November we're holding a half-day Market Briefing event in London on programmatic trading and real-time bidding - come along to learn about the themes and issues in this argument. 

Image via flickr curtousey of jaspnmpersse and gaku.

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