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Yahoo! Shifts Ad Stance

It belatedly embraces the gateway concept.



big promised changes may finally be arriving.

On Thursday, the Internet giant announced that Gregory Coleman, executive vice president of global sales, would be leaving the company. His responsibilities would be folded into a newly formed "global partners solutions" unit to be headed by Senior Vice President Hillary Schneider, who previously ran Yahoo!'s local markets and commerce unit.

For Yahoo!, executive shuffles and reorganizations are nothing new. The company has already seen the replacement of its CEO and the departure of its CTO this year. There have already been three major reorganizations since the end of 2006, when the infamous "Peanut Butter" manifesto -- which argued that the company was spread too thin -- was leaked to the press. In fact, the latest high-profile executive departure and shake-up came only in June, when Chief Sales Officer Wendy Harris Millard left the company amid a restructuring of its ad sales force.

But while prior hues and cries about new strategies at Yahoo! may have emphasized the need to do things differently -- shares are off about 52% since 2006 highs, and traded at $22.63 on Friday afternoon -- investors are finally getting a glimpse of how the company expects to adjust its strategy to meet a changing ad marketplace. And while Yahoo!'s latest moves are shrewd, they also expose the company to new risks as it leaves its tried and tested turfs and heads into new territory. While taking note of the new strategy, investors would do well to gauge its effectiveness before jumping in.

In essence, Yahoo! now seems to want to position itself as the gateway for advertisers who want to place ads of many different styles in many different locations all over the Internet. For Yahoo!, a company that by most accounts operates the most-visited Web sites on the planet, that signals a shift from focusing on selling high-quality and high-priced ads on its own Web sites.

The shift can be seen in the choice of Schneider to head Yahoo!'s most important division, the company's jettisoning of other executives, and the April acquisition of ad auction exchange Right Media.

The move also comes as Yahoo!'s bread-and-butter business of selling high-quality display ads has been flagging for several quarters. Harris and Coleman, highly regarded executives within the advertising community with long track records in the business, were crucial to that prior strategy.

Schneider, by contrast, has next to no experience coaxing traditional advertisers to put more and more of their ad dollars online. But the key ally of Yahoo! President Sue Decker is seen as being able to put together the kind of deals that will give Yahoo! access to more ad inventory on other Internet locations.

She played a leading role in forming a partnership with a variety of newspaper companies that would allow Yahoo! to sell ad space for them. Yahoo! also seems keen on expanding its partnerships with companies like


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that will allow it to provide advertisers with more online space to place ads.

The new changes also follow Yahoo!'s acquisition of Right Media earlier in the year. The ad exchange, which lets advertisers bid for space on a broad network outside of Yahoo!'s premium properties, has often been pointed to as a sign of things to come in online advertising by Yahoo!. The emphasis on less-trafficked territory outside of Yahoo!'s main pages is contrary to what the company focused on in its initial stages.

The new moves signal that Yahoo! is on the right course and is moving to adjust to a more "open" version of the Internet, as CEO Jerry Yang said it would attempt to in the company's last conference call with investors. Under an open model, the company would cater more to users who visited a host of destinations on the Internet, rather than the "walled garden" model that portals like Yahoo! and

Time Warner's


AOL began with.

But it also heralds a riskier era for the company. Selling cheap online ad space can put pressure on its ability to charge high rates for its premium properties. Companies like DoubleClick, which rival


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is intent on buying, are also in the process of launching their own online exchanges. And social networking sites like MySpace and Facebook are rapidly expanding the supply of online ad inventory.

Yahoo!'s latest changes are good moves from a bad situation. But that is hardly a reason for investors to jump on board yet.