Marissa Mayer's Plan to Save Yahoo: Reading Your Mind

Christopher Mims Oct 23 2012, 10:02 AM ET

Technically, the CEO's vaguely telepathic strategy is called "audience-based buying," but in order for it to work, Yahoo needs to grow its audience

Reuters

Yahoo CEO Marissa Mayer has plans to transform Yahoo's tired brand into a Wall Street darling, and one of the most important planks involves reading your mind. Twice in the conference call following Monday's slightly better than expected earnings report, Mayer mentioned "audience-based buying," noting that advertisers "love" it and that she is "bullish" on its potential.

Yahoo plans to win by grouping users according to their interests, not their demographic...

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So what's audience-based buying? It's what happens when advertisers divide customers into groups centered around particular interests, including "gourmands," "social media junkies," "culture vultures," people who like living alone with cats, whatever.

That might sound like what advertising has always done. But throughout much of its data-impoverished history, advertising consisted mostly of dividing television and radio audiences into demographics (Female, 18-34) or selling ads against content (putting an ad for a laptop into a computer magazine). Audience-based buying is also distinct from "behavioral targeting," which is what happens when you search for "gas grill" on Google, and afterwards every website you visit has banner ads advertising them.

One of the challenges of audience-based buying is that it works best when you have access to consumers in many places at once, on the desktop and mobile web, in apps, etc. Helping advertisers reach users wherever they are is one reason Facebook launched its new mobile ad network. For Facebook, this makes all kinds of sense, since users are constantly using the site to broadcast information about their interests, and even advertisers wishing to reach, let's say, Wiccan cigar aficionados in the market for deodorizing dreamcatchers are sure to find a market.

... But the company also needs to stop losing the battle for audience

For Yahoo to pull off anything like what Facebook can do, it has to attract more users and get them to stick around longer. Mayer announced during the call that she wants to attract more people to Yahoo's core businesses, including search. Her strategy seems to consist primarily of tuning up the company -- Yahoo is 1,700 people lighter than it was a year ago, Mayer has replaced a number of C-level executives, and now all the company cafeterias serve free food, a Silicon Valley perk that was standard everywhere but Yahoo.

It's easy to discount the company, but, somehow or other, Yahoo still attracts around half a billion unique visitors per month. Chopping up audiences for advertisers might not be a terribly sexy business, but it's one that Yahoo pioneered. As long as Yahoo can hold on to its 300 million or so email users, it will have plenty of places to stick its tuned-up ads.