Yahoo blames Microsoft’s adCenter for revenue shortfall

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It looks the search alliance between Microsoft and Yahoo isn’t going exactly as planned. Yahoo blames technical issues with Microsoft’s adCenter for a shortfall in revenue in Yahoo’s Q1 2011 earnings.

As reported by Mary Jo Foley, Yahoo moved its advertisers from its own ad platform, Panama, to Microsoft’s adCenter platform as part of the search alliance between the two companies. However, technical problems have now put a halt to the transition with Yahoo CEO Carol Bartz claiming issues such as relevance and “prediction of what an ad campaign for new advertiser’s going to be versus one that’s been on there”.

Bartz made the following comments during the earnings call:

“adCenter isn’t yet producing the RPS we hoped for and are confident as possible. Advertisers are seeing strong ROI (return on investment), but technical limitations in the current adCenter platform mean the click volumes just isn’t there yet. We had expected RPS to be neutral by midyear, it’s now evident that it will take Microsoft longer to achieve that goal. We expect that to happen by year-end. In the meantime, the RPS guaranty helps protect our revenue and our view of the long-term potential of the marketplace remains unchanged.”

“We are working very close with Microsoft on this. They understand the issues and they’re hard at work on systems architecture, science models and better features and functions in adCenter. They have an aggressive roadmap to bring those to the marketplace.”

Mary Jo Foley contacted Microsoft about Bartz’s statements and received the following response:

“We are working very closely with Yahoo on bridging the RPS gap, and have an aggressive roadmap of enhancements designed to improve three key areas: monetization, relevance and advertiser-facing tools. We continue to see progress and are encouraged by the positive results we’ve seen in advertiser ROI, query share and click-through metrics. Recent reports by third-parties point to this positive momentum (Efficient Frontiers and Marin). Each search platform has unique capabilities; we are working closely with some advertisers and channels to help them adapt to adCenter’s evolving platform and marketplace. Additionally, in the past six months, we have successfully migrated tens of thousands of advertisers and their campaigns into the combined Yahoo!/Bing marketplace in the U.S., which was a massive combined effort.

“We remain optimistic about the long-term potential of the combined search marketplace and are working collaboratively with Yahoo to identify real-time insights and create optimizations strategies for our customers and partners.”

Hopefully these issues will soon be resolved between Microsoft and Yahoo in order to provide some viable long term competition to Google’s search and AdSense platform.