Yahoo! Makes $25 million advertising commitment to Netscape
Interactive advertising is an extension of traditional advertising, using the Internet as a new way of reaching publics, targeting demographics and creating product awareness. By creating new ways to communicate via the Internet, companies and organizations have been able to advertise almost instantly worldwide. While the initial idea of interactive advertising came about in 1994, pivotal moments have turned it into the phenomenon of today. One of these moments occurred in 1997, when Yahoo! and Netscape created a strategic allowance that would bring interactive advertising into a new era.
David Filo and Jerry Yang, two Electrical Engineering students at Stanford University, founded Yahoo! in 1994. It started as a way to keep track of their interests on the Internet. As their lists became longer, their search for became more time-consuming. As a solution, the created categories and subcategories of their interest. After much interest in their guide, the concept was implemented and later named Yahoo! (Yahoo! Media Relations ,2005).
Like most other search engines, Yahoo! was run on online advertising revenues and start up funding capital. According to statistics at the time, this strategy was supported: Online ad revenues surged to $129.5 million in the first quarter of 1997, an 18 percent rise from the previous quarter, the Internet Advertising Bureau reported in June. Ad revenue was expected to reach $5 billion by the year 2000 (Galante, 1997). However, because the industry was unstable at the time, Yahoo! was encouraged to extend its business strategies and create a brand. If successful, the goal would be to create brand loyalty and ultimately gain more users. This lead Yahoo! to team up with Netscape, a premium Internet browser, to expand their user base.
In 1997, Yahoo! and Netscape created an agreement that would expand their services and increase both players profit. In this agreement, Yahoo!, the world’s leading navigational web guide announced its commitment of $25 million in advertising to Netscape, the leading provider of the web. Under the agreement, Yahoo! became the premier international search engine for Netscape, providing service to people in 12 countries. "Yahoo! is committed to serving an ever expanding global audience," said Jeff Mallett, Senior Vice President of Business Operations, Yahoo! Inc. "Our comprehensive content and strong brand awareness continue to make us the world's navigational service of choice." (Galante, 1997)
In return, Netscape provided the means for people to communicate and retrieve information in a larger context. Users of Netscape gained access to Yahoo!, in addition to over 70,000 websites. "Netscape is committed to empowering Internet users worldwide with the best tools and features on the Web," said Jennifer Bailey, vice president of electronic marketing at Netscape. "Working with Yahoo! and search providers, we can now offer many of our international users with localized search and navigational services, another indication of Netscape's commitment to a rapidly growing international audience." The merger created an international base and a search engine with which to navigate.
Yahoo! became the first brand that really attracted people to their navigation system. Yahoo! created the ability to search the Internet to search based on keywords.. In addition, Netscape now had the revenue to broaden their base. This new publicity created a large network extremely fast, leading to a perfect environment for advertising. This merger was a turning point to get people to go to one central point. Therefore, Yahoo! could turn around and sell advertising for their search engine. This became a place where outside companies and organizations could create an outlet to reach consumers. It created a snowball affect because first people would log into Netscape, then see Yahoo! advertising to search for keywords and then once into Yahoo! they would find advertising for other things. It created a means to separate demographics and interests based on keywords such as travel and sports. Now we have yahoo! paying for advertising from Netscape and other companies paying for advertisements from Yahoo!. This development ultimately created the birth of Yahoo! and jump started online advertising.
Yahoo! is still one of the top search engines for the Internet, if not the top. The company was able to extend their business and create a following. While Yahoo! was founded years before, this strategic alliance formed with Netscape turned Yahoo! into a new phenomena and allowed internet advertising to prosper. Today, as we see on the chart below, Internet Advertising is a successful means of revenue and continues to rise.
Sources
(2005). The History of Yahoo!: How it all started. Retrieved January 11, 2009, from Yahoo! Media Relations Web site: http://docs.yahoo.com/info/misc/history.html
Chandrasekaran, R. (1997, March, 20). Netscape and Yahoo Plan Joint Web-Site Venture: Companies seek to lure AOL subscribers. The Washington Post , Retrieved January 10, 2009, from http://www.highbeam.com/doc/1P2-715121.html
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http://en.wikipedia.org/wiki/David_Filo
Galante, S. (1997, July, 9). Search Engine urges to Expand Business Model . CNET News , Retrieved January 10, 2009, from http://news.cnet.com/Search-engines-urged-to-expand-business-model/2100-1001_3-201275.html)
Outing , S. (1997, August, 4). Publishers Pay Netscape, Yahoo! for Extra Hits. AllBusiness.com, Retrieved January 10, 2009, from http://www.allbusiness.com/services/business-services-miscellaneous-business/4671288-1.html
Yang. Retrieved January 09, 2009, from Wikipedia Web site:
http://en.wikipedia.org/wiki/Jerry_Yang