Yahoo Kisses It All Good-bye

Seth Godin, a former Yahoo executive and a Fast Company contributing editor, wrote the book on this subject. Permission Marketing (Simon & Schuster, 1999) was ahead of its time -- but exactly right for the future of Yahoo. The premise was straightforward: People do want to be advertised to. They just don't want to be advertised to unnecessarily. If you ask them for their permission and give them lists of categories that are acceptable to them, they will be open and responsive to your appeals.

When I worked in Boston in the 1990s, I can remember driving to work every morning and being bombarded with radio ads for Giant Glass (I can still remember the song: "Who do you call when your windshield's busted? Call Giant Glass"). Could there possibly be a less efficient marketing campaign? I probably listened to 2,500 Giant Glass ads in all that time. My windshield never cracked.

Because of its customer base, Yahoo had the opportunity to merge with, acquire, or be acquired by one of the Big Three advertising-and-marketing-services companies: Omnicom Group, the Interpublic Group of Companies, and the WPP Group. In so doing, the company had an opportunity to create a permission-marketing model that would have reaped substantial revenue from every one of its customers, while rationalizing the advertising market in a profound and important way.

Consider my family's time in Boston. We moved out of an apartment in Boston into a larger residence in nearby Dedham, Massachusetts. We completely renovated the Dedham house, and in so doing, we found ourselves in the market for all kinds of products, from mattresses to appliances to plumbing fixtures to garden tools. Had a Yahoo/Big Three Ad Services combination existed then, we could have asked for advertising in all of these product categories and made our decisions accordingly. That would have provided well-compensated work for the ad-services division, a commission for the Yahoo division, and a willing target audience for product companies. A win-win-win.

Now fast-forward to, say, 2005. Roughly 33% of the U.S. population has high-speed Internet access. Another 50% is connected at 56-K speed. Most companies are connected to one another through Web-services technology, which enables Wal-Mart computers to inform Yahoo computers of the latest price points on every single product sold in the store -- instantly. The Big Three Ad Services Giant has gone out and organized specialty stores into advertising co-ops. They now pay a fee for the same kind of Web-services technology that the big companies use. All they need now are people who want their stuff. And there sits Yahoo, every day, providing all of these vendors with the names and addresses of each and every one of its customers, with their permission to do just that.

Former Citigroup chairman and co-CEO John Reed thought he could build the biggest bank in the world by taking a penny on every transaction conducted with a Citibank credit or debit card. Similarly, Yahoo/Ad Services Giant could take 5 cents on every transaction and make money -- and it could make even more money by producing and distributing the advertising.

It would, of course, take time to build such an enterprise and to make it work. It might be 2006 before it would really begin to click. But look at the alternative. Imagine coming home from work at Yahoo and saying to your spouse, "We're no longer just the greatest Internet company; we're also email spammers and dinnertime-harassing phone callers and junk mailers." What would your spouse say? What Yahoo's most fervent admirers said was, "Please go away."

John Ellis (jellis@fastcompany.com) is a writer and consultant based in New York. Read his weekday musings (www.johnellis.blogspot.com) or find a catalog of his columns here.