The last 13 weeks have been a remarkable time here at Yahoo!. We’ve been living under the microscope in a way we never have before. There has been greater attention than ever on our strategy and our ability to execute against it. Some even questioned whether Microsoft’s unsolicited proposal would distract us from our mission, just as we were beginning to really push the pedal on our strategy.

Those people underestimated the determination of Yahoo!’s incredible people, spirit and culture.

Our first quarter was probably one of the most exciting quarters in our history in terms of delivering innovative products and services that really move the needle and make a difference for our users and customers: Acquiring Maven Networks. Launching Buzz, OneSearch 2.0, voice-activated mobile search, video on Flickr, Shine. Previewing AMP! from Yahoo! and SearchMonkey. Adding more Newspaper Consortium members. Establishing our New R&D labs in India and Israel. Our first quarter results proved that we have the right strategy, a fantastic team, and that our investments are starting to pay off.

All of this reinforced our board’s position that Microsoft’s offer undervalued our unique global franchise.

So, what’s next? With Microsoft’s withdrawal, we’ll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders. We’ll continue to execute on our plan — making your Internet experience as personal, relevant, open and social as possible, serving advertisers so well they insist on working with us, and opening up Yahoo! in a way that developers dream of. And, we’ll also continue to pursue strategic opportunities that position us for long-term success.

Has this experience changed us? Of course, it has. We’ve emerged a stronger, more focused company with an even greater sense of purpose. I’m so proud of how this company has come together, put the noise aside, and showed the world that we have the resolve and determination to thrive in challenging times.

We know the spotlight will probably stay on us for a while. That’s fine — we have a clear path ahead and momentum to build on. And thousands of dedicated Yahoos around the world who have held up well to scrutiny. It’s now up to us to show what we Yahoos can really do.

By the way, I’m sure you’ve all read or watched the news about this. Frankly, there’s a lot of nonsense and misinformation in what’s being reported. Just so we are all clear, here’s what happened. The board took its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo! and was in the best interests of our stockholders.

No one is celebrating about the outcome of these past three months… and no one should. We live and work in a competitive world and the Web is only going to get more competitive. Executing on our strategic plan is what matters most.

Finally, I’d like to thank the many of you who so passionately shared your support for Yahoo!. That’s what brings it all home for us.

Jerry Yang
CEO and Chief Yahoo

This morning, our General Counsel, Michael Callahan, and I testified before the House Foreign Affairs Committee in Washington, D.C. I wanted to share with all of you some of the thoughts I conveyed to the Committee today. You can read my full testimony here and Mike’s here.

On a personal level, the very serious human issues at stake cause me great concern. I’ve invested my professional life in this company, and I believe in the Internet and its incredible power. I also know that governments around the world have imprisoned people for simply speaking their minds online. That runs counter to all my personal and professional beliefs.

Our company is centered on empowering our customers. We never lose sight of the fact that our success as a business is built upon the trust we maintain with our community of global users, including citizens around the world, our advertisers, publishers, and business partners.

Today, despite broad limitations on discussion of sensitive political subjects, Chinese citizens know more than ever before about local public health issues, environmental causes, politics, corruption, consumer choice, job opportunities, and even foreign affairs. Much of this change is due to the Internet.

These markets also present companies like ours with challenges in the areas of free expression and privacy. This morning, I described some of the steps we’ve taken to address these challenges. I’ve personally met with senior State Department officials, Members of Congress, and others to discuss the issues. For the past year and a half, we have been actively engaged in a formal human rights dialogue to design an industry code of conduct. We’re working closely with a number of the most prominent human rights groups.

We have been and will continue to be actively engaged for the long-term. As a company in its teenage years, with hundreds of millions of users, and with the human stakes more challenging than ever, we know we must work collectively to find approaches that maintain engagement in markets like China and also put companies in the position to act responsibly.

Jerry Yang
Chief Yahoo and CEO

Click fraud has been in the spotlight quite a bit in the last six months. Click fraud is generally considered to be “clicks made with bad faith with the sole purpose of generating a charge to the advertiser with zero possibility of a legitimate site visit or transaction occurring.” Earlier this week, search influencer Jeffrey K. Rohrs put out an open letter dubbed the “Sausage Manifesto” to paid search networks like Yahoo!, Google, MSN, Ask.com and others, asking about the problem and what companies like ours are doing to address it.

Yahoo! Search Marketing’s Senior Director of Product Management John Slade posted a preliminary comment in response and we didn’t want you to miss it:

Hi Jeff,

John Slade from Yahoo! here. On behalf of the entire team, just wanted to jump in and say that I really appreciate your opening up this forum because (yes, it’s true!) we at Yahoo! want more dialogue too. We’re more than happy to participate in this discussion because we firmly believe that open communication - along with real commitment - is the best way this industry can get ahead of the click fraud issue.

I’m going to post in more detail on this blog in the coming days, but wanted to start off by reassuring you and your readers that Yahoo! agrees that click fraud is a serious challenge. We as marketing professionals shouldn’t spend any more time arguing about whether click fraud is a problem or what percentage it is. Any amount of money – no matter how small - lost as a result of click fraud is worthy of our attention. So we believe the more important discussion is, How can we better identify it and fight it?

I know I’ve said this many times on conference panels and in interviews, but I can’t state enough that tolerating click fraud is NOT the path to long term success as a search engine. We know that the ongoing growth of this industry hinges entirely on the ROI we deliver to our advertisers — if we don’t filter out click fraud, our customers will lower their bids or reduce their spend with us. I think I speak on behalf of my colleagues at Google, MSN, Ask.com and others when I say that click fraud does nothing but erode the trust that businesses have in our medium, and we want to put a stop to it.

Click fraud isn’t going to be solved by any one company and it sure as heck isn’t going to be addressed with a single solution. Tracking, filtering, standards or lawsuits alone aren’t the answer. There are multiple facets to this problem and we need to fight it together – search engines, advertisers, agencies, tool providers, researchers - on multiple fronts.

With that belief in mind, Yahoo! is working hard to put our money where our mouth is. We proactively identify suspicious clicks and remove them from our billing system 24 hours a day, 7 days a week — as a result, we’ve given away billions of clicks for free. We’ve invested significant technological, financial and human resources in clickthrough protection since we started this industry in 1998 and are redoubling our efforts by dedicating even more resources to this issue. You’ll be hearing more specifics from us soon, but I can tell you that we have in fact committed to building a Traffic Quality Resource Center, are continually expanding our clickthrough protection team and will be announcing new leaders within our organization who will focus entirely on enhancing and overseeing our traffic quality initiatives.

I know there’s a lot more discussion to be had and many more questions to answer, so you’ll be hearing more from me and others at Yahoo! as this forum evolves. I look forward to reading additional perspectives from our fellow industry colleagues (thanks for taking the first plunge, Andrew!), and will make sure to keep everyone apprised of our developments on this front.

John Slade
Sr. Director, Product Management
Yahoo! Search Marketing

Well, 2006 is a thing of the past and I am finally getting around to posting some thoughts on Yodel Anecdotal — it’s about time!! My topic: start-ups.

I spend a lot of time meeting entrepreneurs and evaluating new business ideas in my role to find big ideas for Yahoo!’s future. Last year proved to be an exciting time to be an entrepreneur in Silicon Valley, working on the next generation of potentially life-changing Internet services. Back at the Web 2.0 conference, for example, more than 200 start-ups tried to get into the Launch Pad workshop. My top picks among the presenters were Sphere (blog discovery tool) and TimeBridge (easy meeting scheduling). I was also impressed by Microsoft Live Labs fellow Gary Flake’s very cool demo of Photosynth, which allows you to fly through a 3-D scene built from your own photos. I don’t see a clear business model there, but it definitely has a wow factor.

In the past few months, I’ve seen some very creative companies working on new web services, such as Mashery, which helps developers “power your API,” and Mybloglog, a community-building service for publishers and developers. I also like WidgetBox and Clearspring, which are developing widget marketplaces and syndication services to go after the long tail of publishers — bloggers and social networking sites such as MySpace. While there’s a big opportunity to provide these kinds of web services to publishers and developers, monetization needs to be integrated from day one. I don’t always see that done well.

Silicon Valley isn’t the only hotbed of innovation these days. I’ve spent lots of time recently with entrepreneurs from India, China, Korea, Scandinavia and Eastern Europe and I continue to be amazed at the level and quality of ingenuity in these countries. Korea pioneers the leading innovations in the world of digital gaming. Scandinavia is producing some of the most interesting new community-based services (both web and mobile). Israel and Eastern Europe are coming out with new disruptive communications products. In fact, I just spoke in Israel to 200 local entrepreneurs who are working on the next generation of web and mobile services. The passion and energy of Israeli entrepreneurs always blows me away — it’s hard to believe that such a small country can produce so much talent and innovation.

What makes today’s environment different from the 1996-2000 cycle? Entrepreneurs are operating in an environment where the capital required to start and run a new business is much lower, thanks to open source, web services, and outsourcing. Companies like Yahoo! are providing developers with a toolkit of services and API’s that enables them to take advantage of existing technologies as well as outsource monetization infrastructure and sales so developers can focus on technological invention. Web services from Yahoo!, Amazon, eBay, Microsoft, Google, as well as many small companies are enabling innovation to take place much faster and more cheaply than ever before.

Consumers are also much savvier about discovering — and building — innovative new services. Electronic word of mouth is creating large audiences with minimal marketing expenditures. With the new architecture of participation, consumers are playing a significant role in improving the quality of services they use, not only through customer feedback, but through contribution of content and metadata such as ratings, reviews, tags, video/photo posting etc. This reduces the cost of content creation and editorial because consumers are directly contributing to the product experience to make it better for the next person who comes along.

Discovery of information has also improved since consumers can find what they’re looking for not only through the usual search tools but also through their networks of friends. For example, Sphere helps you find new content related to a blog post, while Mybloglog can help you discover new content by becoming a “fan” of other people who share your interests. Digg, Flickr, del.icio.us, and Technorati are better-known examples that are socializing the Web. Yahoo! just acquired Wretch, a very fast-growing social networking service in Taiwan that is used by over 60% of that country’s Internet population. Users have uploaded more than 500 million photos and posted more than 70 million blog entries — an impressive level of participation for any community service.

There appears be to plenty of money available for start-ups from venture capitalists. Venture capital investments are on track to reach $32 billion in 2006, with about $8B of that going to Silicon Valley companies. China and India are attracting a substantial share, as are emerging sectors such as clean technology. Entrepreneurs with good teams and a good ideas have lots more places to go raise money than in the past few years.

Some people speculate about whether we’re entering another bubble. In the dot.com heyday, an abundance of startup money was also available. But many companies didn’t focus on creating sustainable stand-alone operations; they developed product features rather than businesses. There was a red-hot IPO market for Internet start-ups. And the primary source of income was an advertising market fueled by venture capital funding. Things are different this time:

1. There is a robust Internet advertising market (estimated at over $30 billion globally in 2006) with the global Fortune 1000 making the Internet an integral part of their marketing plans.
2. The cost to start companies is lower than ever (see above).
3. The IPO market for Internet start-ups is much more modest.
4. Incumbent players such as Yahoo!, Google, Amazon and eBay are big and strong.

There’s no shortage of visionary talent out there. Yahoo! has been fortunate to attract through acquisition some of this generation’s brightest entrepreneurs, helping them realize their vision as part of the Yahoo! family — people like Flickr’s Stewart Butterfield and Caterina Fake, del.icio.us‘ Joshua Schachter, Upcoming.org’s Andy Baio, Konfabulator’s Arlo Rose, Jumpcut’s Ryan Cunningham and Mike Folgner, and, most recently, Bix’s Mike Speiser. These smaller start-ups are a key part of our acquisition strategy — modest investments from which we’ve generated great value through great talent, great technology, and great traffic. We’ll continue to survey the emerging landscape for great ideas.

I don’t know how 2007 will play out. But Web innovation is alive and well and I’m more excited than ever about the opportunities for entrepreneurs, companies like Yahoo! and, therefore, all of you out there.

Happy New Year!

Toby Coppel
Senior Vice President, Corporate Development

Photo from armisteadbooker.

When banner ads started cropping up on the Internet in the mid-’90s, the term “hit” was all the rage. A “hit” (as in, a hit to a server) was the reigning measurement of a site’s popularity. Hits attempted to show how many times a page was viewed by a user. As the online measurement industry evolved and site designs grew more complex, “hits” fell out of favor because they included all server calls, even those where users ditched a page before it fully loaded. Counts were therefore inflated.

It also became apparent that some independence was necessary to have believable performance numbers. Over time, engagement with a site evolved to measuring “page views,” which were typically collected from independent, third-party sources. When combined with the “unique visitor” count, page views (or PVs) provided a metric of who saw the site and how much content or how many ads they consumed.

Enter the first measurement dilemma: There was no industry standard for how a page view was measured. Different firms used different methodologies, which differed still from how sites’ internal logs were measuring traffic. No one was right or wrong, just different. Do you count PVs from outside the country? From spiders and bots? Do you count when the page is requested, or when the page is fully loaded? Although the industry has radically improved standardization in recent years, many questions remain about the efficacy of the page view as a method for tracking engagement or impressions.

Before I joined Yahoo!, I was President and CEO of comScore Media Metrix, where we spent years grappling with the challenges of measuring a dynamic web environment. It’s 10,000 times more complicated than measuring television, and it’s only gotten more complicated in the last year or so, with the adoption of cool technologies like Ajax and Flash and the growth in video. They’ve changed the way Yahoo! and other companies are designing products for consumers, but they will also translate into page view declines.

When you view our new Yahoo! Maps, for example, Ajax allows you to drag the maps around and zoom in and out without having to wait for the page to reload. But for all that convenience, the new experience translates into just one page view. Our users tell us they much prefer the new maps to those of old, so suddenly counting page views seems far less important.

Yahoo! has long reigned in page views. But we knew we’d eventually cede this honor as we incorporated more consumer-friendly technologies into our products. And that’s OK with us, if it means our services will be better built for how people want to use the Internet today vs. in 1998.

Page view counting has been a key measure for a decade but just because it was once the obvious solution, doesn’t mean it’s the best one now. A couple of reasons why:

• PVs aren’t a good reflection of web activity in 2006 and beyond. It’s a broadband world and page views are irrelevant to some of the most frequently used Internet services like instant messenger, VoIP, or video, in addition to technologies such as Flash and Ajax. More page views might actually reward sites for poor site design in light of these new technologies.
• PVs have never been consistently measured by third parties or by sites themselves. Everyone has a different definition of when and how a page is counted.
• PVs don’t represent ad inventory. In the early days of the Internet, page views were used to represent available ad impressions, but the reality is that page views and ad impressions are actually counted in different ways and don’t correlate. PVs also have little to do with available inventory with the different types of ad units available today using text, audio, video, etc.

The bottom line is that the page view has outgrown its usefulness. The industry needs to embrace change and develop new metrics that measure this new world more accurately. We all need to help to wean the industry off the crutch of familiar metrics in favor of more accurate and representative ones. We all need to be smart about these new metrics — the measurement companies, major publishers, and advertisers.

I remember a quote by Albert Einstein, who said something along the lines of: “Everything should be made as simple as possible, but no simpler.” We can’t oversimplify complex web measurement. We need more innovative ideas and execution to measure new technologies and incorporate user behavior into measurement standards.

At Yahoo!, we’re working closely with the measurement firms and our internal analytics teams to ensure we’re creating the most accurate representation of user activity on our sites. Nobody has all the answers, so we need everyone pushing.

Peter Daboll
Chief of Insights

It’s Advertising Week in New York City — a fiesta that has thousands of marketers from all over the world swarming Madison Avenue to hobnob and banter about the latest trends. Yahoo! sponsors the annual America’s Favorite Ad Icons and Slogans contest. Previous champions include Juan Valdez, the Geico gecko, Mr. Peanut, the Pillsbury Doughboy, and “Sometimes you feel like a nut, sometimes you don’t.” Be sure to get in your vote before 1:00pm ET tomorrow, when this year’s winners will be announced following the annual icon parade. As part of the week’s affairs, Yahoo! also disclosed the results of an interesting market research study on technology’s impact on families. Surprisingly, the family dinner and board games are on the rise in response to addictions to things like gadgets, DSL, instant messaging, etc.

All this talk about marketing inspired me to sit down with our own brand guru, Yahoo! Chief Marketing Officer Cammie Dunaway. I wanted to hear her views on the Yahoo! brand and how we approach marketing, her all-time favorite industry campaigns, the impact blogs and word-of-mouth have on marketing departments, and how controversial figures like Howard Stern can mesh with our brand. Here’s the transcript of our conversation.