This year, delegates from 90 countries gathered to hear distinguished speakers like the UN’s Kofi Annan, Microsoft’s Steve Ballmer, Twitter’s Biz Stone, Bob Geldof, and the heads of the world’s largest advertising agencies. And jury members judged more than 22,000 pieces of the most creative advertising from every corner of the globe. In short, it was the place to be for ad types.

Since advertising is one of our passions at Yahoo!, you can imagine we wanted to support the festival, Yahoo!-style. Our goal was to communicate that the world’s biggest ideas should live on the world’s biggest stage –- the online arena. So, Yahoo! had an innovative, local presence at the festival. Naturally, we placed ads in local media saluting the creatives, but we also deployed an awesome purple van and hit the streets with a giveaway that literally declared “Nothing Creative Happens in Penny Loafers.”

Our Mission: Project Flip Flop
How do you show the creative community that you really love them? You make them comfortable, of course! Members of Project Flip Flop canvassed the Croissette with pairs of purple Yahoo!-branded Havaianas flip flops, slipping them on the weary feet of anyone with a festival badge. Meanwhile, our purple van circled the streets and our own Purple Pedals bike rode the promenade to document the mission. By the end of the week, thousands of feet were happier.

The response was très fantastique!

• Fast Company wrote that the flip flops were the most sought after prize at Cannes;
• The Cannes Daily covered the campaign (page 12);
• A creative director from a global agency said to me, “Thanks for letting us be free!”;
• The head of marketing for one of the largest global brands in attendance asked for pairs for her children;
• Even the Twitterverse played along. One tweet suggested that we put this campaign up for a Lion next year. Another from halfway around the globe asked to add a pair to a Yahoo! footwear collection.

To see the mission in action, check out this short video (below), view our Flickr album, and see some of the images that our Purple Pedal picked up.

Creativity is the secret sauce in the best advertising and we want your Yahoo! experience to be well seasoned with it. For a look at the creativity that snagged the Lions, check out the official site at canneslions.com.

Elisa Steele
Chief Marketing Officer

• Toolbar tricks: Now, every browser comes with a toolbar, so why would you want the new one from Yahoo!? Does yours let you preview your email or content from more than 100 popular sites? Does it give you query suggestions as you search? Does it let you search directly within sites like Flickr or Wikipedia? I didn’t think so. Go download yourself the new Yahoo! Toolbar. It’s all about letting you do more faster. More here.
• Making the little guy feel big: If you own a small business, you know how much you covet the marketing dollars of the big dogs. Well, the playing field has officially been leveled. Our new My Display Ads let businesses of any size run affordable online display (or banner) campaigns that reach local markets on Yahoo!. How affordable? Let’s just say we can make thirty bucks go a long way. These self-service ads are easy to create – just pick from one of our 800+ templates; customize text, images, colors and add your company logo; select your target audience; and off you go. You’re guaranteed to feel embiggened. More here.
• Proud to have Pride: It’s LGBT Pride month and we’re doing it up big with this year’s Yahoo! Pride site. We’ve got news from the Advocate, a killer timeline that summarizes the last century in gay, lesbian, bisexual, and transgender history, and an event finder for more than 1,000 Pride events around the world. But best of all, we might be sending you and a friend to Sydney for the LGBT Mardi Gras in February. But hurry, you have to enter by July 1st (or come meet us in San Francisco this weekend to enter in person). More here.
• Dog days of summer: The race is on and you’ve got about 11 weeks to make the most of it. It’s summertime and we’ve pulled together a little helpful microsite to keep you from squandering it. Need help with travel plans? Check out articles on getaways that involve beachs, golf, family, national park, or weekend furloughs. Want great recipes? We’ve got ideas for grilling, oven-free cooking, drinks, and chill-out treats. There’s also shopping ideas, tips on keeping that lawn green, kids activities, and giving your Avatar a more sunswept look. Check it out here.

Subscribe to the RSS feed (or add it to My Yahoo!) to get this Product Pulse every week.

Nicki Dugan
Blog Editor

Here’s the bottom line:

• Yahoo! will use this agreement to help us become a stronger competitor in all aspects of online advertising; and
• Yahoo! is not exiting the sponsored search business. We plan to remain a strong player in sponsored search.

What is the agreement?

You may have heard that the agreement gives Google control over 90% of search advertising. That’s just plain wrong. It’s simply a contract that gives Yahoo! the right, but no obligation, to show Google AdSense ads on Yahoo!’s own network. It’s important to note that the agreement is non-exclusive and gives us the option to “backfill” with Google ads if and when we see fit. The reason we structured the deal this way – rather than a more typical exclusive deal with revenue commitments to us and traffic commitments to Google – was precisely to avoid the issues the critics are raising.

Since Yahoo! bought Overture five years ago, we’ve run that business as a closed system. For example, if you want to put a sponsored search ad on a Yahoo! search results page (“SRP”), you have to buy the ad from us. Right now, that’s the only way to access the millions of online customers who visit the Yahoo! network at the key moment when they express their interests by making a search query. Given the size of our user base and the extraordinary diversity of searches they generate, we cannot, by ourselves, provide relevant paid search ads for every search – we can’t “fill up” all of our SRPs.

In fact, no one company can fill them up – not even Google. Yes, you read that right. There are millions of unique queries, like “elevation of Mount Elbert” and many of them are never matched to a relevant sponsored search ad. These “uncovered” queries are missed opportunities for advertisers to directly engage with consumers and for consumers to benefit from relevant offers. Fortunately, Yahoo! has strong “coverage” and “depth” for many queries – meaning we have a good number of ads to display for many searches. However, coverage and depth are not equal for all categories in our marketplaces. One of our key goals is to unlock the huge value of the hundreds of thousands of less popular queries that don’t show ads Yahoo! today.

The “monetization gap” between Google and Yahoo! is in reality a value gap. Where Google is getting higher bids than Yahoo! today, this is because advertisers perceive that Google is delivering more value – more targeted leads, more clicks, and more conversions. That’s why an advertiser might be willing to bid more for a click on Google than for a click on Yahoo! – the belief that the advertiser will get more value from Google. Google is not setting prices. Advertisers determine how to value keywords. Yahoo! is committed to providing advertisers with greater value and consumers with more relevant offers and this agreement helps us meet this challenge more quickly.

Increasing advertiser value is a complicated endeavor. Part of it is technological –- for example, building better matching algorithms. Part of it is giving advertisers more control over their advertising campaigns. But we also want to increase revenue by building query share, which takes time.

In the past year, we have thought about these challenges very carefully and we created a strategy that we’re convinced is a “win win” for Yahoo! and advertisers. The core idea is limited use of Google ads to deliver more value from our SRPs and other inventory in circumstances where we aren’t delivering the best advertiser value today, and then to use resources gained by that strategy to accelerate our investments in the technologies and marketplaces of the future. That’s where the agreement comes in — it allows us to provide better, more valuable connections immediately.

Current thoughts on implementation

We will implement the agreement in a way that respects an important principle you may know as the Hippocratic Oath: “first, do no harm.” That is, we will not use Google ads in a manner that would create a significant risk to the health of our own sponsored search business.

It’s important for us to recognize when using Google ads is beneficial for users and advertisers. Queries for which we have no coverage, low depth, and/or low relative monetization are all circumstances in which backfilling probably makes sense -– they indicate that Yahoo! is not currently delivering enough value for that inventory. If Google can deliver that value where we currently don’t, then everyone wins -– including the advertiser and the consumer.

It’s equally important for us to protect the long-term health of our marketplaces. As we studied this issue, we became acutely aware that our value proposition depends on having an active, “liquid” marketplace of search terms. The good news? Yahoo! has that for the more popular and commercial queries –- the ones that produce over two-thirds of Yahoo!’s search revenues. This is often not the case, however, for less popular “tail” queries.

As we proceed, we’ll hold true to our goal of making Yahoo! a “must buy” for online advertisers. We have no intention of abandoning our key advertiser relationships. To the contrary, we are exploring ways to further strengthen those relationships, and one of the ways we will do that is through our recently announced Digital Advisory Council. We are asking industry executives from our agency and advertiser partners to join us as we explore the continued evolution of digital media and online advertising. We’re going to start by addressing the confusion and misinformation that currently exists in the market regarding Yahoo!’s agreement with Google, which is a hotly debated topic that needs some much-needed clarification.

I’ve said in the past that we’ll backfill where the monetization gap between Yahoo! and Google is the greatest. This gap is the greatest in areas in which we don’t have matches of offers with very specific queries or where our matches are narrow or not relevant. This should only enhance our relevance to consumers and bring new advertisers to our inventory that didn’t do business with us or that made only limited commitments. Our overriding principle to backfill will be those win-win opportunities to backfill our inventory with advertising that clients find valuable but to which they have had scarce access and in other ways that both optimize for user experience and the maintenance of a robust marketplace.

Finally, let me be absolutely clear that we are not in any way going to be coordinating or setting search term pricing with Google. The fact is that advertisers set prices by bidding in our real time auctions. This agreement gives advertisers a new opportunity to bid for placement on an additional network that includes Yahoo! inventory. They will bid for what they think this opportunity is worth at prices that produce positive ROI. That’s how pricing works today in this industry and this agreement won’t change that.

I hope readers of this post, as well as advertisers and regulators, can move past the false rhetoric being peddled by some of our competitors and see the marvelous potential that the agreement offers the marketplace. It’s a great opportunity for Yahoo!, and we’re committed to implementing it in a way that produces the most value for advertisers and users. Ultimately, that’s the only way we can provide value for Yahoo!’s stockholders.

Sue Decker
President

Don, aka Jon Hamm, joined me, President Sue Decker, and our US Region Head Hilary Schneider on stage at Advertising Week in NYC today to help unveil APT from Yahoo!, our new advertising platform (which was formerly known as AMP from Yahoo! or Project Apex). Jon helped us put our platform in context with the evolution of advertising over the last 40 years – from the time when the advertiser was the indisputable king, to today, when the consumer is clearly in charge.

I started dreaming about this day 18 months ago, when I laid out my vision for our board of directors on how Yahoo! could play a unique role in changing the face of online advertising. In fact, Sue and I called it Nirvana at the time – a platform that would be to 2009 what radio was to 1924, TV to 1947, color TV to 1965, and the Internet to 1993.

Sounds like hype, right? We don’t think so. As Sue posted in April, we listened to all of the pain points that our partners shared about the process of buying and selling ads. Would you believe it takes more than 30 manual operational steps to move from ad strategy concept to launching that ad? It involves faxes (!!) and sometimes weeks in proposal processing. Audiences are now distributed across a sea of web sites and are harder to find, understand, and put a value on. Madison Avenue might think it’s a shame Johnny Walker Red doesn’t flow at the office anymore.

APT looks to change all that. It’s simple. It’s open. It’s fast (like minutes vs. days). It provides a new level of control. It offers cross-selling more easily than ever been before. It will provide large amounts of quality inventory. It will help advertisers customize and target their messages more precisely through advanced targeting. And it will drive results. All this from a single online application. No more cobbled together processes or impressions. No more wasted time.

Our confidence in APT’s ability to transform the marketplace isn’t based on theory or conjecture. It’s because of the feedback we’ve been hearing from partners who have been working with us side-by-side as we developed and then began testing the platform. In fact, William Dean Singleton, CEO of Media News Group (parent company of the San Jose Mercury News), also joined us on stage today, using words like “extraordinary and “sea-change” to describe how APT will take MNG into the future.

APT is real today and we’re starting to roll it out to our Newspaper Consortium members, which will continue for the remainder of this year and into the next. They’ll be followed by other publishers, advertisers, agencies and ad networks beginning in 2009.

If only Sterling Cooper could be here to reap the benefits.

Jerry Yang
Chief Yahoo and CEO

Our strategy to fully realize Yahoo!’s potential is based on the convergence of search and display — the next big opportunity in the rapidly growing online ad industry. This agreement helps us capitalize on that. We’re moving full speed ahead to execute with speed, commitment, and passion.

It’s also in keeping with our open strategy — WebMD sells their audiences on Yahoo!, Yelp can customize how their local search results appear using Search Monkey, advertisers and publishers will buy and sell in an open marketplace with our upcoming AMP! from Yahoo!, and we’re now opening our paid search results to Google.

I wanted to put this arrangement in perspective and comment on what it is and what it isn’t. First, it does not signal that Yahoo! plans to exit paid search. Quite the contrary. Through the financial benefits of better monetizing our search traffic, we’ll be investing in search services and ad platforms, including Panama. An independent search business is critical to our future. We will retain complete flexibility and will call the shots on where and how often Google ads will appear. While Google has better advertiser coverage in some query areas, we still have the ability to provide Panama ads where they are most valuable.

Second, this deal is good for competition. It may seem counterintuitive that doing a deal with a competitor would improve our competitive position. But as search and display continue their convergence, it puts Yahoo! in a better position to innovate and compete aggressively with Google and others for ad dollars. It also offers advertisers more choice and publishers gain better distribution and monetization to grow their business.

Finally, this agreement is non-exclusive. We remain completely free to display any paid search listings across our properties — whether from Yahoo!, Google, or any other third parties.

We’ve done something important today. We are directly addressing one key element in Yahoo!’s strategy to lead the way in search and display. I believe it puts us on a faster track to creating stockholder value and strengthening our advertising leadership.

It is, of course, just one step. We’ll continue to look at all of our alternatives to advance our strategies and enhance growth and profitability.

Jerry Yang
Chief Yahoo and CEO

After all, nothing is worse for advertisers — and consumers — than marketing that bombs.

Enter IndexTools, a leading provider of Web analytics software for online marketing, which we announced we’re acquiring today. Their technology will give our customers tools for monitoring and analyzing websites and marketing campaigns, providing valuable insights into key metrics, traffic patterns and performance. And that means consumers are more likely to see marketing content that’s engaging and relevant.

We’ll initially make these tools available to our vast community of 150,000 small- to medium-sized business customers, but we’ll eventually extend them to third party developers who can use them to track how their applications are performing with visitors.

When it comes to marketers, we have just one goal: To be their partner of choice. IndexTools is another great arrow in our quiver.

Bassel Ojjeh
SVP and Head of Yahoo! Strategic Data Solutions

We’re popping the hood today on a new advertising management platform, AMP! from Yahoo! (you might have seen it referred to as Project Apex). It’s been under development for some time now by an army of engineers, product strategists and managers, and user-interface design experts — all intimately familiar with the online advertising industry. They understand the pain the industry currently feels in how things are done.

Here’s the core premise that’s fueled this new platform: Online advertising is growing increasingly sophisticated, yet it’s unnecessarily Byzantine to buy and sell. The online media landscape is incredibly fragmented. And, today, the process of finding your target audience, booking inventory, negotiating pricing, seeking approval, creating tearsheets, testing ads — it’s living in an 8-track world. Let’s just say people are doing a lot more faxing and phone calling than should be necessary in 2008. It’s terribly inefficient.

AMP! will not only automate all of these processes and take the cycle time down from weeks to minutes, it will enable a new, more open paradigm, taking participants from private walled gardens to a new world where they will be able to buy and sell across the entire Web – all in one interface, with a few clicks of a mouse. It’s like a stock market for ads — the more efficient the marketplace, the more value in it. The impact is hard to overstate. This is simply not possible today and we think that’s really hobbling the industry’s ability to focus on what matters most — developing great creative and getting it front of the right person.

We recently previewed AMP! for our partners in the Newspaper Consortium and there were “ah ha!” moments visible across the room, with execs throwing out comments like “blown away,” “revolutionary,” and they even put “sexy” and “ad serving” in the same sentence.

AMP! from Yahoo! is real. We will start rolling the platform out in phases beginning next quarter, and will open it up for additional publishers as well as advertisers, agencies, and ad networks throughout the rest of 2008 and into next year. And you can see what the newspaper execs were so excited about by checking out this short video:

Sue Decker
President

To quote Nestlé’s press release announcing the initiative, “The renaming program reflects the results of a two-year comprehensive study conducted by the company into consumer perceptions of the Butterfinger name. According to the study, an overwhelming majority of consumers identified the phrase with undesirable traits, such as being clumsy, awkward, and lacking in physical coordination, skill, or grace.”

Nestlé has partnered with Yahoo! to provide consumers with a robust, turnkey solution for providing fans of the crispety, crunchety, peanut-buttery taste with more insights into the brand transformation. The robust new packaging instructs users to go to Yahoo! and search for “The Finger” to find more information, creating unique synergies and cross pollination opportunities between the two leading brands.

This cutting-edge campaign leverages Yahoo!’s pioneering approach toward creating premier opportunities for its marketing customers. We believe this sort of high-performance solution will continue to empower marketers to broaden their horizons as they build next-generation online brand identities.

UPDATE: Ok, people, you’ve probably figured this out by now — this is all just a load of April Fool’s horse puckey. But we are partnering with Nestlé to launch the new Butterfinger Comedy Network on Yahoo! Video, featuring hundreds of the funniest comedies, spoofs, pranks, and standups from across the Web. And Nestlé actually is distributing these clever babies — 200,000 free Finger bars are now available at 2,000 7-Eleven stores across the country. Or you can bid on one on Ebay’s Giving Works site. Tasty.

Curtiss Barr
Director, Global Partner Solutions

The challenge is that advertisers and publishers are forced to deal with disparate systems and multiple platforms for buying search, display, video, and local ads. That in itself is an inhibitor to achieving that growth. And we’re trying to solve these headaches by taking a different approach.

As the largest publisher on the Web that also leads in display advertising, and holds a strong number two in search, we maintain one of the world’s largest advertising networks and operate the Right Media Exchange. We’re truly in the best position to understand the evolving needs and demands of the entire ecosystem.

And at Yahoo!, our goal is simple. We want to eliminate all the friction and complexity that advertisers, publishers, agencies, and exchanges deal with so they can focus on reaching the right audiences and driving greater monetization.

We’re building a cutting-edge platform that simplifies the process for advertisers when buying targeted, guaranteed and non-guaranteed advertising inventory across Yahoo!’s owned and operated network, partner sites, and other advertising networks. And furthermore, this new platform will be a web-based, hosted application that harnesses the power of collaboration across the Internet.

Our approach is as different to current advertising platforms as the DVR was to VCRs. We believe this to be a real game-changer.

The new platform will enable all participants in the ecosystem to benefit:

• Publishers will be able to better serve their advertisers’ needs by making it easy for publishers to sell, package, and distribute other publishers’ inventory alongside their own, giving advertisers extended reach to audiences across the Web through a centralized platform.
• Advertisers will be able to spend more time on driving revenue and developing compelling creative for their audiences, rather than dealing with the complexities of ad generation, assembly, trafficking, and serving ads.
• Advertising agencies will be able to streamline the buying process for multiple accounts across multiple publishers and allow for creative testing and campaign optimization, even as the campaign evolves.
• And last but not least Advertising Networks will benefit from having a platform that connects publishers to the best advertisers for their site and audience, and advertisers to the best publishers with the most relevant audiences, thereby increasing both their reach in the process.

We previewed this new platform for our partners in the Newspaper Consortium a couple of weeks ago, and were so pleased with their response that we decided to give the attendees at the IAB Annual Meeting a glimpse so they could share in our excitement. And since most of you weren’t there this morning, I wanted to tell you about the great stuff we’re working on at Yahoo!, so that you can get fired up with us as we set out to revolutionize the online advertising market once again.

Sue Decker
President

Photo from DougGoodman.com.