Yang puts faith in Yahoo! kudos

Jerry Yang, 27-year-old co-founder of the world’s leading Internet directory and search facility Yahoo!, is not married yet. But already his girlfriend and bride-to-be is an Internet widow.

“We’re planning our honeymoon on the Internet,” says Yang, in London to promote the launch of the UK, French, and German versions of the Yahoo! directory.

When Yang is out for the evening, the means of accessing the Internet accompany him. “I have a laptop and modem, so I can log on from a restaurant and order movie tickets and we don’t have to stand in line,” he says. “Is that nerdy?”

Definitely, according to TV presenter Paul Ross. He opposed Yang at a knock-about Oxford Union debate on the Internet last month, stating it is “a high-cost international version of CB radio which allows acne-ridden computer nerds to bore each other with e-mail”.

However, Yang can take Ross’s jibes in his stride. His stories of booking tickets over the Net, nerdy or not, is indicative of how Yahoo!, whose sites ranked third top ad revenue earners for the first half of 1996, is set on exploiting local as well as global marketing budgets.

Yahoo! UK and Ireland, Yahoo! France and Yahoo! Deutschland are the latest in a series of geographically-specific versions of the main directory product which have followed the launch of services serving Japan, Canada and several US metropolitan areas earlier this year.

“In the Bay [San Francisco] area, a very wired community, thousands of businesses have Websites, down to car dealership level,” says Yang. “Real estate agents are posting ads which before could only go in local newspapers, local banks in California are going on the Internet,” he says.

The development of localised directory services – where Yahoo!, of course, faces rival domestic operators in several markets – is a key element in deepening demand for online advertising and marketing. There are already signs it is accelerating a shift away from the narrow category of international IT brands which continue to dominate much electronic banner advertising.

“Rates we offer on regional sites are more in line with local media costs – and we can guarantee a certain level of impressions,” says Yang. “These impressions obviously work better for small businesses when they are targeted on local audiences.”

The launch of Yahoo! Japan, claims Yang, created the market for online advertising there which did not exist prior to the April launch. “There was no Net advertising in Japan – now we have 50 advertisers and that is growing,” he says.

And although he accepts the market for Internet advertising in the US remains modest compared with other media, he says, no major US agency can afford to ignore it.

“In the US, every [major] advertising group says interactive is part of the mix. It may not be a big part, but they want to be able to offer it to clients,” says Yang. “They know they need to stay with the game.”

UK companies such as Lloyds TSB, Tesco and BT are supporting the Yahoo! UK and Ireland site. The UK agency scene, he says, appears to be following the US in accepting Net advertising as a media option.

The use of Yahoo!’s sites – alongside rival search engines such as Lycos and Infoseek – continues to grow at an exponential rate. Yahoo! now registers 1.5 million visits a day. Infoseek, Yahoo!, and Lycos ranked two, three and four after the Netscape home page as the top ad revenue earners in the first half of this year.

Yet Yang concedes that against this background of fast-growing audiences and interest among advertisers in the high-traffic sites, none of the search engines is making money – including Yahoo!

“I’m not going to make a million in the short term – we are losing money at the moment,” he says. But while he concedes some form of rationalisation may occur in the arena, he says the question is when, rather than if, Yahoo! starts to generate profit. Then it will be pay-back time for the venture capital investors who backed two Stanford University students back in 1995, when they realised they could turn a hobby into a business.

“If Yahoo! went out of business tomorrow, we would have had a great time doing it,” says Yang. “But we are in the lead today without a doubt. Once you have achieved a certain scale and brand presence, other competitors will have a tougher time coming in.”