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Yahoo's Challenge

Yahoo faces many challenges as it tries to turn vast sums of data it has on visitors into revenue. Another challenge: that little company called Google.

The challenge is to translate what Yahoo has--more visitors spending more time on its sites--into something advertisers want. And that's where IT will help determine whether Yahoo is a contender or an also-ran. It involves leveraging its low-cost, high-performing IT infrastructure and its top experts in search and data mining to provide advertisers with more effective and relevant methods for reaching consumers.

The Difference Maker
One approach is to do more data mining to maximize the effectiveness of ads and show the world that Google's way of delivering advertising isn't the only one that works.

Yahoo is certainly within striking distance. In an Outsell survey of 1,200 advertisers released in January, some 70.9% of respondents rated Google "extremely/somewhat effective" for keyword search ads, compared with 61.9% for Yahoo and 46.1% for MSN. For contextual placement, those numbers were 46.8% for Google and 40.1% for Yahoo. MSN doesn't offer such ads.

That's why Fayyad is gunning for Google. Tall, with a shaved head and slight, hard-to-place accent (he's from Tunisia), he might be mistaken for a distant relative of the late actor Yul Brynner. He's a formidable presence, and with his increasingly impressive team of researchers, he aims to use Yahoo's massive knowledge of its users to improve the relevance of ads for users and the effectiveness of those ads for marketers.

Fayyad cites Yahoo's ability to define groups like "automobile purchase intenders." "Based on how you use Yahoo, you give me a lot of hints to the fact that you're in the market for a car," he says. "In fact, I can guess with very high reliability that you're interested in buying a car in the next 90 days." Armed with that knowledge, Yahoo can offer companies the ability to buy ads that will appear in front of the people they most want to reach.

It's an IT-intensive challenge. The 425 million users who visit Yahoo each month generate a data trail that amounts to 10 terabytes a day. And that's just usage data. It doesn't include E-mail or images. "We need to be able to take 10 terabytes of data every day, collecting it from hundreds of thousands of servers around the world, process it, reduce it, decide what to keep, what to get rid of, make sure we update all information we have about users, and age it correctly," he says. "And then drive a whole bunch of applications. That alone is a tremendous challenge."

More Usage, More Ads
Yahoo now argues that using a search keyword's bid price as the sole metric to determine the position of ads on a search result page isn't the best way to advertise. "That's not the optimal way to do it and, in fact, that's something we're changing," Fayyad says, signaling a shift toward Google's more lucrative approach of positioning ads using additional criteria like ad popularity.

Fayyad says his mission at Yahoo is to listen to what customers are saying through their actions and use that information to improve Yahoo's products, which will keep visitors on the site longer. "If I get 10% more usage from the average consumer, I have suddenly created 10% more inventory for my ads," he says.

Yahoo accomplished something like that last year when it made an effort to improve user retention with Yahoo Mail. As Fayyad tells it, while combing through data, Yahoo engineers noticed that users of the company's free E-mail service also read a lot of news. From conversations with the Yahoo Mail business unit, the engineers realized it wasn't as easy as it could be to switch between E-mail and news on the site. So they added a news preview module that let users read news from the Yahoo Mail screen. After two months, they found that it dramatically improved retention. "That went from noticing a data pattern to a real product in two months," Fayyad says. Company officials declined to discuss the size of Yahoo's IT staff or its budget.

CIO Rabbe, VP Timmons, and chief data officer Fayyad inspect one of Yahoo's 27 data centers

CIO Rabbe, VP Timmons, and chief data officer Fayyad inspect one of Yahoo's 27 data centers

Battle For Talent
Speedy enhancements like that can only happen with a lot of superior brain power. So Yahoo is competing just as fiercely for people as it is for ad dollars. Google has been wooing top scientists in its quest to organize the world's information and make it universally accessible. In early February, for instance, it poached Udi Manber, CEO of's search subsidiary,

With its acquisition of Inktomi in March 2003, Yahoo not only got back into the search-engine race, but it also stepped up the pace of R&D. In 2004, it opened Yahoo Research Labs to work on Web search and information retrieval and last year partnered with UC Berkeley; this year it turned to university researchers in Spain and Chile. Last summer, it hired Prabhakar Raghavan, a former senior researcher at IBM and chief scientist at Verity, to run Yahoo Research. He joined noted researchers Andrei Broder and Jan Pedersen. In January, Yahoo hired data-mining scientist Ricardo Baeza-Yates to run its labs in Chile and Spain.

They're mining data collected in Yahoo's data centers, which are costly and, for the most part, hidden from view. There are 27 of them, more or less, around the world, filled with between 100,000 and 200,000 servers. InformationWeek was invited to one in Santa Clara, Calif. When you make your way past very tight security and step inside, you can feel the cost of cooling the company's machines as conditioned air beneath the raised floor blows up through perforated tiles. If data had a sound, it would be the drone of fans.

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