One of the key lessons we learned when we became a part of Yahoo! is
that people tend to think about just getting revenue from free web-based
services. The cost part of the equation gets lost. For this free ad supported
model to make sense, you don't just have to generate revenue, you have
to deliver a service at low cost. Yahoo! has got the magic on the inside
in terms of delivering these services at a low cost infrastructure.
We started to spend a lot of time to get the cost down on the inside.
A lot of times that meant choosing a lower cost solution and customizing
it a little bit versus maybe buying some high end piece of software or
hardware and maybe not using all the capabilities of it and having the
high cost of it. We started to make more intelligent decisions about how
we delivered the service, which is really important.
The second thing was that the more strategic your advertising is as a
part of the service or the application you're delivering, the more successful
it's going to be. One of the early advertisers on Yahoo! Mail was Hallmark.
They were delivering electronic greetings. This was very powerful for
a Yahoo! Mail user to come to our site, see a link to Hallmark, build
an electronic greeting and send it. It seemed almost like a feature of
Yahoo! Mail at the time. It fit very well. That wasn't something that
we did as well at RocketMail. We were much more focused on the categories
of interest. When you think about it, each product and service also has
different components out there; people delivering complimentary services
that make great advertisers because you deliver great users who need and
want their services. The users don't necessarily feel like this is a banner
ad or a sponsorship button. They feel like it's an integrated part of
your service.
KAREN LAKE: Katie, talk to me about the advertising model for Desktop.com
There are so many people in the Internet press, the Internet analysts,
that say, "You can't have an advertising model as your only source of
revenue." What is your comeback for a statement like that?
KATIE BURKE: One of the things that you need in order for the advertising
model to work is a large base of users. That's one of the biggest challenges.
A lot of times, that has to do with the inherent value of the product
itself. It's hard to get tens of thousands, hundreds of thousands of people
to use a product that doesn't have a large market audience because it's
very narrow in what it offers or it isn't designed properly. That's a
real big challenge and something we think about a lot. It's one of the
reasons we listen to customers and try and keep getting as many users
as we can. The truth of the matter is that advertisers are either going
to look for a very, very wide audience that they can target well or a
small audience that they can advertise, if it's highly synergistic with
what they're trying to do. If you don't fit into one of those two buckets,
it's difficult to compete with other sites out there on the Internet that
can do that.
Once you have that opportunity for advertisers, you have to come up with
something that's more interesting than an advertising banner or a sponsorship
button. It has to be placed in an interesting way or have a more prominent
or more interesting look or different functionality. That's tough because
if you do a lot of those things, that's a lot of overhead for a business
to build these customized advertising opportunities for different advertisers.
Finding the ones that are most successful and packaging those and having
those be the things you sell is very important, but it takes a little
bit of experimentation to make it work. People need to think about what
they offer advertisers, figure out if they offer enough of it, whether
it's that really, really strong targeting or that breadth of users where
they can hit multiple different kinds of targets and then, find creative
ways to deliver that to the advertisers. Those are the important things
to make it work.
KAREN LAKE: Could you share a specific example of a way that you've used
a prominent look or alternative advertising to please an advertiser?
KATIE BURKE: With our current product, we default users into a particular
environment when they log into us. When users log into our service, it's
a way for consumer users to organize their Internet experience. It has
the look of a PC desktop. We sell those default icon spots on the desktop.
It's similar to what hardware providers do when they ship their products
with special icons on the desktop. We're doing a similar thing. For an
advertiser to have their logo and their brand sitting on our desktop for
users when they log on is something different and interesting. When we
built our service, we wanted to have a balance, a selection of icons that
are broad to the user and hopefully will have a couple of things there
that pique their interest. At the same time we wanted to go after the
advertisers who have really strong interests and want to get their brands
out there and say, "Yes. We'll sell a couple of those spots. Some of them
we'll keep for editorial interests. Others we'll sell." We do that instead
of putting banners on our service. It's much more powerful and people
are much more interested in it.
KAREN LAKE: Can you describe what your product looks like to the user
and what the inherent value of your product is?
KATIE BURKE: As I mentioned earlier, I spent a lot of time with my partner,
Larry Drebas, building a web-based e-mail service and running it for tens
of millions of people. The portability of e-mail was really powerful.
We found there's something else really powerful about web-based e-mail.
That was that users felt a sense of personal space on the web, a place
where they could go and read their e-mail and send their e-mail and store
their e-mail and get to their contacts and their address books. They would
have the folders that would hold their old mail. People have a sense of
this familiar environment that they would log into. They do what they
want to do in their e-mail and then they log out. This familiar environment
concept seemed very compelling. We saw people doing that across different
vertical markets, calendaring and address book and those types of things,
but nothing was the killer application that web-based e-mail was. Part
of that is just because Internet e-mail's a killer application in and
of itself - before it was even on the web. Also, there was an opportunity
to take the familiar and drive it across not just a specific vertical
market, but a horizontal market. We're building a service where you can
store and organize all the sites and services that you use on the Internet.
We take a PC metaphor so you have icons to represent sites and services
and web-based applications.
KAREN LAKE: And those are the things that you sell? That's beautiful.
KATIE BURKE: Yes, exactly. We put those in one singular environment on
a web page. Every time you log into us, we pull up your Internet environment
and auto log you into all the sites and services that you use. So you
double click to launch icons and can use tool bars and task bars and it
feels a lot more like your personal Internet space. You don't think about
logging into your PC as being a particularly intimate experience, but
log onto someone else's PC and there are different icons. Things are in
different places. They have different software. We want logging onto the
Internet to have that same, powerful PC feeling. You log onto your own
PC. It's familiar. It has everything you need. You can go there and start
your web experience.
One of the other interesting pieces to our product is we're building
it so that developers can build and deploy their own application ideas
into it. We're providing tools and interfaces to developers. These are
developers who are hobbyists and enthusiasts. It's not super technical.
You need to know HTML and a couple other things about how to build websites
and services. They can put applications into our environment. This is
an interesting opportunity for a lot of people in your audience. To the
extent that people want to have their own internal applications that they
use for sales leads or managing project issues or whatever, they can hopefully
find some applications on our service that other people have built and
made available. But additionally, if they wanted to contract someone to
build that application for them, they'd be able to do that. Those are
our two target markets. One is this consumer end user who comes to us
for their Internet home. The second is the web developer who comes to
us and can build and deploy web applications very quickly. [cont..]
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