Yahoo merges advertising departments

Move signals possible shift in strategy at the web search firm

Yahoo is desperate to gain more ground in the online advertising market

Yahoo is to merge its display and search advertising operations in a bid to stop its steady decline in advertising revenues.

The search giant, whose boss Terry Semel quit this month to be replaced by co-founder Jerry Yang, has been losing ground to Google over the past three financial quarters in the expanding online advertising market.

'When combined, the two organisations will deliver profoundly better results than when delivered separately,' said Gregory Coleman, Yahoo's executive vice president of global sales.

The move means that Yahoo will streamline the two departments and put greater emphasis on more diverse, multimedia ways of selling advertising, such as video and interactive ads.

Google is increasingly dominant in the search advertising market, with over 50 per cent of searches being done on its engine, and 99 per cent of its revenues coming from search advertising.

Experts have predicted that the online advertising market will shift from search advertising to display advertising as advertisers look to create brand 'profiles' online.

David Bradshaw, analyst at Ovum, says the move by Yahoo could be designed to take advantage of that shift.

'There are some signs that the tide may be turning here, and that could benefit Yahoo – despite Google’s prospective purchase of display specialist DoubleClick. Yahoo has a more diverse business than Google's, and needs a strategy to make it work, rather than following the Google model. This development seems to be a step in that direction,' he said.