Optimizing for the Right Thing (Yahoo and Ads)

Hilary Mason says that Yahoo is optimizing its mail interface for the wrong thing. The gist of her complaint is that Yahoo’s emphasis on making users click on ads creates a horrible experience for users.  The implication is that Yahoo should be optimizing for user experience.

I sympathize with the sentiment; I am annoyed by unwanted ads as much as the next nerd. However, Yahoo has chosen to be an advertising business. Asking them to optimize for user experience would be like asking NBC to broadcast shows without ads. Bad NBC trying to make me buy soap or Romney or Happy Fun Balls.

The question of what Yahoo should be optimizing for is not that simple. All ad-based web services face a conflict: On one hand, advertisers want the best possible return for their money. On another, users want the best possible experience. The extremes would be:

  • show no ads whatsoever and focus on the most pristine user experience.
  • plaster the page with as many ads as you can sell, until the page becomes unusable.

Here’s an example of a site that is closer to the latter (GoDaddy is always a good whipping boy):

Obviously the extremes don’t work. If you are an ad-based business with no ads, you make zero revenues. On the other hand, if all you do is show ads then you have no user experience, so you will end up with zero users (and obviously, nada de dinero).

This is reminiscent of another famous economic problem: determining the tax rates that maximize government revenues. Tax rates of 0% and 100% yield no revenue (with 100% nobody would do any work). This concept is illustrated by the Laffer Curve.

Economists agree that there must be a tax structure that doesn’t force people to emigrate or stop working, while at the same time yielding near-maximal revenues. Of course, finding it is another matter.

To complicate things for Yahoo, it’s much easier to move to another site than it is to leave a country. Countries can make it hard for people to emigrate, so they can get away with unfair tax schemes for relatively long. This comes at the expense of other variables because there is no free lunch in our globalized economy, but I digress.

So, what should Yahoo optimize for? Clearly Yahoo’s demographic is not the same as those of Google, Twitter or Facebook. Only they know what amount of ads will make leave their contacts behind and run for the GMail border. Given how long Yahoo has been around for, I have to assume that they know very well their position in the “Laffer Curve” of web advertising. I suspect one problem for Yahoo is that their demographics are changing, and they haven’t completely re-optimized yet. Their revenues have been decreasing faster than their eyeballs.

Judging by Hilary’s post though, they are doing something right. Her grandparents didn’t seem too annoyed with the state of Yahoo Mail until she came to visit and showed them the true path. Luckily for Yahoo, there are not too many Hilary Masons on the planet :)

Discuss on Hacker News if you’d like.

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