• by Mark Walsh  @markfwal, January 9, 2012

Revitalizing Yahoo's core display ad business will be one of the main tasks awaiting the company’s incoming chief executive Scott Thompson. According to a Macquarie Research report tracking home-page advertising on the major Web portals, that challenge appears to be greater than ever.

The study found that display trends on Yahoo remain weak, with the use of oversized/custom ad units -- which command premium CPMs compared to traditional placements -- falling to 26% of days in the fourth quarter, from 32% in the prior quarter and 34% in the year-earlier period. The largest chunk of Yahoo’s home-page ads were standard rich media formats (44%), while another 30% were regular display ads.

While Yahoo’s login page sold out a strong 75% days in the fourth quarter, Macquarie analyst Ben Schachter expressed particular concern about the site’s “poor home-page monetization on the key holiday shopping days right around Christmas.” 

AOL was in the same boat, as oversized/custom ads on its home page fell to 28% of days, compared to 40% a year ago. Worse, the custom ads didn’t include a single one of the Project Devil units that AOL introduced last year to help regain momentum in the display category.

Old-line portals, such as Yahoo and AOL, continue to lose ground to new rivals and technologies. “We believe that YouTube, Facebook, and increasing mobile Internet access are negatively impacting the position of traditional portal homepages (a theme we expect to continue into 2012),” wrote Schachter.

Specifically, YouTube’s oversized masthead unit sold out 90% of days in Q4, and the proportion of days with tandem masthead or expandable ads increased to 16% from 13% in the previous quarter and 2% in the first quarter. The majority (55%) of YouTube’s home page ads come from the media industry, leaving the site vulnerable to a dramatic downturn in spending in that sector.

Another new challenger is Amazon, which Macquarie began tracking in the fourth quarter because of the company’s plans to ramp up its display ad business (not only on its own site, but by powering ads on third-party properties as well). The type of high-impact brand advertising that has become familiar on the main Internet portals is still scarce on Amazon’s home page.

CPG ads were the most pervasive category of advertising on the retailer’s site -- accounting for a quarter of placements, followed closely by financial services, at 22%. Media was just under 20%. The report noted that Amazon cut back on house ads in Q4, ending the home-page promotion of its Amazon Local service in the second half of the quarter after it accounted for 28% of ads in the first half. 

MSN, meanwhile, saw a seasonal lift in oversized/custom ads, which appeared on the home page 26% of the time in the fourth quarter compared to 15% in third quarter. Ad quality, where MSN has historically lagged, has also improved, as direct-response and brand advertising are now about evenly split on its home page. 

Overall, 43% of the home-page ads tracked across Yahoo, AOL, MSN, and YouTube were oversized/custom ad units -- up from 35% in the third quarter, but below the 50% level of the year-earlier period. Retail and automotive were the most prevalent ads as key holiday sales events and year-end auto sales and promotions drove ad spending.

The report also showed that advertising from daily deal sites on the home pages studied continued to decline throughout the last quarter of 2011, accounting for just about 2% of total ads versus 3% in the prior quarter and 8% a year ago.