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By Jennifer Saba and Alexei Oreskovic
NEW YORK/SAN FRANCISCO, Oct 14 (Reuters) - Three weeks ago,Yahoo Inc Chief Executive Marissa Mayer strode into aManhattan hotel and was greeted like a rock star by hundreds ofadvertising executives who snapped pictures as she sat down foran interview with journalist Charlie Rose.
That same audience a year ago would have been grousing thatMayer had not done enough to engage Madison Avenue, which isarguably Yahoo's most important constituent since the Internetcompany derives more than 75 percent of its revenue from adsales.
"I think that Marissa has gotten a bit of a bad rap," saidDavid Cohen, the chief media officer at UM, the global media armof Interpublic Group.
The industry perceived Mayer as not caring aboutadvertising, choosing instead to focus solely on products, Cohensaid.
Ad agency executives say that over the past six months Mayerand her team have been working hard to change that perception,courting advertisers at key industry events, hosting lunches andattending meetings with agency representatives that includeYahoo excutives like Chief Operating Officer Henrique de Castro,Senior Vice President and head of Americas Ned Brody and ChiefMarketing Officer Kathy Savitt.
The charm offensive has impressed many on Madison Avenue,but getting advertisers to actually spend more on Yahoo's Webproperties will not happen overnight, industry experts said.
The shift to advertising exchanges, which allow marketers toinstantly buy placement for their ads across a broadconstellation of websites, has pushed down the prices thatonline publishers such as Yahoo can charge.
That was painfully apparent in the second quarter of thisyear, when Yahoo's display advertising revenue slid 11 percentdue in part to a double-digit decline in ad prices.
"Advertisers will become more excited if there's clearevidence that Yahoo is growing again in terms of its users andits engagement," said Mark Mahaney, an analyst at RBC CapitalMarkets.
Since Mayer became CEO, Yahoo's stock has more than doubled,recently reaching a near 8-year high of $35.06. But analysts saythe gains are mostly due to aggressive share buybacks and theimpending initial public offering of Chinese e-commerce giantAlibaba Group, in which Yahoo owns a 24 percent stake.
More than a year into Mayer's tenure, Yahoo's core businessremains stagnant. Revenue has been flat or down for the pastfour years and Wall Street does not expect the situation toimprove when Yahoo reports its third-quarter results on Tuesday.
Analysts are expecting third-quarter revenue to declinearound 1 percent to $1.08 billion, according to Thomson ReutersI/B/E/S.
A Yahoo representative said the company has built a team tospecifically focus on agency relationships and has recentlyrealigned its sales force according to industry expertise.
Yahoo is "working closely with our advertisers to developopportunities in a more integrated way across our full suite ofmedia, programmatic, video and mobile properties," Yahoo said inan emailed comment.
MOBILE TARGET
Yahoo is trying to play catch-up to Facebook Inc,Twitter Inc and Google Inc in thefast-growing mobile advertising business, as consumersincreasingly access the Web on smartphones instead of PCs, andflock to social media websites that require novel ad formats.
Spending on mobile ads grew 145 percent year over year to $3billion in the first six months of 2013, according to theInternet Advertising Bureau.
Mayer has revamped many of Yahoo's mobile apps to make themmore attractive to consumers and advertisers. In May she spent$1.1 billion to acquire Tumblr, a popular blogging and socialmedia website.
"There's a promise there but it's not ready for prime timetoday," said Ritu Trivedi, managing director, digitalmarketplace at MediaVest, a Publicis media agency,referring to Yahoo's mobile ad efforts.
Mayer has said that turning Yahoo's business around will bea multi-year process. She has accelerated the pace of productdevelopment, and added workplace perks such as free food andtop-of-the-line smartphones for employees.
But even as the CEO tries to forge closer ties withadvertisers, she has made it clear that Yahoo's users comefirst. That is a big change from the old Yahoo, which was famousfor loading its websites with advertising that critics said wereoverly intrusive and detrimental to the user experience.
For instance, Yahoo's new mobile weather app, which takesbasic weather feeds and links them with the Flickr photo-sharingservice, has sparked interest from advertisers. The app could beparticularly appealing to hotel and retail marketers, said PeterStein, CEO of Razorfish, a digital marketing agency.
So far however, Yahoo has kept the weather app ad-free.
"Their message has been very direct and on point; they aredefinitely focused on the consumer," said Ari Bluman, chiefdigital investment officer in North America for WPP's media buying arm GroupM.
CONSUMERS FIRST
Some ad experts say Mayer's prioritization of users beforeadvertisers is a smart move that could ultimately pay off byincreasing Yahoo's popularity with consumers. But others say itmay not go over well on Madison Avenue in the short term.
For instance, Yahoo did a major overhaul of its popularsports home page to coincide with the start of the NFL seasonthis year. One advertising agency executive said they found outabout the change a week before the launch, and so the agency hadto scramble to re-design ads that would fit with the new format.
"Our client was very upset," said the executive, who did notwant to be identified because the agency works closely withYahoo. "I have a six-page typed memo about the problems we hadwith Yahoo and this one client."
A Yahoo representative said that the company has "movedfaster in the past year than anytime in our recent history" tolaunch better products and to "evolve" the ads on its websites."We think this will improve performance for our advertisers overtime, and we're working closely with our advertising partners."
Still, the overall assessment of Mayer is positive.
Tamara Bousquet, senior vice president of media at digitalmarketing agency DigitasLBi, recalled a dinner she attended inlate September with other advertising executives where Yahoo wasthe topic of conversation. "Every single person around thattable thought the company was handled better since Marissa cameon board," she said.
