But now that online ad dollars are scarcer, Yahoo has discovered the Old Economy tactic of cozying up to the ad agencies that help their clients decide where and how much to spend. It's a shift not lost on the agency executives who drank Yahoo's port at Silverado. "They're playing nice" these days, says Mr David Smith, chief executive of Mediasmith Inc., an online advertising agency. "They're really extending the olive branch to the agencies about how they can partner."

The shift is another sign that Yahoo is losing some of the phenomenal clout it had in online advertising. During the Internet boom, the Santa Clara, California, company could choose among advertisers - many of them dot-coms - that rushed to its global network of Websites. "We were in the period of the phone ringing all day long with people wanting to give us business," says Mr S. Murray Gaylord, Yahoo's director of "fusion marketing," as the company calls its integrated-marketing programme. "There literally wasn't time" to reach out to agencies, he says.

All that has changed since April 2000, when the fortunes of Internet start-ups started tumbling. Hundreds of start-ups and publicly traded companies that threw money at prime advertising sites such as Yahoo and America Online Inc. have been eliminated. Though Yahoo says its new ad- agency outreach isn't necessarily a response to the dot-com failures, the agencies say Yahoo has had no choice but to look for more stable, traditional advertisers, who often insist on dealing through their agencies.

"Who has the dollars? They're in the agencies' hands," says Mr Smith of Mediasmith. As a result, he says, the new message from Yahoo now is "very much 'let's work together.' "

The current economic slowdown hasn't helped matters either. "Hard times force people to make changes," says Mr Jim Nail, a marketing analyst at Forrester Research Inc. "There's no question it is a contributing factor" to Yahoo's efforts. Other online media giants are taking a similar tack: at America Online, Mr Richard Ward, vice-president of interactive marketing, now oversees a team of six people who focus on fostering agency relationships. That attention to detail helps to build credibility, the agencies say.

The upside of Yahoo's woes, at least for ad agencies, is the new attention being lavished on their executives. Some ad industries veterans say Yahoo officials are inviting them to lunch with much more frequency than before. Yahoo also has hired ad-industry people who previously have worked at large New York, San Francisco and Los Angeles agencies. For example, Yahoo hired Mr Gaylord, an alumnus of Young & Rubicam and TBWA Chiat/Day, last March.One big factor in the agencies' favour: Today, advertisers aren't looking for a Web-only marketing strategy. Advertisers want to promote their wares or services across a wide spectrum of media, including broadcast, radio and print, in addition to the Web-the agencies can offer that spectrum to an advertiser in a way that Yahoo can't. The agencies "are the brand stewards, they guide the overall brand effort" for advertisers, Mr Gaylord says.

Probably the most common complaint from ad agencies was that the old Yahoo at times worked directly with advertisers to nail down business-development deals, says Mr Mark Stephens, director of media services at Lot21, a San Francisco agency. By bypassing the agencies, Mr Stephens says, Yahoo was able to sell advertisers more services than they might necessarily need, including pricey sponsorships and special placement arrangements, such as being the exclusive credit card promoted by Yahoo.

Yahoo's Mr Gaylord says the agencies themselves were partly to blame because they didn't understand the Internet early on. When Yahoo approached agencies in the past with Web marketing ideas, "they would sit on it and say 'we don't want to do it,'" Mr Gaylord says. On the other hand, "we would go to the clients and they would say 'we want to do this' and saw the value in it."But, "the world has changed," says Mr Gaylord, who acknowledges that Yahoo is helping to mend some fences. "We weren't reaching out to agencies to the degree we have in the last year."

For now, the agency-outreach effort is paying off. The company already has won new business for various marketing programmes from companies such as McDonald's Corp. through the food chain's agency, DDB Chicago, and Quaker Oats Co. through its own agency, Foote Cone Belding. "We're getting more business from agencies than we ever had before," Mr Gaylord says. Of course, it helps too, that the agencies have matured in the past year and a half and better understand the role of the Internet in the advertising marketing mix, says Forrester's Mr Nail. "The agencies are recognising that this Internet thing is for real."