Yahoo! for Yahoo? New worries
The hundreds of newspapers counting on Yahoo to turbo-charge their online sales could suffer sputters instead, as their prime technology partner addresses a hostile takeover bid by Microsoft and a simultaneous internal reorganization to cut costs.
While there are too many moving parts at the moment for anyone to predict the future with certainty, the reality is that Yahoo’s newspaper partnership in the greater scheme of things is far more strategically significant to publishers than to Yahoo – or its potential new owner, Microsoft.
With all due respect to the newspaper alliance, it is hard to see how Yahoo’s share of the sales associated with the partnership could have amounted to even one whole percentage point of Yahoo’s nearly $7 billion in revenue in 2007. With far bigger lines of business and more momentous issues at stake for Yahoo and a potential acquirer, it is not hard to imagine how the newspaper project could be overlooked, sidetracked, or, in the worst case, scuttled.
Consequently, publishers would be well advised not to put all their eggs in Yahoo’s basket.
As discussed here, here and here, a dozen newspaper chains publishing more than 500 titles have entered into a multifaceted partnership since 2006 that would include jointly selling help-wanted ads on HotJobs, featuring Yahoo search on newspaper websites, enabling newspapers to tap into Yahoo’s banner ad network and providing newspapers with easy access to such technology as Yahoo maps.
While some publishers like Lee Enterprises achieved an initial lift as high as 56% in online sales in fiscal 2007 as the result of adding HotJobs listings to their want-ad inventory, other Yahoo partners fear such gains are unsustainable on an ongoing basis, especially with recruitment advertising shriveling as the economy stalls.
Further, publishers were disappointed recently to learn that Yahoo will be late in delivering the ad interface they had been expecting to beef up their banner inventories and fatten their effective ad rates. Sources say Yahoo told partner newspapers that the system would be delayed as the result of an internal reorganization occasioned by a plan to eliminate 1,000 positions to pare operating expenses at the 14,000-person company.
While the downsizing would be enough to distract any management team, Yahoo’s executives were handed a much larger challenge on Friday when Microsoft launched a hostile offer to acquire their company. As any company would be obliged to do in this situation, Yahoo now will go through the process of (a) trying to wriggle out of Microsoft’s embrace (perhaps with Google's help); (b) finding a higher offer from a competing bidder; (c) cutting a deal with Microsoft or an alternative buyer, or (d) all of the above.
To the extent Yahoo tries to fight what I would regard as its inevitable acquisition by Microsoft or a company like News Corp., Disney, General Electric or a financial buyer, Yahoo may elect in the near term to enhance its profitability as a free-standing enterprise by cutting expenses even more drastically than it had planned to do. If so, the newspaper project could be a casualty of Yahoo’s decision to focus on other, larger business segments.
(UPDATE 2.4.08: An example of Yahoo's desire to tighten its focus was the announcement today that it will turn off its paid music service, which has been a weak also-ran in comparison to competitors like iTunes. At the same time, Yahoo may consider outsourcing its core search and/or banner-ad business to Google, according to the Wall Stret Journal.)
In the event Yahoo and Microsoft (or some other company) agree to merge, two long and consecutive periods of uncertainty will ensue. The first period of uncertainty will be the lengthy review of the antitrust implications of a merger between Yahoo and the winning acquirer – a process bound to be complicated by Google's outspoken opposition to the deal. The second period, which would commence only after the first ended, would be the immensely complicated process of consolidating two enormous companies operating with two management teams in multiple locations with many overlapping lines of business.
Microsoft’s primary rationale for wanting Yahoo is to combine the search and advertising businesses of both companies to compete with you-know-whoogle. Search and advertising, of course, are two of the key areas where newspapers are looking for Yahoo’s help. While the eventual combination of Yahoo and Microsoft may produce stronger products and a more commanding market position for Microsoft, the time it takes to consolidate the two could cost newspapers months (years?) of revenue growth and hard-to-recover market share.
Taking the risk analysis to the next level, what if Microsoft decided not to support the newspaper alliance?
Many publishers still recall bitterly Microsoft’s ambitious, but ultimately futile, effort in the late-1990s to compete with newspapers by hiring local staffs to create elaborate news and entertainment portals under the Sidewalk brand (since subsumed by Citysearch).
While the Sidewalk debacle may have cured Microsoft of wanting to compete in this arena, a lot has changed in the last 10 years. Microsoft certainly could decide to take a run at the Yelps of the world with YahooLocal or any number of successor products that could be built from the vast array of search, mapping and other technologies the combined companies would have at their command.
In that event, newspaper publishers would be looking at the same problem start-ups face when deciding whether to deal with the 10,000-pound canary of the software business. “You don’t know if they want to mate with you or eat you,” goes the saying in Silicon Valley.
With far more formidable matters on the table at Microsoft in connection with the Yahoo deal, it is unlikely the folks in Redmond are thinking very deeply at the moment about whether they want to eat or mate with newspapers.
Even if the eventual answer is “mate,” however, the lengthy period of uncertainty that lies ahead could be a big problem for publishers.
While there are too many moving parts at the moment for anyone to predict the future with certainty, the reality is that Yahoo’s newspaper partnership in the greater scheme of things is far more strategically significant to publishers than to Yahoo – or its potential new owner, Microsoft.
With all due respect to the newspaper alliance, it is hard to see how Yahoo’s share of the sales associated with the partnership could have amounted to even one whole percentage point of Yahoo’s nearly $7 billion in revenue in 2007. With far bigger lines of business and more momentous issues at stake for Yahoo and a potential acquirer, it is not hard to imagine how the newspaper project could be overlooked, sidetracked, or, in the worst case, scuttled.
Consequently, publishers would be well advised not to put all their eggs in Yahoo’s basket.
As discussed here, here and here, a dozen newspaper chains publishing more than 500 titles have entered into a multifaceted partnership since 2006 that would include jointly selling help-wanted ads on HotJobs, featuring Yahoo search on newspaper websites, enabling newspapers to tap into Yahoo’s banner ad network and providing newspapers with easy access to such technology as Yahoo maps.
While some publishers like Lee Enterprises achieved an initial lift as high as 56% in online sales in fiscal 2007 as the result of adding HotJobs listings to their want-ad inventory, other Yahoo partners fear such gains are unsustainable on an ongoing basis, especially with recruitment advertising shriveling as the economy stalls.
Further, publishers were disappointed recently to learn that Yahoo will be late in delivering the ad interface they had been expecting to beef up their banner inventories and fatten their effective ad rates. Sources say Yahoo told partner newspapers that the system would be delayed as the result of an internal reorganization occasioned by a plan to eliminate 1,000 positions to pare operating expenses at the 14,000-person company.
While the downsizing would be enough to distract any management team, Yahoo’s executives were handed a much larger challenge on Friday when Microsoft launched a hostile offer to acquire their company. As any company would be obliged to do in this situation, Yahoo now will go through the process of (a) trying to wriggle out of Microsoft’s embrace (perhaps with Google's help); (b) finding a higher offer from a competing bidder; (c) cutting a deal with Microsoft or an alternative buyer, or (d) all of the above.
To the extent Yahoo tries to fight what I would regard as its inevitable acquisition by Microsoft or a company like News Corp., Disney, General Electric or a financial buyer, Yahoo may elect in the near term to enhance its profitability as a free-standing enterprise by cutting expenses even more drastically than it had planned to do. If so, the newspaper project could be a casualty of Yahoo’s decision to focus on other, larger business segments.
(UPDATE 2.4.08: An example of Yahoo's desire to tighten its focus was the announcement today that it will turn off its paid music service, which has been a weak also-ran in comparison to competitors like iTunes. At the same time, Yahoo may consider outsourcing its core search and/or banner-ad business to Google, according to the Wall Stret Journal.)
In the event Yahoo and Microsoft (or some other company) agree to merge, two long and consecutive periods of uncertainty will ensue. The first period of uncertainty will be the lengthy review of the antitrust implications of a merger between Yahoo and the winning acquirer – a process bound to be complicated by Google's outspoken opposition to the deal. The second period, which would commence only after the first ended, would be the immensely complicated process of consolidating two enormous companies operating with two management teams in multiple locations with many overlapping lines of business.
Microsoft’s primary rationale for wanting Yahoo is to combine the search and advertising businesses of both companies to compete with you-know-whoogle. Search and advertising, of course, are two of the key areas where newspapers are looking for Yahoo’s help. While the eventual combination of Yahoo and Microsoft may produce stronger products and a more commanding market position for Microsoft, the time it takes to consolidate the two could cost newspapers months (years?) of revenue growth and hard-to-recover market share.
Taking the risk analysis to the next level, what if Microsoft decided not to support the newspaper alliance?
Many publishers still recall bitterly Microsoft’s ambitious, but ultimately futile, effort in the late-1990s to compete with newspapers by hiring local staffs to create elaborate news and entertainment portals under the Sidewalk brand (since subsumed by Citysearch).
While the Sidewalk debacle may have cured Microsoft of wanting to compete in this arena, a lot has changed in the last 10 years. Microsoft certainly could decide to take a run at the Yelps of the world with YahooLocal or any number of successor products that could be built from the vast array of search, mapping and other technologies the combined companies would have at their command.
In that event, newspaper publishers would be looking at the same problem start-ups face when deciding whether to deal with the 10,000-pound canary of the software business. “You don’t know if they want to mate with you or eat you,” goes the saying in Silicon Valley.
With far more formidable matters on the table at Microsoft in connection with the Yahoo deal, it is unlikely the folks in Redmond are thinking very deeply at the moment about whether they want to eat or mate with newspapers.
Even if the eventual answer is “mate,” however, the lengthy period of uncertainty that lies ahead could be a big problem for publishers.
posted by Newsosaur at 11:50 AM
3 Comments:
What do you make of Print Ads 2D Barcodes? It seems to me Yahoo has not innovated much, if at all, with their newspaper alliance. Instead they are peddling their low-CPM display ads.
In re the above post:
I think th idea is goofy, because nobody is going to jump out of his easy chair and run to the computer to scan an ad.
Agree, it is not only goofy, but has already failed. Remember how retailers (Radio Shack comes to mind) put barcodes in their print sale circular with instructions to scan to go to that item on their website? It succumbed quickly and painlessly to its lunacy.
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