Wednesday, January 14, 2009

Yahoo! for Yahoo? Yikes!

The appointment of no-nonsense Carol Bartz as the new boss at Yahoo is a cause for major concern at the hundreds of newspapers that ceded much of their technological future to the stumbling Silicon Valley giant.

If publishers can’t prove themselves in short order to be worthy partners for Yahoo by selling lots of advertising, the new chief executive, who is bound to be closely monitoring the relationship, could decide to curtail or abandon it.

That would leave participating newspapers “up the creek,” as one executive put it rather succinctly.

Some 770-plus newspapers owned by 32 publishers have come to rely on Yahoo as a primary provider of advertising technology and inventory. Newspapers sell ads on the HotJobs recruitment site and get paid 99 cents whenever one of their website visitors clicks on a Yahoo-generated contextual ad.

But the biggest and newest initiative is called APT, a platform for creating, scheduling and billing ads based on customer behavior.

APT, which is just edging into early beta tests at a handful of papers, could be the best thing for newspapers since the Linotype machine. Or not.

But its success will depend on the ability of newspaper salespeople to grasp and successfully sell something more sophisticated than X number inches on Y days of the week for Z dollars per inch.

I’m not saying they couldn’t do it. But some newspaper executives are worried.

While it still is early days for reps and advertisers alike, “our sales staff has not adapted and the product is not selling as quickly as we hoped,” said one exec. “If this washes out, we are up a creek.”

Through no fault of either Yahoo or the newspapers, APT is rolling out in the face of the worst economy since the 193os. Extenuating circumstances aside, APT's success will have a direct bearing on the future of the Yahoo-newspaper consortium. Here’s why:

Newspapers entered into the partnership with Yahoo because they recognized that they did not have the native capability or resources to fund technology development. Yahoo supplied the technology in return for a 50-50 share of future ad sales, recognizing the superior efficiency of selling ads to small and medium clients via the thousands of newspaper reps working in hundreds of markets across the country.

Now that Yahoo is under new management and hard pressed to raise profits to rehabilitate its stock price, the company’s new CEO will be closely evaluating which projects to expand, which to support and which to throttle.

If Carol comes to believe that newspapers are not likely to be able to pay back the investment her company has made – or will make – in developing technology for them, then she might curtail or kill the partnership. (For a second opinion, see this from fellow kibitzer Ken Doctor.)

To date, the dollars spent on the various newspaper projects have been “disproportionate to the outcome,” triggering envy in certain quarters at Yahoo, said a newspaper exec. For example, he noted, Yahoo loses money every time it pays a newspaper 99 cents for a click on a contextual ad.

The consortium already has lost a major champion in Yahoo president Sue Decker, who resigned her position immediately after learning she was passed over for the CEO position. Sue was a staunch supporter of Hilary Schneider, the former Knight Ridder executive who conceived and managed the newspaper project.

When Carol is done putting her stamp on Yahoo, will anyone be left to speak up for the newspapers?

Related posts

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3 Comments:

Blogger tom said...

I wonder who gave newspapers the idea that Yahoo was a technology company. Yahoo is a good online media company that keeps getting its fanny handed to it by google, the superior technology company.

Papers should've gone to Google from day one.

I will note, though, that click-to-pay is iffy without targeted content, and there are few products that naturally dovetale with your average shootout or city council report.

6:14 PM  
Blogger T Heller said...

"there are few products that naturally dovetale with your average shootout or city council report"

Very insightful, tom. (And excellent distinction of Yahoo from Google, btw.)

Thanks for providing an 'in the trenches' perspective on the (so called) "marriage" of journalism and the internet.

Personally, I think the marriage is headed for a divorce, otherwise the news industry and journalism will whither on the vine.

8:41 AM  
Anonymous Evil Pundit said...

"Through no fault of either Yahoo or the newspapers, APT is rolling out in the face of the worst economy since the 193os."

I question this point. The newspapers share the blame for the economic downturn.

The newspapers watched as the bubble built up, and their "expert" reporters failed to warn the public of the dangers. The newspapers watched as Freddie Mac and Fannie Mae were forced to extend loans to people who had poor prospects of repaying them, and failed to warn the public of the dangers.

Even as they were missing the big stories of impending structural failure, the newspapers talked down the economy for political reasons. Growing employment could not be acknowledged during the Bush years -- and every year recession was forecast because of some mysterious Bush-inspired factor. Meanwhile the real structural problems went unnoticed.

The economy was portrayed in terms of doom-and-gloom even while it boomed for seven years -- purely to damage the Bush administration. Since a large part of the economy depends on consumer confidence, this can only be seen as in effect a sabotage attempt.

I suspect that lots of economic "news" will suddenly improve after January 20th. This may not necessarily correspond to reality, though, as that has little to do with what appears on front pages.

1:09 PM  

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