Yahoo signals major challenge to newspapers
Yahoo appears to be getting ready to produce local websites filled with original content that could compete with newspapers, posing a particular challenge to the hundreds of publishers who now sell advertising for the powerful portal.
The apparent intention to target the sweet spot for publishers was signaled last month when Yahoo announced plans to buy Associated Content for $100-ish million to gain access to some 380,000 individuals who are willing to write articles, take pictures and produce videos for rates starting at $2 per effort. The deal is scheduled to close later this year.
Insiders here in Silicon Valley say the odds are strong that a good number of those content producers will be deployed to cover local news in the hope of assembling ever-larger audiences for the premium-priced advertising that Yahoo sells via the rich user database it has amassed over the years.
Assuming the fare produced by Associated Content is sufficiently respectable to attract and retain substantial audiences, then Yahoo’s ability to deliver targeted ads – combined with its overwhelming market presence on the web – will give it significant advantages against the incumbent newspapers operating in most markets.
This could make Yahoo the most formidable single competitor yet to take on newspapers. Here’s why:
As one of the largest and oldest portals on the web, Yahoo knows at least a little something about almost everyone who ever has gone on line. In fact, it knows lots more than a little something about most of us. Using that information, Yahoo can target advertising not only to a person’s location but also to her demonstrated online behavior.
Publishers know the extent of Yahoo’s power only too well, inasmuch as some 800 of them partnered with the company through the Newspaper Consortium in the last few years to sell targeted advertising that enabled them to charge as much as $15 per thousand page views for banner ads that, absent targeting, might have gone for maybe a buck or two per thousand.
The concept is described below in a YouTube video posted by the Peoria Journal Star, one of the affiliates of the consortium.
To date, the publishers who took full advantage of Yahoo’s targeted audience data were able to generate handsome improvements in their online sales. Yahoo, in turn, benefited not only by having access to abundant ad inventory on high-traffic local websites but also by leveraging the thousands of well-connected ad sales people fielded by the hundreds of participating publishers.
The nature of this mutually beneficial relationship could change – not necessarily for the better for newspapers – if Yahoo starts running local news sites of its own.
After mustering the Associated Content crew to produce local stories at far lower cost than any newspaper, Yahoo can use its vast reach on the web to point users to its own websites. As one of the five largest destinations on the web, Yahoo’s traffic of some 70 billion page views a month is more than 100 times greater than of NYTimes.Com, the busiest newspaper website of all.
Here’s how a major foray by Yahoo into local-news could put members of the Newspaper Consortium in a pickle:
If publishers let their reps sell advertising for Yahoo’s local sites, the newspapers potentially can tap into a welcome new revenue stream for themselves. In so doing, however, the publishers face the danger that a great deal of the traffic now attracted to their own sites could be diverted to Yahoo, instead.
With digital media being the future for local newspaper franchises, strengthening Yahoo’s hand as a competitor for online and mobile local news would be strategically suicidal for newspapers.
Even if publishers decide their short-term economic interest requires them to continue selling ads for Yahoo, the nature of this relationship could be strained, if not changed. With Yahoo having the power to produce and promote local sites on its own, the balance of power in the current, reasonably symmetrical partnership will shift to Yahoo.
Where will that put consortium members? Will Yahoo demand a larger revenue share from publishers in exchange for access to its targeted audience data? Or will Yahoo simply terminate the relationship with publishers so it can engage alternate sales agents to pursue the local news business?
Assuming Yahoo and the publishers find a basis for sustaining their partnership, newspapers in the consortium will be in the position of being deeply beholden to the portal for the technology necessary to remain competitive in the increasingly important realm of targeted advertising.
Publishers in the consortium conceded too much when they elected a few years back to outsource the development of this sort of strategically decisive technology to Yahoo instead of getting together – as they could have done – to build it themselves. Now, those decisions may come back to bite them.
Newspapers that are not members of the consortium could be even worse off than those who partnered with Yahoo. In the event of a competitive thrust by Yahoo into their markets, they could be dangerously ill prepared and frighteningly over-matched.