Friday, October 01, 2010

Schneider exit clouds Newspaper Consortium

The departure of Hilary Schneider at Yahoo could be a major blow to the Newspaper Consortium she founded, as well as many of the 800 newspapers that count on the partnership to boost their online revenues.

The four-year old Newspaper Consortium was formed to help publishers in two ways: By giving them the opportunity to sell unsold inventory on the vast number of websites operated by Yahoo and by using data supplied by Yahoo to increase the rates that publishers charge for targeted advertising on their sites.

But the future of the consortium, which has had several ups and downs in its short life, could be endangered by the upcoming departure of Hilary Schneider, a former senior vice president at Knight Ridder who rose to the position of executive vice president for the Americas at Yahoo.

As originally reported here by Kara Swisher at All Things D, Schneider is departing the troubled mega-portal along with two other senior managers. The company confirmed here that Schneider will be gone after a “transition period” expected to conclude by the end of the year.

With widespread changes in the upper echelons at Yahoo likely to lead to a review of corporate priorities, it is safe to presume that the Newspaper Consortium will come under close scrutiny.

This would seem to be particularly the case, given that Yahoo boss Carol Bartz in the past has voiced tepid support for the newspaper project – which was launched prior to her arrival as chief executive in January, 2009 – and that Schneider, the program’s champion, won’t be there to defend it.

Schneider, who rose rapidly at Yahoo after losing her post at Knight Ridder when the publishing chain was sold in 2006, put together the consortium with several former colleagues from the newspaper industry.

The seemingly symbiotic partnership gave newspapers access to sophisticated ad-targeting technology created by Yahoo, while giving Yahoo access to thousands of local ad reps in hundreds of markets across the country. With 800 participating publications today, the consortium has some 30,000 newspaper reps available to represent it.

Newspapers joined the consortium because they felt they did not have the native capability or resources to fund technology development. Yahoo supplied its technology in return for a 50-50 share of future ad sales, recognizing the superior efficiency of selling ads to small and medium businesses through a sales force hired, trained, managed, supported and paid by publishers instead of Yahoo.

The problem with this arrangement is that the complex Yahoo ad-serving platform, called APT, took longer to build, cost more money and worked less well than had been anticipated. Further, many of the participating papers proved to be less than adept at selling the expanded inventory available to them. When Bartz arrived at Yahoo in early 2009, newspaper industry sources said Yahoo actually was losing money on the deal.

Since then, Bartz has complained to securities analysts in earnings calls that the program has been more complex and less productive than hoped. At a meeting of the Newspaper Association of America in the spring, one participant recalled, Bartz said she “probably” would continue the program only “if the papers start selling.”

Some publishers did notably well selling ads through the consortium, which sold $42.5 million in Yahoo inventory as of the end of August, according to a presentation recently distributed to members. However, said one participating publisher, only a handful of companies are performing well and a whole bunch are doing squat.

Some publishers seeking recently to join the consortium report that they were rebuffed by Yahoo.

“Newspapers have required more hand-holding and service from Yahoo than originally expected, and even then they have not sold very well,” said one newspaper ad specialist. “So, the emerging picture is one of a low-margin, high-cost business for Yahoo against a background of increasing openness on the part of local advertisers to deal with Yahoo directly.”

As if Schneider’s departure were not bad enough, some of the key newspaper executives who founded the consortium also have moved on. They include Eric Grilly, a former MediaNews Group executive who now works at Comcast, and Rusty Coates, the former digital chief at E.W. Scripps who has left the newspaper business.

In light of the above circumstances, some observers feel the days of the consortium may be numbered. “Hillary's departure,” said one, “looks a wee bit scary.”

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4 Comments:

Blogger Martin Langeveld said...

$42.5 million sold by 30,000 reps in 8 months? That's only $177 per rep per month, split 50-50 in most cases. (And in reality concentrated among relatively few publishers who figured out how to make it work for them.)

For most of the papers, it's not enough to cover real costs and lost opportunity costs.

On the Yahoo! side, they have to figure a lot of this business might have come to them directly anyway, and that they probably would do better if they cut the cord and boosted their own local sales efforts.

5:59 AM  
Blogger Gordon Borrell said...

I doubt the exit of Ms. Schneider signals that Yahoo will walk away from a strategy to empower the estimated 93,000 local ad salespeople -- 30,000 of whom work for newspapers -- to rep the Yahoo network. It's a smart strategy, not confined to newspapers. AT&T, which has the largest local advertising sales force of any single company (5,000) is also quietly repping Yahoo, with promising results. I know it seems vogue (especially on these pages) to bash newspapers and anyone foolish enough to do business with them, there are indeed bits of strategy that make perfect sense. This is one of them, though it may boost the banner-ad revenues of Yahoo and the newspaper industry only a few percentage points each. If the departure of a single executive pulls Yahoo from that strategy, I'd say they might have removed the wrong executives.

7:07 AM  
Blogger Gordon Borrell said...

Sorry, I should have been clearer. There are 30,000 newspaper reps nationwide, only a small percentage of whom sell Yahoo ads. I don't know what the average per rep might be, but I do know that Yahoo would sink itself if it hired local sales forces, and the newspaper industry would be dumb to continue fishing only in that tiny stream of traffic it controls on its own website. Newspapers have to give up this issue of controlling the media and understand that their salesforces are leverageable commodities that are valued very highly by Internet "pureplays." Local advertising is sold, not bought. It takes reps. So I sincerely doubt that the ads will come to Yahoo anyway. Local business owners aren't likely to wake up one day and say, "Hmmm. I think I'll buy a banner ad on Yahoo."

8:03 AM  
Blogger Peter Ibsen said...

Newspapers shouldn't have rented themselves out to Yahoo in the first place. Yes, they can make some incremental revenue short term by giving their sales reps a complementary product to sell while demand in the print space is declining. But they do not build any long term value - on the contrary, they give a tremendous hand to Yahoo helping Yahoo get smarter and smarter as APT's knowledge base on consumer behavior increases.

And this is the true asset for a future that holds fantastic opportunities for smart ad networks that can truly target an ad to a consumer - but in order to target well you need to build the knowledge base. And in this case that knowledge base is owned by Yahoo.

Newspapers need to build their own local ad networks. They should not only sell ads, they should also sell ad serving capabilities to any local web site they can convince to participate in that local network. No one else have the local representation to build such networks, and when in place, these networks will become smarter and smarter every day. The knowledge about local consumers the local networks will gain from local vertical sites like those for schools, sports clubs, local blogs, local companies, associations, etc. will be unmatched by any national network. Add to that the knowledge gained from the papers own sites, classifieds portals, directories, etc. and it will build significant long term value for the papers and give them a true "survival" option.

And this is not going to cost the papers an arm and a leg - the technology is already available for a modest serving fee.

8:06 PM  

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