Monday, October 08, 2007

Yahoo! for Yahoo? Maybe not.

The jumbo online revenue gains at Yahoo’s newspaper partners may be transitory and short-lived, say publishers struggling to sustain initial lifts they fear they can’t replicate in the second year of the agreement.

While online sales increased in the neighborhood of 50% for some publishers who began cross-selling Yahoo’s HotJobs along with their traditional recruitment products, executives on the eve of the one-year anniversary of the partnership say it will be difficult in the second 12 months to equal its first-year success.

The Yahoo newspaper consortium, which launched in November, 2006, was forged by Belo, Cox, Scripps, Hearst, Journal Register, Lee Enterprises and MediaNews Group. Although publishers hailed the deal at the time as “transformational,” executives now are worried about maintaining the encouraging early momentum.

“We aren’t anywhere near matching the initial gains,” says an online executive at one of the earliest publishers to partner with HotJobs. “We are struggling and I don’t see how we are going to make it.”

If this experience proves to be commonplace, it would throw cold water on the idea that hefty, double-digit advances in online sales in the next few years could help Yahoo’s newspaper partners offset an appreciable portion of their declining print revenues.

As previously reported here, one Wall Street analyst hypothesized that the newspapers teaming with Yahoo could boost their online sales by a large enough amount to achieve positive over-all sales gains as soon as 2009. Paul Ginocchio, the Deutsche Bank analyst, premised his forecast on newspapers being able grow online sales by no less than 40% annually for a period of three straight years.

While year-to-date online ad sales at a publisher like Lee Enterprises are 56% stronger in 2007 than they were prior to the HotJobs deal, some executives are worried that the year-to-year numbers after the first anniversary won’t grow at anything close to the original pace.

Industry-wide, print newspaper classified revenue fell nearly 16.5% in the half of this year to $1.97 billion, according to the Newspaper Association of America. Although the NAA does not report online revenues by category, total newspaper online revenues gained 20.3% in the first six months. In the same period, Monster.Com, the leading independent online job site, reported a 22% gain in sales.

Even though Monster seems to be growing at a respectable clip, online newspaper sales can’t help but be dragged down by the eroding print side of the business, which historically was the reason help-wanted advertisers came to the newspaper in the first place. If advertisers are migrating to online vs. print recruitment, it doesn’t necessarily follow that they will stick with newspapers, especially since Monster often is cheaper than newspapers and Craig’s List is free in all but a handful of major markets where its top price for a help-wanted ad is $75.

In addition to the above challenges, newspapers face two additional hurdles in their pursuit of back-to-back years of 40% or 50% gains in their online-recruitment sales.

First, newspapers entering the second year of the Yahoo partnership won’t have the one-time infusion of new revenues they got when they initially added HotJobs to their existing recruitment efforts. A restaurant serving only lunch and dinner can boost its sales quite a bit by opening for breakfast. But it can’t add other meals in the second, third and fourth years to match the first-year bonanza.

Second, help-wanted advertising seems to be declining in concert with a real, or perceived, slowdown in the economy. Employers are thinning their payrolls in response to tighter credit, the housing slump and a feared pullback in consumer spending.

In fairness, there’s more to the Yahoo partnership than HotJobs. The venture also includes mutual cooperation in the sale of national, local and search advertising. While some of those products already are reflected in the improved online numbers for newspapers, it is likely they can be developed further.

At the moment, however, HotJobs is the major factor driving the Yahoo revenue surge. And the outlook for that vertical isn’t auspicious.

“We think recruitment advertising will slow further, even if the economy avoids a recession in 2008,” says John Janedis of Wachovia Bank.

So, publishers counting on Yahoo to rescue them may want to consider some alternative juju, too.


Anonymous Anonymous said...

Was anyone really expecting those revenue growth numbers to sustain themselves? You nailed when tou talked about the one-time infusion of revenue.

More to the point, though, is the fact that, at least from where I'm sitting, neither party is doing anything to leverage the content-sharing opportunities. If anyone stops and thinks creatively for about two seconds, you can see numerous ways in which papers could tap into Yahoo's technology and online utilities - eg: local search - in return for driving traffic across the Yahoo network. But apparently Yahoo was not prepared to collaborate in this way. And I'm not seeing much pressure or creativity from newspaper side. Everyone wants the quick-hit ad dollars. No one seems to want to heavy lifting that actually turn this into a viable partnership. Harumph.

3:14 PM  
Anonymous Anonymous said...


8:56 AM  
Anonymous Anonymous said...

Monster's growth numbers also include international activity, which isn't relevant to these newspaper deals in discussion.

Once Yahoo! has derived a formula for success working with the newspapers (i.e. leveraging the strengths of both parties), they have the potential to outperform both Monster (which they arguably already do) and even CareerBuilder, who pioneered this idea.

6:28 PM  

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