Rupert and Jerry Could Mean More than "Our Space"
Okay, I’ve pulled myself away from the larger American drama of Barack and Hillary, and her coming "Alamo Firewall." Which brings me to another reality show. Maybe we could call it "Rupert and Jerry’s Our Space." (You know "Our Space is a very, very, very nice, place, with…….")
At the core of the proposition we know is a MySpace for 20% of Yahoo swap, providing a News Corp tentacle into the web’s largest aggregator. We can debate relative values of that swap every which way. What’s the real value of Yahoo; Microsoft’s current or next offer? Jerry’s $40 number? A real break-up number? The future value of MySpace itself? That’s a big number if you look at the out-sized duration and frequency numbers of MySpace and Facebook. That’s a smaller number if you absorb the lessons of Facebook’s Beacon — it’s hard to find socially acceptable ways to monetize a social site.
But beyond that path, I think News Corp’s further interest in Yahoo has all kinds of interesting angles. We can talk gaming (News Corp’s IGN/Yahoo Games), movies (News Corp’s Rotten Tomatoes/a struggling Yahoo Movies) and endless potential for sports (News Corp’s highly successful regional sports networks and Yahoo Sports. That’s just a few of them. You can play your own mix and match; just check out News Corp’s "Other Assets."
All those have interesting potential, but let me focus on two others, both of which seem like naturals of this moment in web time.
First consider business news.
Remember the justification for Rupert’s 60+% premium for Dow Jones? It was global domination of business news, in print, online and on cable/satellite (in addition to mobile, no doubt, as it develops). Sure, Rupert’s pulled back from a free wsj.com — apparently accepting the advice of his execs that the market for business advertising on the web, while lucrative, just wasn’t ready to support a free product. But that doesn’t mean he won’t relentlessly seek new audiences to monetize that costly content.
So put together the Dow Jones brands with the considerable power of Yahoo Finance. For Yahoo, the semi-exclusive ability to display DJ content would help Yahoo Finance break away from the pack of too-indistinguishable Google Finance, MSN Money and AOL Money and Finance. It could integrate lots of Marketwatch and selective WSJ and Barron’s content. Then there’s the fledgling Fox Business Network, which produces lots of content, but, oh, doesn’t really have an audience yet.
For Dow Jones, Yahoo brings many more eyeballs to the content and the parties can figure out how to sell and share the advertising. Wouldn’t that make a lot of sense for both companies, especially if Rupert has an equity piece of Yahoo as well?
Second, consider news video. One of the first areas that News Corp has moved on in achieving synergy out of the DJ deal is in video. Remember, Fox produces lots of news video and it is gearing up to produce even more with the web now firmly in mind. So just recently we’ve seen (check the brand) lots of Fox video showing up at wsj.com Video Center and the Marketwatch Multimedia (the two now offering the same videos).
Already, those in and around the industry tell me that $25 is the average CPM for news video, with top-branded business video selling out at $90 and now surpassing $100 CPMs. So if News Corp can gain preference on the web’s largest news audience, it can make a lot of money fast. Preference, you know, like Yahoo newspaper consortium members are getting on Yahoo Local pages. Preference works, creating new pages views and new monetization.
How well-equipped is Fox video to compete? Well, let’s think about what we watch.
Of the breaking news we watch, how closely do you watch and know whether the breaking news video is coming from? Whether it’s coming from Reuters or AP — now in fierce competition and producing more than 1000 news videos a month — or CNN or….Fox. If Fox can gain greater access to audience — beyond the newly bought Dow Jones properties, the monetization of that video can skyrocket.
Yahoo itself, as in so many other areas, has been behind the curve on video, with Comscore assigning a 3.4% of the video market to the company. Hence, its Maven purchase.
What’s news video worth? 2007 revenue totals weren’t huge — $500-750 million is the range of estimates — but it grew 40% YOY. It’s expected to grow 40% again this year and credible estimates put 2011 market size at about $4 billion. So yes, a News Corp/Yahoo video play could yield big and growing dividends as well.
If, against Microsoft odds, Jerry and Rupert do team up, expect a scorecard that goes well beyond social networking.