Yahoo! and Newspapers Cement Their Partnership
Important Details: After a decade of pushing and shoving, 12 major U.S. newspaper companies have finally forged an all-encompassing network, embracing both editorial content and advertising sales. The network’s key partner and technology driver is Yahoo!, which has wooed the newspaper chains for more than a year with its media-centric pitch.
The new network has broad reach, claiming 264 newspapers in 44 states, including such titles as the San Francisco Chronicle, the Miami Herald, the Atlanta Journal Constitution, the Dallas Morning News and the Denver Post. The 12 companies comprise the broad middle section of the U.S. daily press, many of them legendary names: Belo, Calkins, Cox, Hearst, Journal Register, Lee Enterprises, McClatchy, Media General, MediaNews, Morris, Paddock and Scripps. Most notable among those names was the eleventh-hour addition of McClatchy, the U.S.’s second-largest news publisher. The company turned its back on a national ad network promoted by its classified business partners, Tribune and Gannett, and instead joined the consortium, bringing 31 papers and a ringing endorsement from its highly regarded CEO Gary Pruitt.
“The consortium demonstrates that our members recognize this plan delivers significant benefits to our advertisers and readers, starting almost at once,” he said. “We expect other newspaper companies will be joining in the near future, and they will be welcomed as allies whose participation will increase the benefits we can deliver.”
The partnership builds on the earlier announced agreement to share in the online recruitment business, merging newspapers’ online help wanted sales reach and listings with the new Yahoo HotJobs! platform. That program is scheduled to implement this summer when the platform is ready.
The new agreement goes far beyond that single, though lucrative, recruitment line of business. Going forward, Yahoo! provides the glue, in the form of contextual ad and content matching technology, linking local content and newspaper ad sales on the one hand and Yahoo!’s ad sales and 150 million unique visitors monthly reach on the other.
The initiative breaks down into three main initial parts:
- Advertising: Yahoo! offers its national online sales force, and newspapers harness their own substantial local sales efforts, aimed at “all-in-one buying” opportunities. This program uses Yahoo!’s graphical ad-serving, targeting and inventory management technology. The parties share ad revenue, based on who does the selling and where the ads are run.
- Search: Users will now see Yahoo! search across these newspaper sites, providing access to the web and of course linked to Yahoo!’s newly re-tooled “Panama” paid search technology. Customized Yahoo! toolbars will also be offered.
- Local Content: Yahoo! gains access to local content produced by these newspapers, integrating it within its “local news modules and delivering to Yahoo! users interested in local news, sports and finance.” Next up will be use of this content in Yahoo!’s evolving “Go!” mobile products.
Implications: This agreement marks the biggest strategic move in 10 years of newspaper internet history. While significant players – the New York Times, Gannett, Tribune, the Washington Post, Advance and others – remain on the sidelines, it’s a game changer for the industry, and a fundamental acknowledgment that one war has been lost. In the early days of the fledgling industry-sponsored New Century Network, newspapers thought they would be the main audience channels of the new medium. Though they were surpassed early on by portals such as Yahoo!, Lycos, Excite and AOL, they tenaciously hung to the stubborn belief that they’d defeat the upstarts and regain their rightful place in the news cosmos.
Now, with digital reading patterns turning to habits, and with advertising systems and technologies largely owned by others, they’ve decided that partnering with one major player is the best path. The newspaper leaders of the consortium – MediaNews, Hearst and Belo – deserve kudos for keeping a critical mass of newspapers at the table and getting the deal done. How well the deal works will be the product of many details, but Outsell believes they boil down to two main areas:
- Execution: It took yeoman’s efforts to finalize the agreement, with its performance clauses, revenue shares and exclusivity provisions. The hardest work though is ahead. Much of the value of the deal is in newspapers’ use of Yahoo! technology, first around ad serving and later in such areas as mobile, video and perhaps user-generated content. Best use of that technology will require integration at a fundamental level, and it can’t happen quickly enough to match the revenue hopes of the partnership. On the newspaper sides, integration with a motley mixture of platforms will take intensive focus. On the Yahoo! side, the company will have to get the famously balkanized parts of its own company to work together. Those are tall orders for all. On the sales side, newspaper print representatives have a history of uneven sales (and knowledge) of web products. Giving them license to sell Yahoo! products will also be a work in progress. As Yahoo! itself inevitably sells to national advertisers who used to place ads directly with newspapers or their reps, the companies will have to quickly find ways to reduce frictions and jealousies.
- Exclusivity: We don’t know how much contractual exclusivity is declared in the business terms. It’s clear at least that at least some pragmatic exclusivity resides in the newspapers’ use of Yahoo! ad serving systems. In effect, in tying itself to Yahoo!’s ad systems, the consortium members are making a big bet on what has been the #2 ad company on the web. Yahoo! has lagged Google in paid search, and just as Yahoo! announced early initial success with its own “Panama” paid search system, Google announced its own advance by buying graphical ad giant DoubleClick for $3.1 billion. So at once, consortium members widen their audience and ad reach, while probably foreclosing a number of other strategic partnerships that could open those gates even wider. Perhaps, that’s the deal they had to make, but it’s a roll-the-dice bet. Capture more potential audience and ad share, but risk becoming captive to a company seen as challenged in a Google-centric market.
The deal also portends much else – more outsourcing of traditional publishing functions, a perhaps final split among newspaper company brethren, an assumption that newspaper companies don’t have the technological mojo to compete and a belief that newer forms of advertising (like behavioral tracking, video-based and cost per action) will inevitably replace traditional cpm exposure ads. But all that is for the analysts of the deal. Yahoo! and the newspaper companies know they’ll be up to the elbows in hard work of putting first-stage plans into place.