Yahoo!’s Deal with Newspapers Acknowledges Realities of the Day
Important Details: After 18 months of protracted negotiation, seven of the largest U.S. newspaper companies have come to terms with Yahoo! on a potentially far-reaching agreement. That deal touches some 13 of the nation’s 15 largest markets and somewhat less than a quarter of the industry’s readership, including Atlanta, Houston, San Francisco, Denver, and St. Louis. In total, it involves 176 daily newspapers. The agreement is the first major partnership including both a wide range of newspaper companies and the intention to go far beyond traffic-generating distribution deals.
In its first phase, and at its base, the deal is about the most lucrative kind of newspaper advertising: recruitment. Yahoo! builds on its existing, smaller-scale agreements with MediaNews and Belo in the new deal, which included five other middle-rank publishers: Hearst, Lee Enterprises, E.W. Scripps, Cox Newspapers, and the Journal Register Company. Though the companies negotiated somewhat as a group, each signed a separate agreement with Yahoo!
The agreement lays out an ambitious future:
- Recruitment ad partnership: Publishers will feed their job listings to Yahoo! HotJobs, for distribution throughout the HotJobs network. With added distribution, both Yahoo! and the publishers will see new revenues, though no revenue splits were announced. In addition, publishers will use the HotJobs platform. Yahoo! will receive branding on the newspapers’ recruitment sections.
- Local news: Yahoo!, the No. 1 news site on the Web, has long coveted deeper local news content. Though few details are yet clear, the publishers have agreed to provide streams of local news for easier access by Yahoo! readers. Importantly, publishers will provide a better-mapped, better-indexed feed that will allow Yahoo! to better process content, remove duplicates, and display content through its many distribution channels, desktop and mobile. This part of the deal builds on the Associated Press/Google agreement earlier this year, which established such feeds as a valuable asset.
- Technology: Yahoo! will provide some of its advanced content handling/content display tools to publishers. Especially in databased areas like calendars and city guides, such tools may help publishers make better use of the content they already produce but haven’t made easily searchable and usable.
- Other advertising: Yahoo! already has numerous deals with publishers for its Yahoo! Publisher Network search and contextual ad programs. The new agreement announces the intention to deepen the advertising connections between publishers and Yahoo!, making better use of each one’s assets. Publishers bring long-standing advertiser relationships and contracts; Yahoo! brings massive distribution and an improving ad matching system (as it deploys "Panama") to the mix.
Dean Singleton, CEO of MediaNews, was the lead organizer in the agreement, with Eric Grilly, president of MediaNews Group Interactive, among those hammering out the deal points. Singleton’s company has risen from relative obscurity to the No. 4 position in the U.S. newspaper industry, with its recent acquisitions. He made clear that he considers this agreement a centerpiece in the reckoning of newspapers’ role in the new economy: "Many people have asked this question: How will newspapers navigate in the growing, online future? We believe this is the biggest answer we’ve found thus far."
In a related development, MediaNews, Lee, and Hearst announced that they were buying CareerSite from ad network PowerOne. All three publishers have been equity participants in PowerOne, and this move is linked in time to the Yahoo! agreement, as the publishers integrate and streamline their recruitment businesses.
In Outsell’s Opinion: This is a landmark deal. It’s a frank acknowledgment that Round One of the newspaper/portal battles is about over, and the portals (remember that ’90s lingo?) have won. Ten years ago, newspapers thought they could be the portals – their customers’ on-ramp to the Internet and to news, classifieds, and calendars generally. Time has proven them more wrong than right. They’ve developed competent city-by-city Web sites. But in failing to learn the lessons of networking (the New Century Network, one such idea, failed in 1998), of the value of search, and of the foundational role of technology, they’ve come to this point of acceptance and acknowledgment. We can see those both in this agreement and in the recent newspaper partnership with Google, in which Google will sell print ads for the papers. Among the acknowledgments:
- Content-creation companies is primarily what newspapers publishers are, and their content uniqueness is mainly around local content.
- Technology is not a core competence, and partnering with a Yahoo! is going to make more sense for tips and tools, and ultimately perhaps for publishing platforms overall.
- Advertising isn’t what it used to be. Newspapers no longer own their local ad markets. They need both the reach of the Yahoo!s and Googles and those companies’ state-of-the-art ad matching technologies to meet merchant needs.
- Reaching customers isn’t what it used to be. This is a great reckoning that the big lead Google, Yahoo!, and MSN have in reaching customers – for news, classifieds, and shopping generally – isn’t going away. This is an accommodation with the great sales channels of our time.
That’s a heady list, and one that means that other deals, perhaps as big or bigger, will be in the works among these companies and their brethren, both among newspaper publishers and search aggregators.
In fact, one direct impact of this agreement is an adjusted reality in the online recruitment marketplace. HotJobs has long been a No. 3, behind current industry leader CareerBuilder and Monster Worldwide. CareerBuilder, now owned by Gannett, Tribune, and McClatchy, will find renewed competition from the reinvigorated HotJobs. Monster, meanwhile, is busy inking its own agreements with newspaper publishers.
This competition offers two key takeaways: 1) the newspaper industry, long splintering, is now split, in a key product line; 2) expect a more hotly contested battle among those top three in the recruitment marketplace.
The deal comes at a crossroads point for Yahoo! Falling farther in both paid and free search to Google, and with its share price challenged, Yahoo! is seeking its path forward. Just before the newspaper announcement, a leaked memo penned by Yahoo! SVP Brad Garlinghouse excoriated the company’s lumbering pace and failure to make strategic, focused decisions. Some observers have painted the newspaper pact as a mating of dinosaurs, Old Media, and New, Old Media. Outsell believes that’s overstating the point. There remains much revenue in recruitment advertising over a number of years. Still, Yahoo! HotJobs, CareerBuilder, and Monster have to contend with three powerful recruitment forces, all conspiring to take money out of their pockets:
- Niched job sites – there are some 40,000 online recruitment sites overall – will nick away at the big guys. Finding the right employee for the right job is a pinpoint exercise by its nature, and those sites that deliver the pins best will be used most.
- Technology itself continues to improve, making the matching of jobs and jobseekers more accurate and efficient and potentially enabling employers to more directly find talent without as much aggregator intervention.
- The craigslist Effect has sucked tens of millions of dollars out of the recruitment market – print and online – already. As free or very cheap matching sites progress, especially those offering the patina of community, there’s less money for everyone in the trade.