Yahoo & AT&T Market Moves Show Perils of Partnership
Important Details: Yahoo, which has become one of the U.S. news industry’s key partners, delivered news this week bound to be unsettling.
First, the company announced that it was expanding its agreement with long-time partner AT&T. AT&T’s 5000 local salespeople will soon sell Yahoo display ad products, leveraging Yahoo’s advanced, but still-work-in-progress APT behavioral targeting system. Then, word leaked out that Yahoo has been actively shopping its HotJobs recruitment product for two to three months. Finally, the on-again, off-again Yahoo/Microsoft buyout/partnership talks appear to be on again, raising questions of who will provide Yahoo search.
All three developments are potentially highly significant to newspaper companies.
Yahoo HotJobs’ program was Yahoo’s early lure to bring newspaper companies into the Yahoo orbit. Almost 600 of them rely exclusively on the platform, integrating online packages with their print sales. Traditionally, recruitment advertising has been among the highest-margin products. Of course, that market is currently in the tank. Just in the last week, the recruitment year-over-year reports underline the depth of recession: Gannett down 60%, McClatchy down 62.5%, Media General down 63%. Those revenues, of course, will rebound to some degree with an economic recovery, but with significant jobs growth predicted to be as much as a year away, those numbers have been devastating.
The APT program, embraced by almost 40 newspaper companies representing more than half of US daily circulation, has been made a cornerstone of many local newspaper companies revitalized sales initiatives. More than 160 individual properties are up on APT, with most of the rest in various stages of implementation with Yahoo.
There have been many hiccups along the way, yet Hearst, Scripps and McClatchy have been among those touting the benefits of APT. Behaviorally targeted-based, APT has been able to double pricing for some online products. That fact, in addition to newspaper companies’ ability to sell Yahoo.com inventory (at a 50% revenue share) in addition to their own has meant millions of dollars in new revenues already.
Yahoo CEO Carol Bartz acknowledged the program’s hiccups on this week’s Yahoo quarterly conference call, saying that APT had “over-promised.” “We have thrown a lot of bodies at this because it is [technically] inefficient,” she said. “Next year,” she hopes to move out some of those bodies, but Newspaper Consortium members will tell you that more people — support people — are needed, as Yahoo grapples with its new role as vendor, an uneasy fit for a freewheeling B2C company. That fit will, of course, be further tested by supporting AT&T, work that will be done out of the same Yahoo group.
In addition to the implementation issues, publishers are the first to say that the jury is still out on how much incremental revenue, in which categories, at whatever pricing, sticks in the market. The answers are absolutely fundamental to the numbers newspaper companies will be able to report in 2010 and their ability to grow again.
Finally, the next shoe to drop may well be Yahoo’s expected hook-up with Microsoft on search. If that partnership develops, Yahoo will presumably focus on APT and the display side of the business and Microsoft, using its new Bing search engine, will power search. Bing would presumably replace Yahoo search and paid search for the almost 300 Newspaper Consortium members that use Yahoo search products. That would give the new search combination more market power — about 30% of search — but surfaces all kinds of new questions as well.
Implications: The Yahoo partnership has been fundamental to the online growth strategies of the companies involved in the Newspaper Consortium. Smartly, the companies that structured the relationship understood that Yahoo’s growing sophistication with ad targeting and its wide reach were two things that newspaper companies were not going to match. Better to join ’em than fight ’em.
Though the process of implementation has been more problematic than anticipated, the Yahoo APT push has forced newspaper companies to re-examine the basics of how they sell and to whom they sell, two big questions for companies with decades-long habits of how to work the local marketplace. That learning has meant that a number of companies are now adding on other third-party relationships, ad-selling partnerships with companies like WebVisible, Zillow, Trulia, Google, ThePort and others. That’s all to the good, as long as those relationships are effectively managed, optimized and tracked.
Yet, the stream of news coming out of Yahoo’s Sunnyvale headquarters gives the newspaper companies pause, a concern we expressed as the deal took shape (see Insights, Microsoft’s Yahoo! Offer Offers a “Partner Pause” Moment, Feb. 5, 2008). For all their learnings and development of other relationships, for those companies in the Yahoo Newspaper Consortium, Yahoo has clearly been the big online bet.
Now, as Yahoo further splinters the local selling landscape, enabling (over time presumably, giving newspaper companies further time to act on their market head start) Yellow Pages representatives to sell the same products to many of the same potential customers, the Yahoo reliance raises uncertainty. Knowing that HotJobs could soon be in other hands and that the search may be provided by Microsoft compounds the uncertainty. Certainly, we can flash forward a year and see that the new Hot Jobs ownership or Microsoft relationship may actually benefit newspapers. Or we can see a future in which Yahoo may be sold entirely, or split up. The fact remains: newspaper companies are feeling, unaccustomedly, like spectators at the party, watching what others will do, actions that may seal their rocky fates one way or the other.
Such are the perils of partnering.
Outsell believes the week’s developments should simply serve as a strong reminder to newspaper companies about nature of partnering in the digital world. Today’s partner may be tomorrow’s competitor, and vice versa. That means corporate development and business development need to be strengthened, ongoing high-level efforts to find, manage, measure, optimize, and sometimes replace the many web alliances that are key to success.
The local ad-selling marketplace is bound to get only more complex. Even though Yellow Pages sales reps have traditionally been more service-oriented (about 70% of their business) than product-oriented (newspapers’ bread and butter), online it is becoming a free-for-all, as the new Yahoo/AT&T hook-up suggests. We’re also seeing local broadcasters eye traditional newspaper customers, and invest more in their own digital sales pursuits. Each legacy industry — newspapers, TV, radio, Yellow Pages — has its own habits to overcome, yet, each is embracing a similar mandate: Eliminate the order-taking culture and focus local ad salespeople on “consultative selling.”
If ad sellers think they have a puzzle to figure out, think about the ad buyers. Now there are many more people knocking on their doors, offering them “consultation” on marketing their goods and services. In the end, they’ll want to rely on only one or two “consultants,” and the battle is on to be one of them.