Yahoo, newspapers expand partnership
SAN JOSE, Calif. - Twelve newspaper companies have joined Yahoo in a joint effort to sell ads and help readers find local news online, representing one of the broadest attempts by the struggling industry to cope with the challenges created by the continued rise of the Web.
Industry-wide cooperation has been seen as crucial to attracting online advertisers, who want to reach newspaper's online readers, but don't want to deal with dozens of different sales and technical departments.
"This is an agreement that's critical to our future," said Robert W. Decherd, chairman and chief executive officer of Belo Corp., a Dallas-based media company whose newspapers include The Dallas Morning News and The Providence Journal. "It's the way we are going to extend great journalism into an Internet environment."
But the agreement also carries a risk that individual newspapers will find their brands overwhelmed by Yahoo, while an expected windfall of online ad revenues fails to materialize.
Dubbed the "newspaper consortium," the effort was first announced in November. It initially included seven newspaper companies and 176 newspapers. Five more newspaper companies later signed on, including McClatchy, which owns 31 daily papers including The Sacramento Bee; Calkins Media; Media General; Morris Communications; and Paddock Publications.
The consortium now includes a total of more than 264 newspapers spread across 44 states. However, it leaves out key players, including Gannett, the largest newspaper publisher by circulation, and Tribune, the second largest. Gannett and Tribune have been developing a separate online advertising network.
"Others have talked about an industry-wide effort, others have dreamed about an industry -wide effort but this is the closest thing we have to an industry-wide effort," said Dean Singleton, chief executive of MediaNews and one of the architects of the partnership. MediaNews' 120 publications include the Mercury News and 25 other Northern California newspapers.
Singleton said the first phase of the partnership focused on job-related advertising because it was easy to understand and provided a quick upfront revenue boost. Under the agreement, participating newspapers replace their online employment ads with a link to Yahoo's HotJobs service and list jobs in HotJobs database.
In a conference call Monday morning, Sue Decker, executive vice president of Yahoo, said the search giant had gained more than 5 percent market share from competitors like CareerBuilder during the quarter that ended in March.
Singleton said newspapers gained from sharing employment revenues with Yahoo. He said the next phase of the partnership, announced Monday and which focuses on exclusive participation in Yahoo's ad network, is expected to be more lucrative.
Yahoo and the newspapers will begin to jointly sell online advertising later this year and share the proceeds. Yahoo's ad-serving software, which will let newspapers display graphical ads sold by Yahoo on their Web sites, will be installed by the newspapers next year.
The newspapers also agreed to install Yahoo's search technology, while Yahoo agreed to treat consortium members as preferred providers of local news across Yahoo's own network.
Gary Pruitt, chairman, president and chief executive officer of McClatchy, said his company decided to join the Yahoo group because "this is where the momentum is." While McClatchy has a stake in CareerBuilder and will continue to use it for job-related ads, Pruitt said he is fully participating in the agreements around advertising, search and content.
"The message to the other newspaper groups is come on board," Pruitt said.
Singleton said the third phase of the partnership, which is currently under negotiation, is auto and real estate classifieds.
While employment ads have suffered the most from changes in the industry, these areas are also feeling the impact of the Internet. According to Borrell Associates, newspaper recruitment advertising collapsed from $9 billion to $4.5 billion between 2001 and 2003. Automotive advertising was hit next, falling from $5.3 billion in 2003 to $4 billion in 2005.
Gary Borrell, chief executive of Borrell Associates, said real estate advertising is expected to plunge this year. "It's going to be horribly negative," he said.
Meanwhile newspapers' share of local online advertising has fallen 8 percentage points to 36 percent.
This trend does not necessarily bode well for the consortium. Local ad dollars are expected to zoom from $3.4 billion last year to $12.4 billion in 2010, according to the Bank of America.
"To some degree, this represents a panic at the local level," Borrell said. "Newspapers are saying we have to team up with somebody big fast."
Borrell said leads provided by newspapers to HotJobs (which Yahoo presumably pays for) could dry up as newspaper readers begin to go directly to HotJobs. That's the risk the newspapers run of acting as an intermediary, he added.
"In the end, the winner gets to be the bigger brand."