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Yahoo / Newspaper Deal…

Now that I’ve had a chance to digest the deal wanted to put out a follow up post.

The Yahoo/Newspaper consortium represents a deal between two large, traditional advertising entities both looking to shore up their weaknesses. But the deal, in my opinion, is not bold enough to address the seismic changes going on in the classifieds market.

  • Newspapers need to dramatically grow their online audience. Classifieds generate ~70% of their profit (>40% of their revenue). They have steadily been losing share of the online audience as this business move quickly online.
  • Yahoo is desperate to find ways to compete against Google in online advertising. They’re hoping that the newspapers, with their sales teams and relationships with local advertisers, will help them penetrate the local, online advertising (along with video, one the last big frontiers in online advertising).

The deal sounds great especially in the short run, but may have long-term challenges. First for the newspapers, it’s not clear how they retain account control with local advertisers over time. If local advertisers get 90% of their online leads through Yahoo, who are they going to call when the deal ends?

Second from Yahoo’s perspective, it’s hard to believe that Newspapers represent the secret sauce they need to crack the local online advertising opportunity. Businesses such as CareerBuilder leveraged the newspaper sales teams early on in building their business. They quickly evolved however and developed their own in-house sales machine.

Most significantly and for both parties, the deal fails to help either entity address the seismic changes that are occurring within the classifieds business and position them to better compete with threats like Craigslist or Googlebase. Publishing is a commodity on the Internet. The days of getting $500 (or more) to post a car/job/real estate classified online are numbered – with or without more online reach.

Like all other forms of online advertising, value is only created when leads are delivered to an advertiser. Today, a car dealer has an increasing number of options about what to do with their listings. They can pay hundreds of dollars to publish their listings online with the local newspaper. They can publish their listings on their website for free, advertise them on Google and only pay when people are delivered to their listings. They can also publish them for free in Craigslist and choose to spend their time reposting them again and again to help drive traffic.

Oodle is working with newspapers and other companies who see an opportunity in the midst of this disruption. And this includes the San Diego Tribune (that is also now working with Yahoo Hot Jobs). Although it’s difficult for a newspaper to try and transform their entire business over night, I think it’s essential that they begin experimenting with new models in other classifieds categories (merchandise, pets, services, tickets, etc.) where they can take on more risk.

One Response to “Yahoo / Newspaper Deal…”

  1. January 11th, 2007 at 8:48 am

    Newspapers Create The Orbitz of Online Newpaper Advertising » Emad Fanous says:

    [...] It’ll be interesting to see what the future holds for them, who will purchase part of or all of whom, who chooses to increase revenues versus cut costs, who will join forces with whom, etc.              Permalink [...]

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