Future may be murky for Yahoo and newspaper alliance

By Robert MacMillan

NEW YORK (Reuters) - An alliance between hundreds of newspaper sites and Yahoo Inc has helped publishers increase advertising, but it will saddle them with unproven technology and costs them some independence and flexibility.

Billed as crucial to U.S. newspapers whose print editions are steadily losing ads and readers, results of the program are hard to come by nearly a year after it began.

Some of the 19 publishers working with Yahoo say the partnership has brought them new readers and improved advertising in its first phase, which links classified ads between newspaper sites and Yahoo's HotJobs recruitment site.

"We pick up eyeballs. We gain traffic," said Dan Hayes, spokesman for St. Louis Post-Dispatch publisher Lee Enterprises Inc. "Yahoo had a beneficial impact in there."

Other publishers in the group include San Francisco Chronicle publisher Hearst Corp, Miami Herald publisher McClatchy Co, Cox Newspapers and Media General.

Some of the largest U.S. publishers including Gannett Co Inc and Tribune Co, who are developing a display advertising network of their own, are not members.

Wall Street says the companies that have joined the group have made an important first step after dawdling for more than a decade on striking deeper ties with online news disseminators like Yahoo or AOL.

"They have woken up to the fact that their hegemony in the local market is fading, and therefore they need a partnership," said Goldman Sachs analyst Peter Appert. Deutsche Bank's Paul Ginocchio said in a recent research note that the group could reverse ad revenue declines by 2009.

Some industry experts caution that the papers shouldn't bet on one strategy when it comes to advertising.

"My fear is they're going to think, OK, we've done this deal, we're OK now," said Jeff Jarvis, a media consultant and author of the BuzzMachine journalism blog.

In search advertising, Yahoo is losing ground to Web search leader Google Inc., which also is trying to enter the display market by purchasing DoubleClick. Experts point to new forms of Internet activity like Facebook and MySpace as other Web advertising opportunities newspapers may be missing.

The companies have revealed little about the terms of their deal, including how long they are locked in.

Much depends on Yahoo's technology for selling graphical display ads across the network of 400 daily newspaper Web sites, slated to start rolling out in mid-2008.

Alan Mutter, author of the Reflections of a Newsosaur blog, said Yahoo's technology beats what newspapers can do alone, but the company "is not the technology leader."

"Yahoo is the technology follower," he said.