NEW YORK (Reuters) - An alliance between hundreds of newspaper sites and Yahoo Inc YHOO.O 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 LEE.N. "Yahoo had a beneficial impact in there."
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. GOOG.O, 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.
One online ad sales chief at a major newspaper said publishers are gambling that Yahoo’s ad serving will beat Google and that they will have a say in how it works.
“The fact is, they haven’t built the Yahoo server yet,” he said. “Yahoo might build something even better, but the risk is that they don’t.”
Gannett and Tribune hesitated to join due to concerns about Yahoo’s ad technology and ceding leadership to the consortium.
Eric van Miltenburg, Yahoo’s executive in charge of the consortium, said Yahoo is having “good, positive discussions as it relates to their concerns.”
Local newspaper sales staff and Yahoo also are beginning to sell each other’s ad inventory, giving newspapers access to national advertisers while Yahoo taps the lucrative local ad market. They will share the money, but neither Yahoo nor its partners would provide details on the split.
The papers are beginning to use Yahoo’s search technology, while Yahoo will give their articles priority for registered users and local searches on its site.
Another Gannett worry is that publishers will cede too much content to Yahoo, leaving readers with little reason to visit its many local newspaper sites. Van Miltenburg disputed this.
“We’re not bait-and-switching,” he said. “We want to be the starting point on the Internet. That’s what a portal is.”
Yahoo’s partners should think about even less traditional ad partners, such as social networks, said Outsell Inc media analyst Ken Doctor.
“(They) should be doing a deal with Facebook and with MySpace,” Doctor said. “They’ve got to see it as the first step on the road to fully embracing the audience potential of the Internet, wherever that audience is.”
Another question is how much liberty is left to publishers in a large consortium.
Skip Cass, head of Belo Corp's BLC.N interactive group, said a steering committee meets once a month to discuss aspects of the consortium, and senior managers meet by telephone. "Learning how to work together is a big part of this," he said, adding that there have been no major disputes.
But for some publishers, it boils down to control.
“My goal is to be able to react to our customers’ needs, and if I can’t do that, that’s what they’re giving up,” said the online sales executive, who declined to be named because he was not authorized to speak for his company. “When you talk about loss of control of your business, that’s a big deal.”
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