Newspapers: Be Careful Who You Consort With?

Sounds like a safe sex campaign, doesn't it?

Talk to many in the industry about the Newspaper/Yahoo Consortium, and you hear:

• We need more distribution, and Yahoo's got the eyeballs.
• We've proven we can't do it all ourselves.
• Why Yahoo? Because they're the ones who want to dance with us.

All  true.

The 22 companies that have signed up to be part of the consortium have recognized an historic reality: the worlds of content creation and distribution have inevitably changed.

But the lingering question as the consortium tries to find its legs has been: Is the industry putting too many eggs in one basket. Immediately following question: How strong's the basket?

We got one sense of the basket's strength yesterday as word dribbled out that the company may cut 500-700 jobs out of its workforce of 14,000. That's not surprising, given its inability to compete with Google in search or paid search, and the much-laughed-about peanut butter culture that still sticks to the place more than a year after the Garlinghouse memo.

Yes, Yahoo says it is finally jettisoning more things that just don't work or duplicate each other, or things they just can't recall why they started, and that's long overdue. We'd believe that Yahoo's commitment to the consortium and newspaper partners is strong, given Jerry Yang's determined focus to please "regular users, Internet publishers, advertisers and developers" -- if we consider newspaper publishers "Internet" publishers and if we don't take that list of four groups as encompassing too much given Yahoo's resources.

But as newspaper publishers look more to deepen the consortium, going beyond the phase one of HotJobs to the phases of integrated advertising, they might pause to consider what some analysts are saying. Take this comment, for instance, from a Mercury News story:

Noting that Yahoo's share of Internet searches fell from 22 percent to 17 percent in the past 12 months, Jeffrey Lindsay, an analyst with Sanford C. Bernstein, said in a recent research note that Yahoo should outsource paid search, automate display advertising and get rid of one in four employees.

Now that's just one analyst, but the point shouldn't be lost. Yahoo may well be forced into cutting far more employees. And it may get out of some basic businesses -- including paid search -- businesses that newspaper consortium are looking to big brother Yahoo to help them with. If Yahoo's Plan A, what's Plan B?

Comments

[Arul Sundaram]

Ken - great post. I, too, think Yahoo will remain committed to the newspapers, but it will definitely be interesting to see how this all plays out. Today, Yahoo doesn't break out the contribution that its newspaper consortium delivers to the company. In my opinion, unless there's some clear measurement and recognition of this value at the executive level, it's absolutely possible that the newspapers start to see a declining focus from Yahoo.