Yahoo-Microsoft Search Deal Leaves Newspapers on Sidelines

The biggest story of the Microsoft-Yahoo search deal for newspaper companies: What the deal doesn't include.

In a full-blown merger of the companies or even a broader partnership, the more than 30 U.S. newspaper companies in the Yahoo Newspaper Consortium -- more than half of the country's press by Sunday circulation -- might have seen some major impacts. With the deal, finally announced this morning, limited largely to search, that impact is minimized.

In fact, the greatest impact may be addition by subtraction. Newspaper companies like being able to sell Yahoo.com inventory, a key part of the consortium deal. They are also figuring out how to purpose the Yahoo APT behavioral-targeting technology to better sell their own site inventory. What they haven't liked is the uneven implementation they've seen from Yahoo, a company making its first major foray into the Vendor Land.

So if the deal gets DOJ approval, if it gets done "early next year," then, maybe Yahoo will focus more on the business that is key to Yahoo's -- and its newspaper partners' -- future: BT-driven display advertising.

"We would expect that with Yahoo now focused on display advertising, the response [to newspaper company needs] should be stronger," Mike Silver, the Newspaper Consortium's executive director told me this morning. "We would expect more resources....Yahoo has been open on its calls that it underestimated what it would need to do on APT."

Search advertising does have an impact on newspaper companies. Most consortium members take Yahoo search and paid search, both services that would be replaced by Microsoft's new Bing and related products. The newspapers' paid search deal with Yahoo has provided a steady, if small, revenue stream -- guaranteed -- over the first couple of years of their agreement. Last I have heard, not too many had exceeded that guarantee. So when Microsoft replaces Yahoo search, which will give it a roughly 30% share of search combined, perhaps it can drive higher search pricing. Google, though, is clearly still the big dog here, so don't expect a lot of new revenue in this developing paid search duopoly world.

What the deal doesn't include is Microsoft's usage of Yahoo APT; the companies have said they'll go their own ways in selling display advertising. That's a missed opportunity, potentially, for newspapers. As they perfect the art of selling Other People's Local, it would have been good to be able to sell Microsoft local as well.

What the deal doesn't include is HotJobs, still being shopped by Yahoo, and still a major revenue driver for many newspaper companies. Lucrative recruitment packages, though clearly hurt by the recession, have contributed as much as half or more of Yahoo-related revenue for some of the companies.

What the deal doesn't include is more traffic generation, a good Yahoo benefit, as it gives preference to newspaper content. No Microsoft preference in this deal.

Of course, all of this could have been worked out quite differently if newspapers had ever really been a search player. They missed that boat, though, several times.

They mistook the web for a browse medium early on. Then, the old troika of TKG (Tribune/Knight-Ridder/Gannett) almost got into the search business, coming close to closing a deal for Kanoodle, a search player that they wanted to make their own and industry-wide solution. They walked away from the deal at the last minute, though, fearful they were overpaying for a slice of what has turned out to be a $10 billion plus ad segment (paid search alone). So instead, today, they find themselves bystanders, watching from the sidelines as two of behemoths mate.

Comments

[sri]

Finally Microsoft has reached a deal Yahoo for an internet search partnership. Will the newly announced deal between giants Microsoft and Yahoo be a good thing to them and bad to Google? Got to wait and see. I was just curious to know all the past negotiations between Microsoft and Yahoo so collected all the articles and links (more than 200) related to the current merger and the previous events or negotiations between Microsoft and Yahoo. If you are interested check the link below.
http://markthispage.blogspot.com/2009/07/saga-of-microsoft-and-yahoo-from-2007.html

[geoff gevalt]

Ken,
Interesting post; it highlights, of course, the lack of clout of newspapers brought on by some amazing timidity and lack of vision 5 to 10 years ago.

As someone who spent 32 years in the newspaper business, I am really wondering whether they can do anything to catch up, particularly as they have chunked the innovators.

And can they get in the door as this deal is thrashed out to reclaim some of their once-strong franchise of reliable, edited, timely news....

cheers

geoff gevalt