Content Bridges

Frankly, Candidly, Truthfully: Newspapers CEOs Talk About 2Q

It's time for second-quarter newspaper earnings reports, with Gannett leading off Wednesday, with the long tale of woe to follow. Given the many newspaper staff cutbacks, which I thought might include the investor relations people, I've put together a few boilerplate remarks that I hope are helpful.

Good morning. Let me say I’m glad that the few remaining financial analysts covering the industry want to hear about our second quarter results. Our CFO will be giving you the details on those in a few moments. But let me make a few introductory remarks first.

Frankly, visibility has gotten worse. We told you in the last quarter that it was limited. Well, now – did you see that George Clooney movie “The Perfect Storm” -- we’re smack in the middle of the biggest fogbank you’ve ever seen. Some of you have asked why print revenues have fallen off the table. Frankly, I don’t even see the table anymore. What I see though, I don’t like. Some of you have asked to see what I see, and I’ve got to tell you, it’s better not to.

Excuse, me, I think I’m being Twitterized, isn’t that what you call it? Rupert keeps buzzing, like I’m media so I can be in Sun Valley and you newspaper rats are stuck in your hot, brick buildings. But back to the subject at hand.

First, let’s address costs.

We’re having our people talk to Dean Singleton’s people – I’m not talking to Dean directly; I think that’s how Ganzi got in trouble – about centralized printing. Frankly, Dean’s better than us at thinking outside the box, and we’re talking about one large printing plant, somewhere in the low-wage rural West, and then distributing the papers almost instantaneously, through some kind of system of high-tech pneumatic tubes. Apparently, it’s part of that Google Print deal, involving Google Flux technology. Sounds almost like back-to-the-future, but my people tell me it’s got potential.

You all know that Goldman Sachs is now predicting 30% year over year increases in newsprint pricing for the second half of the year. For some reason, all those Indians and Chinese are buying up newspapers like there is no tomorrow, driving up paper usage and pricing; I’d like to know their secret sauce.

As you know, our biggest cost is people.

On staffing, some of you have asked why we don’t cut more, and some of you have asked why we cut so much. Which proves I think that we’re taking the right, down-the-middle approach.  To tell you the truth, it’s a whole new world out there. Journalism schools seem to be stealing away our most experienced talent. Then there’s ProPublica, which considers itself some kind of high-minded, non-profit, picking off our highly prized investigative reporters. Then there’s the allure of these pajama blogger start-ups; did you see that Rafat Ali guy just got a big payday selling his site to the Brits? I always wondered if his work permit was in order.

We do realize that we need reporters, but frankly, they are a pain in the ass to deal with in good times. And, now, always in a bad mood. I’m told all the so-called “content” they create will prove very valuable online, even if we have to shrink the paper to the size of a menu. I just keep asking how soon?

Now let’s talk about revenues.

On ad sales, we’re thinking of adopting more self-service techniques. Hey, if you haven’t seen that YouTube video on how publishers can make more money using Google’s system, you should.

Our big initiative, of course, has been our work with Yahoo through the consortium. We’ve bet most of our 2009 growth on using its AMP system – or whatever they call, seems they have some legal problem on that, but they’ve got enough lawyers to work it out. Frankly, we love it. They do all the technology hocus-pocus, and our sales people just sell more stuff. You know, when they are over there golfing in Scotland with the car dealers and all, they just ladle on some more online products, and we can make some new revenue.

Some of you have asked what if Yahoo gets sold or split up like an estate. To tell you the truth, we haven’t a clue. Frankly, we don’t think it’s fair. We finally get our, excuse me, stuff together with the consortium, and then Steve Ballmer and Carl Icahn have to spoil the whole thing. We can’t seem to catch a break. We try not to think about how we’ve placed the continued viability of the American newspaper industry on the fortunes of Yahoo. I, for one, sleep better, not thinking too much about it, after 9 p.m. Anyways we have the firm assurances of Hilary Schneider that one way or another, it will work out okay, and my people say her track record certainly bears that out.

On content, you’ve asked what we’re doing in video. Lots, I’m told, though it’s not easy getting those union photographers to deal with things that move, my people tell me. Anyhow, AP’s on top of it, I hear; and yes, we plan to stay part of the AP. We’re now paying on a month-to-month basis, though I think we discontinued the use of the IndyMac card on that one.

Now, let me talk about the company overall.

We’ve previously announced that we’ve engaged strategic consultants, which – I won’t be fancy about it – is a way to say we’re offering for sale anything anyone would like to buy. Sam’s running a seminar on selling the real estate out from under each of us; my people are going, and I told them to watch their wallets. Craig still seem to have some cash – I want you to know that while I’m sure he earned every penny of that $7.9 million last year – we’re a tad more prudent than Gannett, and my compensation shows it. 

Yahoo: The Final (Star) Trek?

Yahoo's announced reorg prompted more huhs than huzzahs last week. For instance:

• "The statements from both Sue Decker and Jerry Yang sound sort of like B-school jargon with the soothing tone of a dentist’s assistant, none of it really acknowledging that anything is wrong at the company." (Joseph Weisenthal, Paid Content)
• "Let me keep it short and sweet: Decker is a charmless Wall Street type who's bad at managing people. Patel's main skill, one that has kept him at place in Yahoo for 12 years, is managing up. His second talent: making excuses for the fact that he's rarely seen on campus before 10:30." (ValleyWag)
• "They replaced one highly ineffective model with another highly ineffective model," said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. "It's not clear from this what it's intended to achieve. It seems to be a greater centralization of power and structure that's been tried many times by other companies in the Internet space, particularly AOL, and it never works very well."

One big impact of the re-org: the further ascendancy of Hilary Schneider, to head the new "U.S. go-to-market group," a move that I noted last week would signal continued substantial resources for the newspaper consortium. Schneider will have Scott Moore's Yahoo Media group, reporting to her. That raised some eyebrows among the legion of Yahoo watchers, which Hilary dismissed in a PaidContent interview, suggesting that Moore and she will be of single mind, literally: “It’s a Vulcan Mind-Meld.” More spooky than Spockian, but it suggests the real new Yahoo strategy, hinting at how the new (really!) Yahoo can embrace Trekkie mojo to find a path to independent survival. For instance:

• Hearing Wall Street's increasing skepticism about Jerry Yang's rosy projections in the out-years, Yahoo replaces revenues, uniques, RPMs and time spent on site, with a new metric: warps!

• There may be some truth to the rumor that Yahoo countered Google's offer of Sergei Brin-sponsored space travel with free rides in the teleporter. Media News Dean Singleton was seen with a broad smile on his face as he mouthed, "Beam Me Up!"

• Clearly, no one at Yahoo has yet mastered "Star Trek: The Next Generation - A Final Unity," the Spectrum Holybyte game. We know that because the big announced re-org left a major job un-assigned, the head of a new Insights Strategy team, just the team charged with the meager task of unifying strategy and understanding across Yahoo's too-many platforms.

• Over the weekend, Photoshopped pix of Carl Icahn as The Borg began appearing in Yahoo break rooms.

• New Yahoo talking point: We're not capitulating to Google; we're just joining The Federation!

• Responding to the exodus of those execs departed or re-orged, Yahoo announces the use of its new Exec Replication technology, acquired in the semi-secret Pink Lithium buy. "We don't have to pay benefits or spend lots of money on training them on the Yahoo way. We just make more of people like us!"

• Last resort: Borrowing William Shatner from Priceline, a company with an unambiguous business model,  to revive the Yahoo! Yahoo!!

Yahoo and Newspapers: Playing with Fire

As Yahoo burns, the newspaper industry watches, hoping it won't get singed.

The Google/Yahoo search ad agreement has drawn lots of comments over the past couple of weeks, but its impact on newspaper consortium members has gotten little attention. The deal itself, if implemented, won't have much immediate revenue impact for newspapers, but its strategic game-changing impact could well present a new headache for the throbbing industry.

Yahoo appears to be in freefall.

Its execs are bumping into each other, heading out the door in the latest reorg.  The softening online ad market doesn't bolster the company's hard-to-believe projected growth. Steve Ballmer is going hot and heavy after Yahoo engineers, and indicating that his once-and-future prey's value is declining by the Internet minute. Amid it all, CEO Jerry Yang has gone Yahoo shirt in hand, traveling through the halls of Congress, explaining that his proposed save-Yahoo-partner-with-Google plan really won't create an online ad monopoly.

In old times, newspapers would find this all great sport. They'd cover it big as the fascinating business story that it is, and that would be the extent of their interest.

Now, though, more than 40% of US dailies by circulation have hitched their 2009 growth wagons to Yahoo and its emerging AMP ad platform. AMP is the most important part of the newspaper's consortium's deal with Yahoo.

Yes, traffic programs and providing site search are helpful. It's the AMP promise, though, that newspaper CEOs talk about when asked where the growth is coming from. In short, the promise of AMP is that of sophisticated, behaviorally based, audience-targeting ad delivery system. The hope: $10 CPMs will become $20 CPMs, as new targeting (in hundreds of categories from Boston-based young, SUV-driving moms to empty nester, small-town Midwesterners) improves ad effectiveness.

At this point, AMP is supposed to roll out, first at MercuryNews.com and SFGate.com by the end of 3Q. It would then move through the consortium ranks, being in place at most sites for most/all of 2009, promising tens of millions of dollars in new revenues. Amid a year of incredible Yahoo turmoil, signs still point to substantial Yahoo investment in getting the new system in place.

Most immediately though, here's what at stake:

• Though Yahoo has talked about clearing $250-450 million annually from the deal to have Google to provide some search ads, newspaper companies are unlikely to see any additional search ad revenue out of the deal.  That's because publishers got search revenue guarantees out of Yahoo as part of their multi-year deal. The guarantees didn't ramp; they were set at certain levels, depending upon assumptions of search traffic and search ad rates. So publishers' guarantees have been exceeding actual earned revenues, at least for the most part. So even if Google is able to double ad rates, most newspaper revenues wouldn't change. Midsize sites currently take in Yahoo search revenue in the four digits monthly.

• Put the arithmetic aside for a moment though and consider that newspaper publishers aren't sure whether they'd be part of the Google search ad program.  At this writing, Yahoo's unsure whether the Google ads would be provided to newspaper partner sites (as opposed to Yahoo.com, the core destination of the ads) and newspaper partners are waiting for that answer, though, given the arithmetic above, it may be mainly an academic question.

The Google deal though raises two other big questions for all those newspapers -- owned by MediaNews, McClatchy, Belo, New York Times Regional Group, Scripps, Hearst, Gatehouse, Media General, Lee, Cox and more.

Cablevision Moves Forward with First Home Run Game Plan

I've long compared the cable and phone companies on the one hand to the newspaper companies on the other.

Newspaper companies saw there business being upended by the Internet, made small bets and have lost out on the big ad growth the web has generated.

Telephone companies -- the successors of monopoly Ma Bell -- first consolidated and then saw that old vanilla phone service was disappearing, well, almost as fast as newsprint-based news. They moved into internet service provision and then into more lucrative broadband, acing out the many small companies that had at first parted the waters (some of which, including Infinet, were owned by newspaper companies). They invested heavily (and often clumsily) in mobile and have figured out how to wring many new dollars from all of us.

Cable companies saw that they were reaching a saturation point in their own penetration, and then felt the hot breath of the formerly telephone companies moving to offer .... cable TV. So they've gone after both internet service providing and local voice, understanding that boomers still want the comfort of the old landlines.

Triple Play, once a novelty, has become the standard. Cable + Internet + Telephone.

Now Cablevision's stuck out its neck, $650 million worth, to swing for fences.

Cable + Internet + Telephone + Newspaper. A combo that could give Cablevision an edge against Verizon, its biggest competitor.

A home run?

My betting is that it's one of the best labs for everyone in the news industry to watch.

What stands in the way of a big Cablevision win? In a couple of words: strategy and exectuion.

In strategy, Cablevision must move beyond the hazy notion of Long Island Convergence (some say the Dolans may have had a bit too much Long Island Tea in offering $70 million more than their competition for Newsday) to a true strategy. That strategy, in a nutshell:

---Create a new ad vision of how Cablevision/Newsday can serve local advertisers, from its Long Island home base to metro New York to southern Connecticut to northern Jersey. Providing advertisers reach to mass and targeted niche audiences, through cable, newspaper and internet is what must be done.
---Create a new content vision for how Cablevision/Newsday can serve local news readers, sports lovers, business observers and entertainment seekers. The company will have a newsgathering/production force of more than 500. The goal has got to be to get out of text/TV/audio silos, creating text and multimedia content, distributing that content to become dominant in its key geographic areas
---Connecting the ad and content engines to the wider web distribution world. The new independent-of-Tribune Newsday may well move out of its Tribune partnerships (nothing in release one way or another on CareerBuilder, Classified Ventures, QuadrantONE, etc.) and look at joining the Yahoo News consortium, among others. The Daily News is in it, but has no market exclusivity.

The Execution? Tougher than the strategy. It should be streamlining as many of the cost centers of both companies as possible, but doing that in a way that builds the company for success, rather than crippling it.

Yes, ad staffs and selling propositions can converge and yes, scribes and TV producers are really members of the same species. But the human dimension here is what's tough. Habit, tradition and skill set are all obstacles. As I wrote last week, someone is going to surmount them; Cablevision's just one of the newest and potentially most interesting to try.

For Rupert-watchers, the sale is something of an enigma. Why did it go this way less than a week after his public boast that he'd win the prize? Questions to be answered:
---Did Tribune's latest double-digit declines convince him that it really wasn't a prize at all, that the the Post's $50 million loss really wouldn't turn to profit, given both a bigger Newsday pricetag and the detiorating newspaper ad market?
---Is News Corp thinking that further investment in newspapers just won't pencil out?
---Back to the overpay question. Did Rupert overpay for Dow Jones and did the Dolans overpay for Newsday?
Both are long-term investments, and you can't make judgments based on today's pressures and short-term trends. This is all about real convergence and its value.

King of the City Journalism is All the Rage

Consider the new Big City American journalism and the emerging cast of characters owning it. It's a page right out of the history books when a few well-heeled titans controlled the press, and its new incarnation could have all kinds of implications for the Yahoo Newspaper Consortium, for AP and for the journalism start-ups near and far.

If Rupert Murdoch indeed knows more about who the next owner of Newsday will be than the rest of us, and I'd have a sense he does, that would make him Prince, if not King, of New York. Pending what may be obligatory regulatory review, given the anti-trust and FCC thinking of the moment, he'd own Newsday, the Post, WWOR-TV, WNYW-TV and the solidly NYC-centric Wall Street Journal.

Chicago is Sam Zell-land, as Sam bought the title King of Chicago along with the Tribune, WGN TV and Radio, Chicago Magazine, Redeye and CLTV.

The Bay Area is Dean Singleton's, by far the largest newspaper owner out here, owning about everything daily other than the Chronicle, which is owned by Hearst, his key business partner in many other markets.

Dean is also chair of the AP board, and Sam and Rupert have just joined.

I bet we'll see more. As the new Tribune peels off Newsday, and stares down the next debt payments, eyes are bound to turn to L.A. And there, too, might not a new Big Man in Town buyers emerge? Recall that David Geffen, Eli Broad and Ron Burkle were all in the hunt earlier for the Times.

In Boston, it's just a matter of time before the Times says good-bye to the Globe (paging Jack Welch); it's got to deal with the emerging threat to its core NY Times flagship by.....Murdoch, whose company is talking of synergizing his London Times and the Journal. (By the way, in a recent interview, former Times editor Howell Raines spoke of how the Jayson Blair scandal shelved plans to re-brand the International Herald Tribune with the Times nameplate. Great idea -- the Times now wins or loses as a global news franchise -- and why haven't the plans proceeded? There's little time to waste especially as the Murdochian armies mass.)

It's funny, isn't it, that pundits hypothesized that the Internet and associated technologies would democratize media and here we are back to the landscape of the early 1900s. Hearsts and Pulitzers and the rest changed journalism, started wars and elected presidents. Now undoubtedly, our media is much more diverse, but arguably getting more concentrated at the top end, where most of the ad revenue is and where the greatest bullhorns are heard.

Yes, daily newspapers' businesses are in a world of hurt, but those able to buy low, leverage the assets synergistically with emerging media or subsidize them to meet other business and political goals are in a great position. The brand value associated with the the L.A. Times, the San Jose Mercury News, the Chicago Tribune and Newsday, just to name a few, is still great, and can be harnessed in any ways new owners see fit.

What kind of impacts might such rapidly changing ownership portend:

The Newspaper Consortium's MicroHoo Hedge

Everything's timing, and QuadrantOne's formal launch may be bolstered by the fortune of events, in this case the Microsoft bear shadowing Sunnyvale. Today, it announced the addition of Newspaper Consortium publishers -- adding 138 web sites (both newspaper and broadcast). ClickZ's Kate Kaye lays it out well, here.

The new ad network, announced last month, had been in the works for more than a year. Tribune and Gannett had long tried to rally fellow news companies to consort together and not just with Yahoo. They'd pulled in just two others as equity members, Hearst and the New York Times for its regional newspaper group. The idea: a long-treasured one that trusted newspaper brand online advertising, networked across the country, could boost digital ad revenues, and allow the companies to keep a greater percentage of their sales.

A number of us (Content Bridges: Four Things About QuadrantOne) expressed the opinion that QuadrantOne might be too little (reach, ad technology, scale), too late (as the big four of online ad world -- Google, Yahoo, MSN, AOL -- devour the lion's share of revenues, buying out companies to add to their own positions). And among several hundred online ad networks, how would QuadrantOne stand out?

My own skepticism has been further fueled by talking with several major advertisers who said a couple of things: 1) They didn't really have a need for such a network, finding the current buying choices adequate; and 2) They were surprised that QuadrantOne management, largely experienced Tribuneites, hadn't sought their opinions or given them a heads-up before the announcement. After all, they are the customers, here.

Those doubts are still there. Clearly, though QuadrantOne has more going for it today than it did yesterday.

As I've been asked about the Yahoo Newspaper Consortium, my reply has been: good idea, especially if you take the name "Yahoo" off the front end of it. The idea, which I saw expressed most cleanly today in the release is that the Newspaper Consortium is its own entity, having grown to accept the notion that the struggling US press is best off dealing collectively with the web world. I think that's a maturation, a sense that uniting to do the Yahoo deal was a good idea and should be extended. It's not that the Yahoo partnership hasn't been a good move. On the contrary, publishers report good upsell revenue both from the HotJobs recruitment products and lately from the ability to sell Yahoo inventory to their own local advertisers. But Yahoo is still just a part of the web, and for newspaper companies finally acknowledging that their own destination plays are not enough, Yahoo is only part of a much bigger move into the distributed Web.

Clearly, the timing is as much market-driven as internally driven. The signs that Yahoo will end up as part of MicroHoo are increasing. The questions seems to be when and at what price. Given the likelihood of the deal, newspaper publishers need a hedge. Sure, they can say that the Yahoo ad deal is about local and the QuadrantOne deal is about national. But targeting audience is targeting audience, and the lines between national and local are blurring. And, sure, in the long-term, a MicroHoo relationship could be a strong one for publishers.

In the next year, though, it may give them a big headache, and that's unacceptable if you've already got the flu. If Microsoft emerges from Sunnyvale soon, with Yahoo in its teeth, we'll see a year-long drama of 1) Yahoo staff exodus; 2) Sale "closing" delays with anti-trust reviews; 3) The dreaded "integration" of technologies and staff, which is never a pretty thing, and in this case will something like the sixth sequel in the "Alien" series. You don't want to see this mating on a big screen.

So newspaper publishers quite properly don't want to be left holding the bag, as the air filters out of it. QuadrantOne can be part of that hedge, with lots more needed including other paid search solutions, video/video ad solutions and monetization of emerging user-gen. We still know little about QuadrantOne's own technology ramp-up -- which is absolutely crucial as the audience-targeting business gets more finely tuned each day.

No one wants to talk publicly about how much of inventory the new affiliate sites are "guaranteeing" QuadrantOne. Initially, it had asked affiliates for about 5% of its inventory, as compared to the approximate 10% that equity participants were committing.

Similarly, we don't how much of this guaranteed inventory will end bringing in high CPMs and how much will simply buck up bottom-of-the-barrel remnant inventory pricing. In the ClickZ story, QuadrantOne's Dana Hayes' comment that, "It is not just below-the-fold, remnant-like inventory," is a curious one. Did he really mean the "just"? Yes, 30 to 40% of some sites' inventory is considered "remnant", but even doubling one-buck-chuck CPMs won't save the day.

Today, McClatchy online head Chris Hendricks, a new QuadrantOne affiliate, made the point that, "This is the first step for the industry to come together and work on the national advertiser area as a unified front." Left unsaid in that comment is McClatchy's own unacknowledged Real Cities ad network (which it got out of the Knight Ridder acquisition) and the very real revenue that Centro -- a major partner to most of the industry -- is bringing in every day. But Chris' point on "first step" with QuadrantOne is right.

Whether steps two through ten will match market needs and ad network competition will be the measure of any significant success QuadrantOne accomplishes.

Charlie and Phil's Excellent Global Adventure

Call it physics. Call it Zen. Call it journalism.

As I cover the waning fortunes of legacy media and rising fortunes of start-up journalism sites, I can't help but think of equilibrium. Maybe it's being back on the Left Coast too long, but somehow the scales seem to be balancing. Recall that Americans still read news 62 minutes a day, just as they did 10 years ago. But of course they spend less time with newspapers, TV and radio, stealing some of those minutes for the web.

It's certainly not a gainly equilibrium, but the announcement that Charlie Sennott is joining Global News Enterprises as executive editor is just one more sign that it's happening.

Sennott, award-winning and industry-esteemed, swings out the Boston Globe door, taking the increasingly familiar buyout route after 15 years there, and busts open the portals of Global News.  The site is the first embrace the (lower-case) globe as its reporting assignment. The plan: launch in early 2009, with a complement of 70 corresponents, reporting in from all corners of the world. The correspondents won't be full-time staff, but rather stringers drawing stipends for a weekly report. The site will be staffed initially by 10 full-timers, with the editorial operation headed by Sennott. Over his time at the Globe, he served as Middle East bureau chief in Jerusalem,  as European bureau chief in London and then worked on the Globe's special-projects team, doing year-long work in both  Iraq and Afghanistan. His recent work has tracked the Iraqi war, including this piece -- "New England's Own" -- on veterans returning home from Iraq. It's an impressive multimedia package, one which Sennott says is a "raw prototype of what the in-depth reports might look like on GlobalNews".

Of course, Global News is just one of many new news sites emerging, from its national cousins Politico and ProPublica to its regional kin, MinnPost, PegasusNews, CrossCut, Voice of  San Diego, the New Haven Independent, VillageSoup and more. Their business models vary, from profit-seeking to non-profit, with differing views on advertising, sponsorship, membership and angel funding. But I'm beginning to believe their most important business model is one that's been sucked out of the newspaper industry: enthusiasm.

It is one of the common denominators of all these site founders, and the 45-year-old Sennott's got a good case of it:

"I leave the Globe April 4. I start [on Global News] on April 7....I want to be in the revolution. I want to jump the barricades... Global News will be a dream team of reporters who are at places they don't have to be, ready to commit themselves..."

Sennott was just back from Baghdad, from an embed assignment in a patrolling Humvee, when we talked. He can talk traditional Ernie Pyle war correspondent lingo and the language of 2008. "It used to be you took a brick of notepads," he remembers. Now it's Kevlar, Marantz (as in digital recorders) and a host of audio/video gear to get the whole story. "And I've learned Final Cut Pro."

The site has got more than enthusiasm going for it. It's got almost $8 million to start (intending to raise $2 million more pre-launch), and Phil Balboni as a co-founder. Balboni founded New England Cable News, and he's pulled in as investors former Globe publisher Benjamin Taylor,  Akamai president Paul Sagan and Continental Cablevision co-founder Amos Hostetter, Jr. Balboni, whose business and journalistic acumen is well-regarded, will be CEO.

Charlie and Phil's Excellent Global Adventure is one to watch. They put it together as both had separately noodled on the idea. Sennott has been working on the notion for a couple of years, thinking "non-profit", and seeking funds from the Knight Foundation, among others. When they came together, they decided that a profit-seeking model was better, better at raising capital and in providing some skin in the game to the fledgling correspondent corps, who will get options.

Four Things About QuadrantONE

QuadrantONE moseyed out of the gate last week, after a few false starts. It got good ink because it offered good numbers: a potential of 50 million unique visitors waiting to be served in 27 of the top 30 markets. The new network will leverage sites owned by its four co-owners, Gannett, Tribune, Hearst and the New York Times, though neither the NYTimes.com nor USAToday -- national, not local -- sites are included.

QuadrantONE of course is not unexpected. News about it had leaked out a couple of times as Gannett and Tribune -- the two prominent holdouts from the Yahoo newspaper consortium -- have tried to put it together. They romanced a number of consortium members, including Cox and MediaNews. And where's McClatchy, Tribune and Gannett's sometimes partner? It is telling, though, that in the end only Hearst and the Times ponied up and joined in as equity partners.

How well will its staff of 17, anchored in TribuneLand (Chicago), fare?

My sense is that QuadrantONE faces an uphill challenge. Why? Consider these four things about QuadrantONE:

---Scale: QuadrantONE's numbers sound big, but analyst Greg Sterling's Comscore chart of top-ranked networks show that it will place about 34th among those already established, already knocking on the doors of hyperactive, interactive buyers. Centro, at 23rd, clearly is supplying lots of revenue to local news properties already. Real Cities is still hanging around, as is the Newspaper National Network, which Greg notes in his post, Onion-like headlined "Newspapers Create Another Ad Network", is owned by the same companies starting up QuadrantONE. The new network may get bigger (where for instance are the LocalTV sites, now under common Tribune management under Randy Michaels) as other news chains join as affiliates, but it could still be sub-scale. Importantly, there is no clamor from the ad buyers -- to whom power in the marketplace is plainly moving from ad sellers -- for a new, local network. QuadrantONE: Y(et)A(nother)H(ierarchcal)O(nline)O(uting)?

---Technology: The ad business is increasingly all about technology. We're leaving the selling space (newspapers) and time (broadcast) in the rear view mirror. Analytics is everything. Curiously, QuadrantONE says an unnamed technology partner is involved. My sources tell me that those companies pitched to join as equity partners weren't even told who the partner would be, a stumbling point that helped dissuade them. Coincidentally this week, Reuters Americas -- which is now coming on strong in the US market -- announced a deal with Guardian America to represent it for ad sales. I talked to Stephen Smyth, general manager of Americas Reuters Media, about the deal. He understands how technology isn't an add-on, but the very basis of a modern ad network. Who is Reuters affiliate ad network partnered with? Unlike QuadrantONE, he can name his partners in a flash: "Doubleclick for ad serving, Revenue Science for behavioral targeting, Operative for inventory management, Salesforce for CRM and Rapt for forecasting and pricing. The water level [in digital ad sales] is rising," he says. "Everyone needs to have numbers and the analytics to even be in on the RFP."

---The Guarantee: Part of QuadrantONE's value prop is that it can guarantee space to advertisers, commanding 10% of member sites' inventory across vertical channels. That's a two-edged sword. It may be a value to advertisers -- although access to such site inventory hasn't been a loud hue and cry. But it's a deterrent to getting more sites to sign up as affiliates. There are lots of news site gm's with QuadrantONE affiliate agreements on their desk as we speak. These are sites/companies that decided they didn't want to put up the $500,000 or so each to fund the start-up. Now, they are wondering if they want to guarantee inventory (though maybe less than 10%) to a network that will determine pricing. Can QuadrantONE really deliver more than these sites can get themselves or from Centro and other networks? What if turns out to be more of a high-end remnant network than a high-CPM one?

---Tribune: Yes, it's the new Sam Zell Tribune, but Tribune's still the elephant in this room. Going back now more than a decade, Tribune's been an elite presence. Count in New Century Network, CareerBuilder, Classified Ventures and more. As several would-be affiliates are mulling: Different people, but same feeling. Chicago-based. Tribune-led. The need for centralized (meaning Chicago-based Tribune) decision-making. That's one of the reasons Yahoo's HotJobs and consortium has mojo as CareerBuilder's struggling.

What cheers some in the industry is that it's one attempt for the newspaper industry to reclaim its future, to act independently. That thinking: QuadrantONE is a beachhead, a new place for newspaper leaders to come together, strategize together and streamline revenue opportunities and cost savings. That's a good hope, but one that mystifies me.

What, in fact, then is the Yahoo newspaper consortium? Take away the word Yahoo, and you have 22 companies with more than 500 titles agreeing to act (fairly) jointly. The consensus has been rare and the organizers of it deserve kudos for getting it done and achieving a kind of scale that hadn't been achieved before. Now, can they act together -- with Yahoo, yes, but with numerous others -- to seize the many opportunities to build new revenue streams and cut costs smartly (how about a single platform?)? Call it what you want -- consortium, QuadrantONE -- but that's clearly what these times demand.

Rupert and Jerry Could Mean More than "Our Space"

Okay, I've pulled myself away from the larger American drama of Barack and Hillary, and her coming "Alamo Firewall." Which brings me to another reality show. Maybe we could call it "Rupert and Jerry's Our Space." (You know "Our Space is a very, very, very nice, place, with.......")

At the core of the proposition we know is a MySpace for 20% of Yahoo swap, providing a News Corp tentacle into the web's largest aggregator. We can debate relative values of that swap every which way. What's the real value of Yahoo; Microsoft's current or next offer? Jerry's $40 number? A real break-up number? The future value of MySpace itself? That's a big number if you look at the out-sized duration and frequency numbers of MySpace and Facebook. That's a smaller number if you absorb the lessons of Facebook's Beacon -- it's hard to find socially acceptable ways to monetize a social site.

But beyond that path, I think News Corp's further interest in Yahoo has all kinds of interesting angles. We can talk gaming (News Corp's IGN/Yahoo Games), movies (News Corp's Rotten Tomatoes/a struggling Yahoo Movies) and endless potential for sports (News Corp's highly successful regional sports networks and Yahoo Sports. That's just a few of them. You can play your own mix and match; just check out News Corp's "Other Assets."

All those have interesting potential, but let me focus on two others, both of which seem like naturals of this moment in web time.

First consider business news.

Remember the justification for Rupert's 60+% premium for Dow Jones? It was global domination of business news, in print, online and on cable/satellite (in addition to mobile, no doubt, as it develops). Sure, Rupert's pulled back from a free wsj.com -- apparently accepting the advice of his execs that the market for business advertising on the web, while lucrative, just wasn't ready to support a free product. But that doesn't mean he won't relentlessly seek new audiences to monetize that costly content.

So put together the Dow Jones brands with the considerable power of Yahoo Finance. For Yahoo, the semi-exclusive ability to display DJ content would help Yahoo Finance break away from the pack of too-indistinguishable Google Finance, MSN Money and AOL Money and Finance.  It could integrate lots of Marketwatch and selective WSJ and Barron's content. Then there's the fledgling Fox Business Network, which produces lots of content, but, oh, doesn't really have an audience yet.

For Dow Jones, Yahoo brings many more eyeballs to the content and the parties can figure out how to sell and share the advertising. Wouldn't that make a lot of sense for both companies, especially if Rupert has an equity piece of Yahoo as well?

Second, consider news video. One of the first areas that News Corp has moved on in achieving synergy out of the DJ deal is in video. Remember, Fox produces lots of news video and it is gearing up to produce even more with the web now firmly in mind. So just recently we've seen (check the brand) lots of Fox video showing up at wsj.com Video Center and the Marketwatch Multimedia (the two now offering the same videos).

Already, those in and around the industry tell me that $25 is the average CPM for news video, with top-branded business video selling out at $90 and now surpassing $100 CPMs. So if News Corp can gain preference on the web's largest news audience, it can make a lot of money fast. Preference, you know, like Yahoo newspaper consortium members are getting on Yahoo Local pages. Preference works, creating new pages views and new monetization.

How well-equipped is Fox video to compete? Well, let's think about what we watch.

Of the breaking news we watch, how closely do you watch and know whether the breaking news video is coming from? Whether it's coming from Reuters or AP -- now in fierce competition and producing more than 1000 news videos a month -- or CNN or....Fox. If Fox can gain greater access to audience -- beyond the newly bought Dow Jones properties, the monetization of that video can skyrocket.

Yahoo itself, as in so many other areas, has been behind the curve on video, with Comscore assigning a 3.4% of the video market to the company. Hence, its Maven purchase.

What's news video worth? 2007 revenue totals weren't huge -- $500-750 million is the range of estimates -- but it grew 40% YOY. It's expected to grow 40% again this year and credible estimates put 2011 market size at about $4 billion. So yes, a News Corp/Yahoo video play could yield big and growing dividends as well.

If, against Microsoft odds, Jerry and Rupert do team up, expect a scorecard that goes well beyond social networking.

 

MSFT + YHOO = BALL(MER) & CHAIN? -- Special Newspaper Consortium Edition

Well now. Yahoo's been piling up its own set of endorsements from newspapers over the last year. It has convinced newspaper chains of two things: 1) they needed a big brother with a big network of readers and the latest in search/ad technology; 2) that big brother is Yahoo. With the newly ascendant Dean Singleton leading the charge, a core group of eight entered the Sunnyvale castle. Since then Yahoo has talked, literally, to every one of the rest and now 22 American newspaper chains (with more than 500 of the 1500+ American dailies) are within the gates.

So when Microsoft stormed those gates, formally and officially, Friday, among those parsing the hot breath of Redmond is the news industry.

Microsoft is a familiar, though often distant character, in the newspaper/Web saga. Publishers have made many a pilgrimage north, and Microsoft has offered uneven diplomacy of its own. Overall, the takeaway -- from those Sidewalk/Netscape origins -- has been one of suspicion. It's been hard to walk away from Microsoft meetings without the sense your pocket has just been picked, or its hand is still in it as you depart town. Microsoft earned its early reputation as a "partner" who would pick your strategy clean, taking your experience into its IP, and then decide to go another way. It may have lived down some of that reputation more recently, but the sense persists.

So the news of the Microsoft $44 billion bid for Yahoo sent some shock waves through news industry corporate suites. Here they are, in the first year of marriage, and someone may have switched the groom. The signs that the groom may have been distressed were clear, my "Be Careful Who You Consort With" post of late January was among those that pointed that out. But still when the possible switch is announced, everyone finally takes the new seriously.

Much more's to come, beginning this week, in this takeover (See "MSFT + YHOO = BALL(MER) & CHAIN?"), but here's my beginning list of nine questions. What's yours?

Do you hear the echoes of the Sidewalk era? Sidewalk was Microsoft's push to get into local media in the mid-'90s. Its vision was right-on: becoming the dominant local online events site. Microsoft sent an early scare through the news industry, picking off some top talent, but it was too early in the game. Microsoft folded too soon, selling the remnants of the business to City Search. And don't think Steve Ballmer hasn't kept the foray in mind. Quoted in the New York Times last January:

“But Sidewalk was really aimed at what we now call local search,” Mr. Ballmer says. “Sidewalk is one we should not have gotten out of.”

In its heart, Microsoft still harbors dreams of being a media heavyweight.

Does the deal set back the clock? The newspaper industry hears the ticking of the clock louder each year, with each new year less friendly than the old. The increasing volume has been one prime reason the companies ceded some autonomy to get at Yahoo eyeballs and technology. But given that this deal would take 6-12 months to get finalized and integrated -- and that's really optimistic -- the payoff to publishers in traffic and revenue would only be further set back. Alan Mutter agrees on that point and discusses the consortium angle here.

How will newspapers exercise any change-of-control clause they have in the consortium contracts? At least some of the players have them, giving them a bit of leverage to renegotiate with Microsoft/Yahoo and/or Google.

Would the newspapers like to buy or buy into the HotJobs business to get equity as well as shared functionality and network scale? If Microsoft would be serious in redefining its technology provider/media owner equation, such a deal for equity could further cement relationships with these publishers around a still-essential vertical going forward.

Doesn't the deal open up a new opportunity for the 22 newspaper consortium members to re-think, re-negotiate and reckon its deal with Yahoo? The consortium members have gotten somewhat more comfortable over the last year working with each other. Can they now step back and decide how better to share costs of marketing, sales and technology, working with one of the behemoths or contracting centrally -- oh, Lord, is it finally time -- to create the universal forward-reaching publishing platform all can use and grow on.

Won't this deal help push further rationalization in the recruitment marketplace? Yahoo HotJobs has had the mojo over the last year. Monster's been struggling along with the Gannett-Tribune-McClatchy-owned CareerBuilder. Yes, that CareerBuilder -- in which Microsoft took a 4% stake last June. So the would-be tangled ownership stakes cry out for rationalization.

As recruitment becomes less and less a listings business and more and more a tech-driven matching business, it might make sense for tech/ad company -- Google certainly comes to mind -- to roll up Hot Jobs competition. Monster's got to be available, and each of  now-struggling Gannett, the New Tribune and a seeking-to-reduce-debt McClatchy all have reasons to sell. If they could sell a majority of the company, perhaps, retain some equity and preference in the product, we could see a new duopoly recruitment duopoly born.