jod
11-21-06, 04:36 PM
For a company accused of lacking focus, Yahoo! seems to see well into the future when it comes to advertising. On Nov. 20, it announced a partnership with a group of 176 newspapers that will help it expand into the local advertising market. Analysts called it a welcome move for a company that has trailed Google in ad-revenue growth—despite having the most heavily trafficked family of sites on the Internet. As of Nov. 20, Yahoo's stock is down nearly 40% from a year high of roughly $43.42 in January.
The deal was in the works for more than a year (see BusinessWeek.com, 7/24/06, "Dailies Strike Back at Web"). However, it couldn't have come to fruition at a more opportune time. In recent weeks, Yahoo (YHOO) has faced a barrage of negative criticism that culminated with the Nov. 18 publication in The Wall Street Journal of an internal memo by a senior vice-president who complained that Yahoo's top management lacked a clear vision.
In the memo, known as the "Peanut Butter Manifesto," Yahoo's Brad Garlinghouse accuses the company of spreading its talent too thin and trying to follow every innovation on the Web, rather than focusing on its strengths. "We lack a focused, cohesive vision for our company," wrote Garlinghouse in the October letter. "We want to do everything and be everything—to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it."
Local Presence
That may be changing, in at least one area. During a telephone conference on the newspaper partnership, Yahoo Chief Financial Officer Susan Decker said the company is clear on the need to offer more types of advertising. "We're totally focused on creating the broadest array of ad offerings," said Decker. "We see this as very critical to the strategy of the company."
As part of the deal, newspapers will give their classified advertisers the option of also posting employment ads on Yahoo's HotJobs network. The newspapers stand to benefit by exposing customers to Yahoo's audience of 130 million unique monthly visitors. Meanwhile, Yahoo gains a relationship with local advertisers that may otherwise not have advertised on the Internet. The newspapers and Yahoo will share the revenue, though they declined to say how the money will be divided.
Rob Sanderson, an analyst at American Technology Research, says the local-job advertising market presents a big opportunity for Yahoo. Consider online job listing company Monster Worldwide (MNST), which in the most recent quarter posted sales of $285.9 million. In a note to investors, Merrill Lynch (MER) analysts Lauren Fine and Justin Post wrote that the deals should "revitalize HotJobs, which has been losing share to Monster and Career Builder."
Offline Pull
Yahoo stands to reap added benefit from the agreement if it can deliver ads related to newspaper article searches and parlay newspaper connections to encourage small businesses to also advertise their goods and services on Yahoo. The company sees revenue potential in both areas, pointing out that U.S. online classifieds are growing at a rate of 30% a year and that local online advertising is expected to grow from $3.4 billion this year to $12.4 billion by 2010. Yahoo and newspaper executives said they will explore such possibilities.
Sanderson says that an ability to move beyond just job classifieds could give Yahoo access to the next big market to move online. "This could bring a lot of the offline merchants into online advertising," says Sanderson. "Google, Yahoo, and eBay (EBAY) are national, there's no local presence, and to get the next big wave of growth you need a local presence."
read more (http://www.businessweek.com/technology/content/nov2006/tc20061121_127232_page_2.htm)
The deal was in the works for more than a year (see BusinessWeek.com, 7/24/06, "Dailies Strike Back at Web"). However, it couldn't have come to fruition at a more opportune time. In recent weeks, Yahoo (YHOO) has faced a barrage of negative criticism that culminated with the Nov. 18 publication in The Wall Street Journal of an internal memo by a senior vice-president who complained that Yahoo's top management lacked a clear vision.
In the memo, known as the "Peanut Butter Manifesto," Yahoo's Brad Garlinghouse accuses the company of spreading its talent too thin and trying to follow every innovation on the Web, rather than focusing on its strengths. "We lack a focused, cohesive vision for our company," wrote Garlinghouse in the October letter. "We want to do everything and be everything—to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it."
Local Presence
That may be changing, in at least one area. During a telephone conference on the newspaper partnership, Yahoo Chief Financial Officer Susan Decker said the company is clear on the need to offer more types of advertising. "We're totally focused on creating the broadest array of ad offerings," said Decker. "We see this as very critical to the strategy of the company."
As part of the deal, newspapers will give their classified advertisers the option of also posting employment ads on Yahoo's HotJobs network. The newspapers stand to benefit by exposing customers to Yahoo's audience of 130 million unique monthly visitors. Meanwhile, Yahoo gains a relationship with local advertisers that may otherwise not have advertised on the Internet. The newspapers and Yahoo will share the revenue, though they declined to say how the money will be divided.
Rob Sanderson, an analyst at American Technology Research, says the local-job advertising market presents a big opportunity for Yahoo. Consider online job listing company Monster Worldwide (MNST), which in the most recent quarter posted sales of $285.9 million. In a note to investors, Merrill Lynch (MER) analysts Lauren Fine and Justin Post wrote that the deals should "revitalize HotJobs, which has been losing share to Monster and Career Builder."
Offline Pull
Yahoo stands to reap added benefit from the agreement if it can deliver ads related to newspaper article searches and parlay newspaper connections to encourage small businesses to also advertise their goods and services on Yahoo. The company sees revenue potential in both areas, pointing out that U.S. online classifieds are growing at a rate of 30% a year and that local online advertising is expected to grow from $3.4 billion this year to $12.4 billion by 2010. Yahoo and newspaper executives said they will explore such possibilities.
Sanderson says that an ability to move beyond just job classifieds could give Yahoo access to the next big market to move online. "This could bring a lot of the offline merchants into online advertising," says Sanderson. "Google, Yahoo, and eBay (EBAY) are national, there's no local presence, and to get the next big wave of growth you need a local presence."
read more (http://www.businessweek.com/technology/content/nov2006/tc20061121_127232_page_2.htm)