Yahoo-Newspaper Consortium Producing Some Mutual Gains

When the Yahoo-Newspaper consortium was announced in early 2007 both Yahoo and the newspaper industry were stronger and in better shape than they are today. (That’s certainly true for newspapers.) Since that time Yahoo has suffered through the MicroHoo episode, gone through a couple reorgs, laid off a meaningful chunk of its workforce and gained a new CEO. The newspapers, for their part are mired in a well-publicized crisis, with ad revenues falling precipitously and major publishers making dramatic newsroom cuts, some declaring bankruptcy and even shutting down publications entirely.

Now comes a bit of good news for both Yahoo and its newspaper partners; the consortium deal appears to be going well according to an update in the NY Times on Sunday. It’s being managed by Lem Lloyd and Hilary Schneider, both at Yahoo and both former Knight Ridder executives. Lloyd manages the initiative directly while Schneider has a larger role at Yahoo (as you know) and reports directly to Yahoo CEO Carol Bartz. She is now in charge of Yahoo’s new North American division.

The newspapers participating in the consortium program, which is most of the major publishers in the US, are using Yahoo’s new ad platform, APT, to do a range of different types of targeting on their own sites and boost CPM rates accordingly:

One is a new ad system from Yahoo, currently installed at about 100 newspapers, that allows them to sell graphical ads on their sites that are aimed at specific audiences, like car buyers or sports enthusiasts. The system puts users into those groups based on the pages they visit online, a technique known as behavioral targeting.

This allows publishers to sell, say, high-priced travel ads not only on travel pages but also on any page visited by a user interested in travel. An advertiser may have paid 50 cents to reach every thousand visitors to a high school sports page, for example, said Leon Levitt, vice president for digital at Cox Newspapers. “Now it doesn’t matter where the page is on the site,” Mr. Levitt said. “All of a sudden we can sell that page for $15” for every 1,000 visitors who are interested in travel, he said.

They’re also able to sell into the Yahoo network, which gives them much greater online reach than they would have using their sites alone. Local ad targeting through APT and related capabilities allows them to reach Yahoo users in specific markets.

The anecdotes in the NY Times article suggest that the newspapers are doing well with the program:

A similar sales blitz at The Ventura County Star, a small daily north of Los Angeles, netted nearly $1 million in sales in the run-up to Christmas, or roughly 40 percent of what the paper sold in online ads in 2008. The Naples Daily News in Florida did even better: The late-January blitz generated $2 million in sales, or more than half what the paper sold online in 2008. Some larger newspapers have had similar successes.

Yahoo says that the revenue contribution from its point of view is not “material” but the company is optimistic that the relationship will generate increasing revenues over time. It also values the local sales channel that the newspapers provide and corresponding reach into local markets, which Yahoo would probably not otherwise have.

The Yahoo-consortium program is online only and doesn’t affect print newspaper ad sales. Google recently shuttered its print newspaper advertising program citing disappointment with demand and revenues.