Media/Entertainment
Papers Embrace Enemy
By Nat Worden
TheStreet.com Staff Reporter
11/21/2006 7:24 AM EST
URL: http://www.thestreet.com/newsanalysis/mediaentertainment/10323421.html
When it comes to the rise of Web giants like Google (GOOG) and Yahoo! (YHOO) , newspapers are teaming up in reciting an old adage: If you can't beat 'em, join 'em.
Separate deals announced recently by both Internet companies show that major newspaper publishers across the country are forging relationships with the Web titans in hopes of tapping into the massive online advertising market that has largely left them in the dust.
That said, the willingness on the part of Google and Yahoo! to cut revenue-sharing deals with publishers that have been written off by some investors as a dying breed is evidence that daily papers, and their expensive news-gathering operations, still provide indispensable content for their local audiences.
"A core part of our investment thesis in newspapers is the growing opportunity of the Internet," says Charles Bobrinskoy, vice chairman with asset manager Ariel Capital, which has holdings in Lee Enterprises (LEE) , Journal Register (JRC) , Gannett (GCI) and Tribune (TRB) .
"Most of our newspaper holdings are showing 25% to 30% growth in interactive revenue," he says. " [Monday's] Yahoo! announcement shows that leading Internet companies also value the content which newspapers control."
On Monday, Yahoo! said it will team up with a consortium of print publishers to use its technology to sell advertising and offer search functions on the Web sites of 176 newspapers in 38 states.
The deal will allow Yahoo! to reach local audiences tied to their hometown newspapers. Meanwhile, the group of publishers will access Yahoo!'s online portals to expand their reach and grab back some precious revenue that has migrated away in recent years as more consumers turn to the Web for their information needs.
"Essentially, we both have things to sell to generate new revenue that we didn't have before," said William Dean Singleton, the CEO of privately held MediaNews Group, on a conference call with analysts following the announcement. "I think today's announcement very loudly shouts that we can and we will [adjust to an online world] ."
MediaNews, publisher of the San Jose Mercury-News, among other newspapers, teamed up with Belo (BLC) , Cox Newspapers, Hearst Newspapers, Journal Register, Lee Enterprises and E.W. Scripps (SSP) in the partnership. Singleton said he expects more newspaper publishers to sign on soon.
The financial terms of the deal were kept under wraps, but the parties will share revenue streams resulting from the collaboration.
The partnership will start in December, when the newspaper companies will begin posting their employment ads on Yahoo!'s jobs site, HotJobs, and start using HotJobs technology to run their own online career ads. Ultimately, the relationship will be expanded so the content from the newspapers will be tagged and optimized for searching and indexing on Yahoo!'s Web sites.
On the conference call, newspaper executives said some of their newspapers would be switching their jobs listings to HotJobs from other popular employment sites, like CareerBuilder and Monster Worldwide (MNST) . Otherwise, they said the partnership would not affect existing relationships with other Web companies, but they were careful to specify that they will be using Yahoo! as their primary online partner.
That marks a rift developing in the publishing world, as other newspaper conglomerates have recently announced their own advertising partnership with Yahoo!'s chief rival, Google. Two weeks ago, Google said it will start selling print ads in newspapers published by the New York Times (NYT) , Washington Post (WPO) , McClatchy (MNI) , Gannett and Tribune.
That deal will give newspapers access to the hundreds of thousands of advertisers that do business with Google, many of which are new-age Web companies that weren't previously advertising with newspapers.
"We have strong partnerships with many leading newspapers, and we remain committed to working with them as they grow their businesses on line and offline," says Michael Mayzel, a Google spokesman.
Google's most recent partnership with newspapers is currently in a test phase that will last three months, during which the Internet giant will record no revenue as it connects its online advertisers with print space in metro dailies like The New York Times, The Boston Globe and The Washington Post. If the test is a success, Google will probably start taking a small commission on such deals.
Google has long had online advertising relationships with major newspapers, using technology to post ads that match the content on a specific Web page.
" [This] is an opportunity for us to show these advertisers the power and response of print advertising, and specifically the power and response of advertising in The New York Times," says Denise Warren, chief advertising officer of the New York Times, about the latest agreement. "We see it as a test with very little to no risk."
Unlike the Google deal, Yahoo!'s agreement with newspapers does not include the prospect of selling print ads.
"We have not had discussions about Yahoo! selling onto our print products," said Singleton. "That's not to say that we couldn't have them."
Edward Atorino, analyst with the Benchmark Company, says these deals represent an early step for newspapers in repositioning themselves for the digital age.
"This is a bit of light at the end of the tunnel for newspaper publishers," says Atorino. "It's another way for them to get a piece of the revenue that has moved online and start the process of fixing their business models."
"There was a land of Publishers and Editors called the Newspaper Business... Here in this pretty world Journalism took its last bow... Here was the last ever to be seen of Reporters and their Enablers, of Anonymous Sources and of Stringers... Look for it only in books, for it is no more than a dream remembered. A Civilization Gone With the Wind..."
With apologies to Margaret Mitchell...