With yesterday’s announcement of the acquisition of Associated Content, Yahoo CEO Carol Bartz has sent a loud message: Yahoo is investing in becoming a new kind of digital media company for the new age of digital media. Cheers to Yahoo for recognizing that their “1.0” model needs an upgrade to be more effective in a 2.0 world. The only problem is that this move gets Yahoo just one step toward where it needs to go. It could be a powerful first step to add content and audience to their network, but will only be strategically valuable for Yahoo if it is layered with additional new investments to build true destination media sites with premium positioning.
Let’s explore what Yahoo gets from AC first, and then cover what Yahoo must do from here if it is serious about winning in media.
1. Yahoo gets commodity content at commodity cost. With Associated Content’s marketplace, first and foremost Yahoo can source commodity content – i.e. the kind of content that doesn’t need a particularly differentiated author, original reporting, or other hard-to-find talent – cost effectively.
2. Yahoo can improve time (and value) on network. In this age of deteriorating portal power, users come to portals primarily for one reason: mail. (According to data from comScore, 73% of Yahoo’s viewers of its most valuable real estate – the home page – are Yahoo Mail users.) Once they arrive, however, there is far more money to be made by vectoring them to networked media properties like Yahoo Finance, Sports, and Entertainment than by serving additional pages of poorly-monetizing email. So, by beefing up the available content in the network, Yahoo receives the benefit of extending visits at low cost.
3. Yahoo increases its audience by drawing traffic from Google. Yahoo’s made the strategic decision to move its focus out of the search game and onto media. And so rather than just feeding them from mail and search, Yahoo needs its content properties to draw audience on their own. The AC content marketplace can produce thousands of pages per day of content – each one baiting more search engine traffic, and all produced at modest cost. A recent EConsultancy interview with CEO Patrick Keane revealed that the bulk-buy strategy works: “80-90% of our audience is driven through natural search,” and according to comScore data, nearly 50% of the traffic that AC’s content sees each month is incremental to Yahoo’s core audience that comes for mail most days.
All three of these improvements have financial benefits to Yahoo – both in increasing revenues with greater reach and traffic; and in bringing down average cost of content. But they miss out on the strategic positioning that Yahoo absolutely must own if it wants to ensure a leader as a top digital media company:
Yahoo needs to be a premium destination; and the AC acquisition message undermines that positioning. Yahoo Media VP Jimmy Pitaro indicates the desire for premium positioning in an interview with Staci Kramer at PaidContent, claiming it allows Yahoo to extend content offerings to niche audiences: “This really is about adding quality content to Yahoo.” That positioning is essential for Yahoo to maintain its CPMs as a top media property. Yahoo’s strategic opportunity is in scalably growing its portfolio and audience of premium media properties. But the quality level of Associated Content – under any definitions, old or new – isn’t good enough to earn premium positioning. For example, a quick search at AC for “Carol Bartz” turned up as its number one result an article from January 2009 about her appointment as Yahoo’s CEO. An outdated story like that is off-track for a premium property; and what’s worse, while top news outlets cautioned at the time that Carol’s software background might lend poorly to Yahoo’s media model, AC misses as its top article claims “she has quite a lot of experience in the field of technologies such as this. … It seems like the perfect match on paper at least.” Commodity content executed poorly will undermine the premium positioning Yahoo needs.
So what must Yahoo do from here if they want to be a winner in the future of digital media? Yahoo should set an agenda to do three things following on this acquisition:
1. Apply commodity content selectively. To establish premium positioning, Yahoo must moderate where it uses crowdsourced content. Evergreen topics are a great match; but putting anything less than premium content on the home page would degrade consumers’ experience and Yahoo’s brand. For Yahoo Entertainment, celebrity bios might be a great opportunity: they need to be written; are relatively easy to source and write; and are undifferentiated to consumers. But keep the leading stories in-house and branded – that’s where consumers and advertisers alike had better have a predictable top-shelf experience.
2. Develop new destination properties. Yahoo’s efforts here have been gaining, but more is needed. Properties like Yahoo Sports Minute, Shine and omg! are great starts; but they get the bulk of their traffic from the Yahoo network – and all have less than 25% of their audience coming independent of Yahoo Mail. Internally, each new product should be tracked based on its contribution of new uniques (unduplicated vs. mail) to Yahoo’s network, and on the number of direct and social network visit referrals, to measure success at creating self-sustaining premium branded media properties that draw their own loyal audience.
3. Most importantly, acquire key destination properties. As yesterday’s news shows, nothing demonstrates a company’s strategic direction like an acquisition. Yesterday’s message said that content is important, but that Yahoo considers commodity content the priority. That needs a sharp correction, and quick. The best way Yahoo can clarify the importance of premium content is to acquire a leading premium content network, like Sugar Inc., Huffington Post, or IGN. Sugar is reaching millions of women per month with unique content and an authentic angle that Yahoo has yet to duplicate; while Huffington Post crowdsources content but applies a strong point of view and features premier branded names, lifting it above the commodity fold. And IGN (housed in Fox’s digital media group, which has already divested properties like Photobucket, Rotten Tomatoes, and more) has a strong branded destination for consumers and has become a must-buy venue for entertainment advertisers looking to reach a male audience. Each one of these acquisitions would demonstrate a clear commitment to building a premium media network.
These three steps are the ones that Yahoo will need to take to keep its pricing and positioning high, and ultimately to succeed in digital media.