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. Continue reading