Yahoo Follows Google's Lead With Newspaper Ad Deal

Striking back against rival Google (Nasdaq: GOOG), Yahoo (Nasdaq: YHOO) on Monday inked a deal with seven publishing companies that will allow more than 150 newspapers to sell ads on its online classified service.

The newspaper giants involved in the deal include Belo, Cox Newspapers, Hearst Newspapers, Journal Register, Lee Enterprises, MediaNews Group and E.W. Scripps.

The newspapers in this consortium reach 38 states, and include major market dailies such as The Denver Post, the San Francisco Chronicle, The Dallas Morning News, The Atlanta Journal-Constitution, the Houston Chronicle, the Rocky Mountain News, the St. Louis Post-Dispatch, and the San Jose Mercury News.

"This is a transformational deal for the newspaper industry," said William Dean Singleton, CEO of MediaNews Group, and Victor F. Ganzi, president and CEO of Hearst Corp., in a joint statement.

"This relationship will significantly extend our local assets to a much wider audience, and gives us the technology required to fulfill the growing demands of advertisers and consumers," they added.

Local Ad Appeal

The partnership will launch with recruitment advertising on Yahoo's HotJobs site. Advertisers will be able to use contextual, streaming and interactive media to engage candidates, and will also be able to leverage RSS feeds, job search agents, newsletters and job recommendation engine results.

The arrangement will create a local and national jobs network and product suite designed to allow recruitment advertisers to reach a larger, more diverse candidate pool of job seekers.

"This announcement is consistent with our strategy to establish relationships that advance Yahoo's objective of securing leading positions where we see the biggest prospects for growth," said Yahoo Chairman and CEO Terry Semel. "We believe the local segment is largely untapped and provides significant opportunities to expand audience engagement and subsequently grow local advertising."

The local online advertising opportunity is significant. The U.S. online advertising segment is predicted to grow from an estimated US$3.4 billion in 2006 to an estimated $12.4 billion by 2010, according to Bank of America (NYSE: BAC).

In addition, 35 percent of all online searches are local, according to the Kelsey Group, with volume expected to increase from more than 20 billion searches in the next year to more than 30 billion searches by 2009.

Executing the Concept

On paper, Yahoo's deal with the newspaper industry could be explosive. The explosion, however, comes down to execution, said Greg Sterling, Principal Analyst at Sterling Market Intelligence.

"How this deal plays out, how many pieces of Yahoo technology these newspapers wind up using, and how extensively Yahoo is going to be able to use the promotional and sales assets of the local newspaper sales force is all to be determined," Sterling told the E-Commerce Times.

If it all works well, he added, it could rival RealCities.com, a national network of regional hubs that specializes in local information and services in 50 U.S. cities.

The Future Is Coming

Google is not sitting on its hands in the newspaper arena. Two weeks ago, Google inked a deal with 50 top newspapers to sell print ads through its Web site. Google's deal was a less ambitious effort but still significant for a struggling newspaper industry, Sterling noted.

"Newspapers need a story to tell the marketplace. Now these involved newspapers can say they have a major online partner in Yahoo," he explained.

"This is the wave of the future. Everyone is recognizing that no one has all the pieces of the puzzle. The combination of online and offline is much more compelling than an online only or offline only proposition, especially with geo-targeted or local advertising," Sterling concluded.