2011-09-12 With Bartz out, what’s next for Yahoo?

Intelligence Report - 09/12/2011
By Mark Glaser & Desiree Everts




With Bartz out, what's next for Yahoo?

With the sudden ouster of Yahoo CEO Carol Bartz, analysts and industry watchers are wondering what's next for the company. Yahoo shares traded up sharply following the news that a phone call ended Bartz's two-and-a-half-year reign of the troubled Internet giant, but it hasn't ended speculation about how the company plans to fix its woes. Signs point to a massive restructuring, but will that involve the company selling off its Asian assets or an outright sale? "We are committed to exploring and evaluating possibilities and opportunities that will put Yahoo on a trajectory for growth and innovation and deliver value to shareholders," Yahoo Chairman Roy Bostock said in a statement following Bartz's firing. BusinessWeek's Brad Stone believes Yahoo plans to sell its Asian properties and make a high-profile acquisition with the proceeds. But AllThingsD's Kara Swisher has suggested that potential investors are eyeing the company, with possible bidders including AT&T, Verizon and News Corp.

So where did Bartz go wrong? You don't need to look much further than mobile, according to MediaPost's Mark Walsh. "The burgeoning mobile sector is another key arena where the web portal has been overtaken by rivals like Google and Facebook," he said. "The contrast is especially sharp with Google, which has made no secret of its ambitions for dominating the mobile space as computing and the Internet increasingly shift to handheld devices." GigaOm's Om Malik agreed. "Like everything else, let’s blame it on the iPhone and Google," he wrote. "Search consumer behavior is steadily shifting to mobile and that limits the opportunities for also-rans like Yahoo." Others pointed to the company's advertising troubles. "Though Yahoo's display advertising revenue in total was up 5 percent to $467 million in Q2 results, that was less than analysts anticipated," explained paidContent's David Kaplan. "Yahoo is facing difficult trends that will only deepen its display decline." Meanwhile, speculation about the company's next moves and possible suitors is unlikely to die anytime soon. As the Wall Street Journal's Shira Ovide commented, "With Yahoo relatively rudderless at the moment, be prepared to hear weeks and perhaps months of rumors and news stories about various combinations involving Yahoo, AOL, the sixth-runner-up on 'American Idol' and anyone else who has more than $100 in his pocket."


Why is Google touting daily deals as others pull back?

Has the daily deals sector peaked? It depends on how you look at it. Just a week after Facebook announced it was shutting down Facebook Deals, its daily deals service, Groupon announced that it's reconsidering its plans to go public. While its initial public offering hasn't been outright canceled, Groupon called off its investor roadshow and is postponing its IPO in the face of stock-market volatility, a source told the Wall Street Journal's Shayndi Raice. It didn't help that Groupon CEO Andrew Mason sent out an internal memo (that was leaked) touting the company and defending it against attacks -- a no-no by regulators before an IPO. Meanwhile, Yelp has cut its daily deals team in half. Yelp CEO Jeremy Stoppelman insisted in a blog post that Yelp Deals isn't going away but admitted that the industry "faces some real challenges" and "hasn't all been rainbows and unicorns." Those combined moves bring up questions about what kind of company can withstand the viability of the market. It's a "highly capital-intensive business," noted Forbes' Trefis Team, and it requires a "strong sales force and high marketing costs to acquire and retain both merchants and subscribers."

That could be why Google is singing a different tune when it comes to daily deals. The company advertised Google Offers, its fledgling daily deals service, on its home page, a rarity for the Net giant. As MediaPost's Catherine Taylor commented, "The headlines make it hard to figure out just what's going on with the daily deals/group buying market." Search Engine Land's Greg Sterling believes that while Google missed the boat on an early entry into the sector, it could become a major force later on. "Google’s Offers vision is likely much larger than the current version of daily deals," he explained. "It seeks to develop Offer Ads and tie deals and discounts to Google Wallet and check-ins at offline stores. There’s a much larger canvas and opportunity here." And that opportunity got even bigger in the local space when Google announced it was buying local restaurant guide Zagat, for a reported $100 million to $200 million. Zagat was touted as the original user-generated review service, but Reuters' Felix Salmon said "color me very confused at this weird entry into what looks very much like Old Media — something which was very useful before the mobile internet came along, but which has already been comprehensively disrupted by Google itself."

John Paton brings 'digital first' mantra to MediaNews

John Paton has been gung-ho about digital ever since he took up the helm of the Journal Register last year. Now he's taking his digital pitch to a new level, as CEO of Digital First Media, a new entity that will manage both the Journal Register and MediaNews, the second-largest U.S. newspaper company with more than 150 papers. "Digital revenues can pay for newspaper newsrooms," Paton proclaimed in a blog post following the announcement. And so far, he's got the numbers to prove it. Since the company started its digital strategy in 2010 its audience has doubled to more than 12.3 million unique visitors and its audience on all platforms has increased to nearly 21 million monthly customers up from 14.9 million, according to Paton. Nieman Lab's Josh Benton believes this "merger without merging" could signal the beginning of more consolidation in the troubled newspaper business. "In a few years, we might be looking back on today’s announcement as the beginning of a wave that radically changed the U.S. newspaper industry," he wrote.

While Paton is known for his digital-first efforts, he's long been opposed to using paywalls as a way to boost newspapers' digital revenue. However, MediaNews already has more than two-dozen paywall experiments running, according to paidContent's Staci Kramer. So what will happen to those paywalls now that he's the head of Digital First -- and also CEO of MediaNews? At least for the short term, they'll stay, he told Kramer. She believes it wouldn't be a stretch to see Paton using bundling to encourage more digital adoption by print subscribers or some variation that would work on a market-by-market basis, "particularly if local advertising gets hit," she wrote. But without going the paywall route, will Paton be able to show other traditional newspapers how they can remake themselves digitally to become profitable? "He definitely has a much larger stage on which to work now," wrote GigaOm's Matthew Ingram, "but the patron saint of 'digital first' will still have to provide some miracles before he wins over any more converts."


AOL saga continues with TechCrunch's Arrington out

As rumors have been swirling that AOL is up for sale, another saga has been beleaguering the embattled company. After a week of increasingly tense back-and-forth communications between AOL and Michael Arrington, it was revealed that the TechCrunch founder was officially out, according to Fortune's Dan Primack. It all started when news was leaked about Arrington's venture capital fund, CrunchFund, that would include an $8 million to $10 million commitment from AOL. That immediately started a high-profile debate about whether bloggers should be investing in the companies they're covering. A company spokesman, claiming to act on behalf of Arianna Huffington, said that Arrington had been fired, but another representative later claimed that he was simply no longer in an editorial role. Arrington hit back with a post insisting that TechCrunch either be given editorial independence or the site sold back to him.

That post put CEO Tim Armstrong in a difficult position, with the "choice of possibly losing the momentum of a successful site or looking as if an employee can push him around to get what he wants," noted AllThingsD's Kara Swisher. Wired's Felix Salmon believes that the biggest story here is the fact that "AOL has lost its highest-profile journalist -- the biggest brand name in the company, with the single exception of Arianna Huffington herself." Meanwhile, Adweek's Ki Mae Heussner said that AOL has retained two of the biggest names in mergers and acquisitions, law firm Wachtell Lipton Rosen & Katz and investment banking company Allen & Co., though Armstrong denied that any deal was in the works. Beyond the TechCrunch saga, another disappointment for AOL has been its large Project Devil display ads that take up entire pages. Reuters' Jennifer Saba reports that publishers have been slow to take up the new unit, and advertisers don't want to create ads for specialized formats. "I think (AOL) is on the right track," RPA's Rich Kim told Reuters. "I just wish something like this could be leveraged elsewhere as a more a cost effective solution for my clients. Right now it is hard justify."


Mobile app inventory could overtake display ads

Is all the attention on display advertising about to be a thing of the past? Despite so many companies trying to defend their turf in display ads, they may want to move their battlefield to mobile advertising -- at least, that's what analytics firm Flurry is predicting. Available ad inventory within mobile apps is set to overtake the entire U.S. Internet display ad spend, according to Flurry. "Smartphones app usage, facilitated by explosive iOS and Android device adoption, has created among the fastest-growing media channels in the history of consumer technology," Flurry's Charles Newark-French wrote in a blog post. In other words, available display ad inventory for iOS and Android could take over nearly all revenue for Internet advertising. The results were based on more than 100,000 apps that Flurry tracks.

But ReadWriteWeb's Dan Rowinski noted there's a key factor that Flurry didn't touch on. The research firm takes into account the "total amount of inventory available for the more than 600,000 apps available between Android and iOS," he explained. "That does not necessarily mean that most apps make attractive targets for advertisers." Flurry said the market is growing so quickly because of the dramatic rise in smartphone use, but other reports have shown that while users download a lot of apps, they don't always use them. As Rowinski wrote, "It still comes down to making a product that consumers will actually use. Total inventory is interesting, but advertisers go where the eyeballs actually are."

Age matters in social networking preferences, ad performance

When it comes to how users interact with advertisers on social networks, not everyone reacts the same way -- and it may have to do with your age. A study from SocialCode revealed that older users tend to click through Facebook ads, while younger ones were more likely to "like" fan pages. Users over 50 were 23 percent more likely to click through an ad -- and 9 percent less likely to "like" a page -- than any other age group, the study showed. Aside from being older, Facebook ad clickers are also mostly women, SocialCode said.

Meanwhile, a separate study from comScore showed that Google+ may be the new playground for younger users. comScore found that 34.2 percent of searchers looking for Google+ were under the age of 35, while just 24 percent of Facebook searchers were under 35. Google+ searchers also tended to have higher incomes -- 22.8 percent of searchers for Facebook had an income of above $100,000 a year, while 32.1 percent of searchers for Google+ had six-digit-plus income. So is Facebook losing steam with younger, richer users? Not necessarily. Facebook has become so popular that its audience closely replicates the national population, while Google+ has snapped up the higher-income early adopters, MediaPost explained, adding: "Either way, Google+ is most likely too new to be pigeonholed."

Of Note

Closed, Says Google, but Shops’ Signs Say Open (NY Times)

Conde Nast Spins Out Reddit, Without Letting Go (AllThingsD)

CNN Buys Zite, Continues Magazine Push (Wired)

Google Goes Big With Its Hulu Bid (AllThingsD)

Financial Times Apps Finally Pulled From iOS (paidContent)

How to reboot Slate (Reuters)

Twitter Ramps Up Its Ad Plan Again, With Ads You Haven’t Asked To See (AllThingsD)


openquoteThe board was so spooked by being cast as the worst board in the country. Now they're trying to show that they're not the doofuses that they are.closequote

Carol Bartz, former Yahoo CEO, on what she thinks about the company's board

Carol Bartz exclusive: Yahoo "f---ed me over" (Fortune)


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