Earlier this month, they announced a partnership letting Google sell ads in their papers. This week, a bunch of others struck a deal essentially letting Yahoo! do the same, but also work together in technology and search areas. The second part is better news than the first.
You know what? I don’t get these wealthy owners of newspaper companies. Here are these very wealthy people who view themselves atop the social elite, who feel a sense of malaise over the macro trends around them, but who basically further permeate their sense of irrelevence by acting gun-shy when they need to be bold. I do not want to paint all newspaper owners and executive with one brush, I am admittedly making a general comment on the industry’s state and not trying to say that there are no bold, out of the box thinking, risk taking people there… but what is wrong with these people?
Read this and I will tell you what I would do if I were them, from MarketWatch:
At this rate, Internet advertising spending should reach $16 billion for 2006, which would eclipse last year’s record of $12.5 billion, the IAB believes.
The IAB report, prepared in conjunction with PricewaterhouseCoopers LLC, is yet another troubling sign for newspapers, radios, television and other traditional media. While the amount of Internet ad spending has grown, an IAB spokeswoman said it’s not the result of businesses increasing their marketing budgets. Rather, the report signifies a broad reallocation of traditional media advertising spending to the Internet.
The IAB report is certainly welcome news for investors in Google Inc., the leading Internet search engine, No. 2 search engine Yahoo Inc., which have traditionally garnered a majority of all Internet advertising spending.
But it also bodes well for second-tier Net advertising companies such as Aquantive Inc., ValueClick Inc. or 24/7 Real Media Inc., which are also benefiting from the increases, which have seen their share of the Internet advertising rise this year.
The latest sign of the newspaper dilemma came last month, when Gannett Co. Inc., publisher of USA Today and scores of other newspapers, reported that its third-quarter advertising revenue was flat at $1.28 billion, but would have been down 1.2% if the company had owned the same group of newspapers 12 months ago.
Did you read that? You need to wake up. Why partner up with Yahoo! and Google - who are very strong - when you should be acquiring the second tier companies (before they get too strong and expensive).
News Corp. made two large bets, worth over $1.3 billion combined, on IGN and MySpace but either one could have positioned it for the digital world. Mind you, with MySpace is hit a grand slam… but the point is they stepped up to the plate and did not send in a pinch hitter (Google, Yahoo!) to galvanize their grip on the triple crown, did they?
I own a lot of these small and mid cap dot com’s (aQuantive), or have in the past (Valueclick, 24/7 RealMedia). Part of the reason I buy them is not just the growth they offer, but also because smart managers and owners of established media companies would - one would think - love to have them.
Take 24/7 Realmedia or Valueclick and shove them in the network of sites of a newspaper chain and you have a lot to play with (I own neither of those). In fact, many small/mid sized companies would welcome acquisitions by established, safe, large companies because they know how hard it is to compete with Yahoo and Google. Websidestory probably got nailed when Google bought Urchin and turned it into a free Analytics. This sound drastic: but Google can put a dent in ad networks’ businesses by saying to advertisers who use them: we’ll allow you to use our network for free… you will get as much reach as most of those guys offer you. Why would an advertiser still pay a network if they can get Google exposure/reach for free. This is a bit insane, but it would certainly force 24/7 or Valueclick to sell to google for cheap out of fear for “the worst.” I think that is free tip to Google #3 this week…
Need help in search? Buy a search engine: Answers.com, Looksmart - both companies I own - would help in many ways. Ask.com was acquired by IAC for $1.8 billion and it is now the 4th largest search engine, it’s market share is tiny, but imagine that in a newspaper’s “web.” That would be interesting, no?
Yahoo! and Google would still love to work with you, but at least you start capitalizing on the macro trends instead of accelerating your decline and relevance because of them.
The one factor that these newspaper companies seem to forget is that a lot of these young entrepreneurs would actually welcome being acquired by a traditional company like a newspaper. Many won’t, of course, but it’s an automatic acceptance for many young folks who lack the ticket in that circle otherwise (assuming they want in, that is).
At this rate, with these major newspapers remaining on the sidelines, what is happening is that ultimately, they sell out to the major tech and new media companies (MSFT, Google, Yahoo!) who only strengthen their grip on the growth out there and add to their top line as dollars migrate online.
Previous things we’ve written on newspapers:
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