NEW YORK (AdAge.com) -- Despite Yahoo's well-publicized strategy to corner a broad array of online businesses from advertising to search to content, it has more aggressively moved into the publishing space, increasingly looking like a content company.
Last week, the Sunnyvale, Calif.-based portal dropped $100 million on articles aggregator Associated Content, and in so doing has effectively proclaimed its stake on a media model that in many ways is strikingly similar to AOL, a once-faltering digital business that recently underwent a massive transformation into a content-driven business.
Yahoo is the largest online content player in terms of traffic and audience, and it plans on doubling the share of original material it publishes with Associated Content, which manages a network of freelancers. Associated has built technology that predicts what kinds of content consumers want and seeds that content through natural search on engines such as Google, Yahoo and Microsoft's Bing.
"Yahoo is the world's largest media company," Exec VP Hillary Schneider told Advertising Age in the wake of the Associated deal. "Content is core to our strategy."
Vital to growth strategy
Indeed, the Associated acquisition brings a tonnage of original content to Yahoo, which executives now affirm is vital to the company's growth strategy. "Right now, across all our media properties, the original content counts for about 10%," said Jimmy Pitaro, head of the company's media division. "We'd like to get to 20% of content being original over the next year."
Yahoo has been quietly heading in that direction over the past few years when it formed Yahoo Sports in 2007 and brought in bloggers and editors to produce original articles. More recently, it made a few high-profile hires for its Yahoo News division, including journalists Michael Calderone of Politico and Anna Robertson, an Emmy-winning producer for ABC's "Good Morning America." But whether by some inherent coincidence or unstated design, these latest developments position Yahoo to become a far more dominant player in the world of content, now pitting it against a clearer group of competitors from AOL to the New York Times.
"We're building this out very responsibly," Mr. Pitaro explained. "Each time we brought on a new writer, there was an expectation that the revenue generated by that writer would be greater than the cost tied to that writer." More specifically, Yahoo measures each writer's page-view performance on a quarter-to-quarter basis. Mr. Pitaro declined to explain what the minimum threshold is for a writer's performance.
The deal makes Yahoo a more direct threat to AOL, which expanded its content properties under CEO Tim Armstrong, who is an investor in Associated Content. At AOL, Mr. Armstrong launched SEED, a content platform very similar to Associated. Another content generator, Demand Media, is planning an initial public offering this summer.
Yahoo's branded properties, such as Yahoo Sports or OMG, have stirred the most chatter among both consumers and industry observers. Some examples of the effectiveness of Yahoo articles include its coverage of the most recent Olympics and the Oscars race.
"If you look at what clicked well during our coverage, the majority of our top performing stories was original," Mr. Pitaro said. "In a way it was surprising, but not when you consider we produce some of the best content." He pointed out that Yahoo's original content got better click-through off its home page than articles from partners such as AP or Reuters that were also featured on its home page.
37 billion page views
Over the last three months, Yahoo has drawn an average monthly audience of more than 155 million, driving 37 billion page views, according to ComScore. AOL averaged a monthly audience of just more than 99 million people who surfed 13.5 billion pages over the same period. Looking at other major media publishers, CNN.com brings in about 39 million viewers clicking through 1.3 billion pages, and the New York Times hauls in just less than 14 million people who crawl through 176 million of its pages every month.
"I agree with the view that Yahoo is moving in a direction of more originally generating content," said Jim Friedland, a director and senior research analyst at Cowen and Co. "But it's not necessarily that easy to monetize, especially at their scale. The Associated Content asset is incremental to that strategy but it's not game changing."
Mr. Friedland pointed out that within Yahoo Finance, only about 5% is original to Yahoo, and that if Google wanted to fill out its own finance vertical, it could easily aggregate the same content.
But Mr. Pitaro claims Yahoo has already been on the path of distinguishing its content presence.
"When we started to invest in professional writers and bloggers, it helped us to build out a unique identity and differentiate ourselves from a lot of the competition," Mr. Pitaro said. "First of all, it was free marketing -- when you break news in sports, you are very quickly credited, and you see immediate value and immediate impact. And that's very valuable to us. And we'd love to break news from our news division, and have CNN give Yahoo News credit. I'm fully expecting our bloggers to break news, but their first priority for the moment is to identify hot topics quickly and just get that content up."
Some marketers have bought into Yahoo's content ambitions. Toyota, for example, is a sponsor of Yahoo's original video series "Who Knew," which runs in Yahoo News. "It completely resonated with me that Yahoo is moving into this original content space," said John Lisko, communications director for Saatchi & Saatchi Los Angeles, Toyota's lead U.S. agency. "A company like Yahoo is a major portal, so there are many levels of content they need to provide. I know there's a concerted effort with them to continue to build the best original content they can."