Yahoo Plots YouTube Rival for Summer Debut After Delay

Portal's Proposed Terms Have Received Pushback From YouTube Creators

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Yahoo wants to rival YouTube for viral videos.
Yahoo wants to rival YouTube for viral videos.

Is there room for another YouTube?

Yahoo is ramping up talks with video producers and plans to premiere a rival to Google's video service later this summer, according to people briefed on their plans.

Yahoo had intended to unveil the new service at its upfront presentation for advertisers in April, but contract issues have held the project back.

But for video creators dissatisfied with YouTube, Yahoo has a compelling pitch: more generous revenue-sharing deals, or fixed ad rates that are significantly higher than YouTube is currently delivering to creators.

Like YouTube, creators will be allowed to establish their own channel pages and host their videos on Yahoo. Like YouTube's video player, Yahoo's video player will be embeddable on other sites.

Those that sign a contract with Yahoo will get a publishing dashboard and have the ability to distribute across Yahoo properties including the home page and blogging service Tumblr, as well as a network of non-Yahoo sites.

Talks with the video creator community have been ongoing since the beginning of the year. Yahoo is even recruting producers that have been packaged as part of Google Preferred, which allows big brand advertisers the ability to buy videos produced by the top 5% of creators.

YouTube creators have long-chafed over YouTube's standard revenue split, where Google takes 45% of ad revenue. Yahoo is offering a split tipped more in favor of creators, or a higher ad rate overall. Creators contacted by Ad Age declined to specify the specific rate they were offered for fear it would reveal their identity to Yahoo.

Higher ad rates
Yahoo is also offering the option of a fixed ad rate said to be 50% or 100% higher than YouTube's average net ad rate. YouTube averages a $9.68 cost per-thousand impressions in the U.S., according to video company Tubemogul, before revenue sharing.

Yahoo isn't requiring exclusivity in its contracts so creators can simultaneously upload videos to YouTube and Yahoo. Instead, Yahoo is trying to present revenue terms that would persuade creators to upload a video to Yahoo first.

Yahoo declined to comment. Re/code had previously reported some details of Yahoo's talks with YouTube creators in March.

Building Yahoo's video business has been a priority for Ms. Mayer since taking the reins in 2012. Last year the company tried to buy YouTube's European counterpart Dailymotion (the deal was blocked by French authorities) and then Hulu. This year has been in acquisition talks with YouTube networks Maker Studios and more recently Fullscreen, according to people familiar with the matter.

Yahoo plans to sell pre-roll ads against the videos, which is part of Ms. Mayer's plan to jumpstart Yahoo's stagnant revenues, and compete for the $70 billion U.S. TV market. One person familiar with Yahoo's video business said the company has increased the number of ads running on its videos in recent months. At its uprfont presentation in Manhattan earlier this month the company announced plans to debut two TV-length original series on its streaming video service Screen as well as a way for TV advertisers to retarget viewers with online ads.

Yahoo's proposed pricing has piqued a number of creators' interest, but others have dismissed the offer as low because their channels already reap higher-than-average rates on YouTube and Yahoo's offered price falls short of those figures.

Contract talks
Yahoo has also run into a series of setbacks during contract negotiations.

One point of contention centered on content ownership. In contracts presented to creators, Yahoo stipulated that Yahoo would be given a perpetual license to any videos that were shared to Tumblr. That would effectively transfer a video's ownership rights to Yahoo.

"I've never seen anything like that in my life, and I'm assuming they're going to strike that [from the final contracts]," said one producer whose contract talks with Yahoo have gone through more than a few revisions. "Anyone who's done a content deal knows that would never fly."

Some contracts also included language that would let Yahoo videos available for download for offline viewing, which rankled some but not all who were pitched.

The delays have led some online video producers participating in the talks to question whether Yahoo has a clear strategy for its video business. One YouTube network executive said they have decided to hold off from signing a deal until after the program goes live in order to see whether it's worthwhile.

Yahoo has also given mixed messages on how videos will be promoted. In a recent meeting, a Yahoo business development executive told one producer that the company was shifting to a more algorithmic-based approach. But a Yahoo homepage editor was present at the meeting. "That's when I got the real sense that they don't have a clue," the producer said.

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