Reducing ad reliance: Yahoo! push stresses subscription service

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Yahoo! is about to launch what could be its most comprehensive consumer ad campaign as it plots an ambitious drive to offer high-speed Internet service, coupled with a host of add-on subscription services it hopes will make the company less reliant on advertising.

Final tweaks to the campaign-which will include multiple TV executions, with a barrage of outdoor, online, print and radio ads also likely-were ongoing last week. The first TV spots could break as early as this week during premieres of prime-time network shows.

A Yahoo! spokeswoman declined to comment on the company's advertising and marketing plans. While spending on the effort is not known, Yahoo! spent less than half a million dollars in measured media in the U.S. from January-June of this year, according to Taylor Nelson Sofres' CMR. Spending for 2001 was $38.2 million, according to CMR. An all-out media assault could run into the tens of millions of dollars in coming months.

The campaign, created by Havas' Black Rocket Euro RSCG, San Francisco, retains the whimsical "Do you Yahoo!?" tagline and will feature spots that hype a handful of the company's flagship services including Yahoo! Mail, Personals and online job searching via HotJobs. The move to tout key offerings in multiple executions concurrently marks a departure from Yahoo!'s typical strategy of running a single execution over a long period of time, such as a recent spot for Yahoo! Travel that featured a talking dolphin. The agency declined to comment.

Yahoo! this year has attempted to build a cache of premium pay services to help diversify its revenue base and reduce dependence on advertising. The company currently has more than 20 such premium add-on services. A partnership with SBC Communications will help Yahoo! market broadband Internet service and premium content services. In entering the broadband arena, Yahoo! will compete with AOL Time Warner's embattled America Online and Microsoft Corp.'s MSN.

Yahoo! remains in the painful throes of diversifying its revenue stream. Yahoo!'s revenue in the first half increased 15.5% to $418.5 million, mostly due to the February acquisition of HotJobs. However, advertising revenue fell 9% in the period amid the continued tepid Internet ad market. For the second quarter, advertising comprised 60% of total revenue, according to Justin Baldauf, VP at Merrill Lynch. On a positive note, Yahoo!'s pact with Overture Services for paid ad listings accounted for one-sixth of the 60%.

reducing ad income

Mr. Baldauf noted that in 2000, revenue derived from advertising hit 87%. Yahoo! Chairman-CEO Terry Semel has said he wants to reduce ad income to 50% of total revenue by 2004.

Analysts remain skeptical as to whether Yahoo!, and for that matter AOL, MSN and others, can make consumers pay for premium Web content and services. Yahoo!'s $436 million acquisition of HotJobs has yet to bear fruit. It has provided no financial guidance on the jobs service for the third quarter, fueling analysts' concerns over HotJobs' future given continued weakness in the employment market.

Yahoo! is notoriously conservative in its media spending. Even in 1999 during the heady dot-com frenzy, the company spent just $27.9 million in measured media in the U.S., according to CMR. In 2000, U.S. spending spiked to $43.8 million.

Fast Facts

Company: Yahoo!

Agency: Black Rocket, San Francisco

What: Expected to kick off its most comprehensive consumer campaign

Goal: Diversify revenue base with non-advertising businesses such as premium subscription services and broadband Internet

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