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No longer a media company: Yahoo’s pirouette from editorial to tech

It wasn't that long ago that Yahoo could've bought both Google and Facebook. But now with the business sold to Verizon, we look at how it's evolving its strategy in the local market.

By Damien Venuto | June 20, 2017 | features

Much has been written and said about Marissa Mayer’s inability to turn Yahoo around during her tenure, which ended last week with the acquisition of the company by Verizon for US$4.5 billion.

As it turns out, Mayer will go down in history as the last CEO of the company, which will now be combined with AOL to form the Verizon subsidiary Oath, led by AOL boss Tim Armstrong.

While Mayer leaves the company after an intense period of scrutiny over her performance, she is far from the worst CEO Yahoo has ever had.

The title undoubtedly must go to Terry Semel, who made a series of errors that would make even the most emotionless CEO feel self-aware.

Included in his unfortunate legacy is the failure to buy Google when Larry Page and Sergey Brin were willing to sell for US$3 billion (he only wanted to spend $1 billion), failing to close a deal to purchase Facebook after Mark Zuckerberg had agreed to a sale of a $1 billion (he tried to drop the price to $800 million right before the deal was signed off), and then also failing to buy the DoubleClick technology that would come to power Google’s entire ad network.

In the words of the great tech entrepreneur Al Pacino: “Life’s this game of inches… the margin for error is so small. One-half step too late or too early and you don’t quite make it. One-half second too slow or too fast and you don’t catch it.”

In a particularly insightful piece written in 2010, former Yahoo computer scientist Paul Graham wrote that one of the biggest problems with the company was its unwillingness to see itself as a tech company. Instead, Graham says, Yahoo wanted to be a media company.

“What Yahoo really needed to be was a technology company, and by trying to be something else, they ended up being something that was neither here nor there,” says Graham, explaining that Yahoo never had a clearly defined identity.

Compare this to the PR narrative spun by Google and Facebook, and you quickly understand the differences between these companies and Yahoo. For years, the team at Facebook, in particular, has repeated ad nauseam the line that it’s a technology rather than a media company (in late 2016, Zuckerberg finally seemed to concede that Facebook is in part a media company, but not a traditional one).

Part of the reason why Google and Facebook have been able to perpetuate this claim for so long is that they don’t actually make the media; all they do is serve as the conduits for media produced elsewhere to reach a broader audience.

Yahoo, on the other hand, has over the years invested heavily in producing media—and this happens to be expensive.

Look, for instance at the New Zealand office, which as recently as 2013 housed a digital media team of around 50 staff.

Compare this to the local teams of Facebook and Google, that only house a handful of staff, and it quickly becomes clear that Yahoo had its priorities in a different place.

The eventual gutting of the editorial team in this market is in some ways an example of the good guy losing.

While the other major international players have been happy to employ just enough people to hold their ad spend vacuum cleaners in place, Yahoo had at least invested in providing a decent number of jobs in the local market.

Now that the team has been whittled down to only a few, Yahoo has—whether by necessity or strategy—now shifted its local narrative from media to technology.

This move was signalled late last year when the business rebranded to Yahoo Platforms, giving a nominative nod to its identity as a tech company. 

Arnaud Calonne.

“Being part of Yahoo Global, we have decided to take the best of Yahoo and apply a specific strategy for the New Zealand market,” Yahoo Platform head of sales Arnaud Calonne recently told StopPress.      

“That strategy is moving the business to an ad tech platform.”

To do this, Yahoo is focusing its efforts on selling its BrightRoll and Gemini products in the local market. The former is a video advertising programmatic system bought by Yahoo for US$640 million in 2014, while the latter focuses on native advertising placement.

Calonne says the aim of this new strategy is to give users access to eyeballs across the internet.  

“It’s about reaching consumers that are going to Yahoo on a daily basis to get their news, but it’s also about reaching consumers off-network.”

The latter part of this statement is particularly important when viewed in the context of Yahoo’s recent history in the local market.

At the end of last year, Spark made the decision to move its Xtra email service from Yahoo to SMX after enduring a string of security issues.

The process of migrating users’ email accounts across to SMX started in February, with Spark inviting customers to switch over to the new services. 

And if Nielsen online ratings are anything to go by, then it would appear that this migration has had a significant impact on the number of people visiting Yahoo.

The numbers show that Yahoo had around 1.3 million visitors in March, which then dropped to 1.1 million in April before sliding further to a million in May.

"What the figures appear to show is that Xtra Mail was driving a proportion of Yahoo's overall traffic and with the migration of that service to Spark,  the Yahoo brand has so far seen a unique audience decline of over 20 percent," Nielsen New Zealand director Tony Boyte tells StopPress.

If Yahoo isn’t producing its own content and if it can’t rely on users visiting its site to access their email, then it must go elsewhere to find those audience numbers.

Calonne says the local site continues to attract decent numbers through the global content that’s now distributed on the site, but adds that Yahoo can stretch beyond this audience through the BrightRoll demand-side platform (DSP) and through the syndicate of publishing partners tapped into Gemini. 

Calonne says that Gemini currently has over 35 publishers using the Gemini product at the moment and he expects this to increase over time.

Calonne also says the business is making a major mobile push in the mobile space through app analytics company Flurry, which came under the Yahoo umbrella following a 2014 acquisition.

“Flurry has about 800,000 apps across the world,” Calonne says. “It’s a very powerful analytics solution, and if app developers want to monetise their apps they can then use Gemini.”

As a corollary, Gemini, when combined with Flurry, gives advertisers access to users when they enter those apps—a space that remains relatively difficult to reach at scale.

It’s fair to say that Yahoo has acquired some decent ad tech over the last few years, but it’s far from the only player in the market. In fact, the ad tech landscape is fiercely competitive, with numerous players all grappling for a cut of the pie.

Calonne concedes there certainly are myriad companies operating in the market, but believes Yahoo has an advantage in being here physically.

“What bugs me is that if you need any support, usually the support will be based in Australia or somewhere in Asia,” he says.

“At Yahoo Platform, we have platform specialists and strategists that are here to train users to better use the Brightroll DSP. We have even developed a number of training courses designed to the level the client is at.”

Having been in the local market for so long, Yahoo also has an advantage in terms of the data it has accrued about local online use.

“Yahoo has a lot of data in New Zealand. We’ve got multiple sources. We have data from registered users, from Tumblr and from email users. And what we do is make that data available through the BrightRoll DSP across all ad exchanges.”

Calonne says this last point also offers Yahoo an important differentiator from the likes of Google and Facebook in the local market.

“All the other big tech companies also have a lot of data, but they keep everything behind walled gardens. They use their data only in their own environments. At a global level, Yahoo has decided to make that data available across all exchanges.”

Having a point of difference is one thing, but this is unlikely to cause the likes of Facebook and Google to quiver or even pay attention just yet. Their ad tech vacuum cleaners are still securely fastened to marketers’ pockets. And while there has been the odd slip up with YouTube’s brand safety issues or Facebook’s measurement woes, clients, for the most part, seem happy to feed the juggernauts.

And as 2017 rolls on, Yahoo remains just another party looking to break the duopoly in digital advertising. For now, this seems about as likely as two media companies merging in the local market. 

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