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« Google, AOL embrace RSS | Main | Blogging goes mainstream »

August 01, 2005

Yahoo and the future of media

Cover story in the August Fortune mag is "Yahoo and the Future of Advertising". While the world spent most of the past year focusing on the incredible multiple that Google was getting, Fortune takes a closer look at what Terry Semel and the Yahoo team have "quietly" been doing.

While the two companies have similar revenue results (Yahoo's Q1 was $821M vs. $794M for Google), the revenue mix is quite different. Search advertising on their own site accounts for 83% of Google's revenues, but only 22% of Yahoo's. Outsourced search and contextual advertising is the bulk of the remainder for Google (15%), while it's nearly 28% for Yahoo.
But where that's the end of Google's revenue stream, it's only half of Yahoo's. The single largest component, representing 29% of Yahoo's revenues, come from brand advertising. Another 20% come from various services, including job classifieds & personal ads, sale of broadband access and various niche targets (mail, music and more).

The article shows how Yahoo has positioned itself to be the top recipient of online brand advertising - in other words, as "traditional" advertisers move money from traditional media to online, their first stop is Yahoo. What this means is that Yahoo is starting to take dollars away from its content partners. The relationship between Yahoo and its media and content partners is shaping up similarly to those relationships between content aggregators and content providers in the past. Eager to gain access to new distribution channels, content providers will also be wary of Yahoo, particularly as it begins to develop its own content. While initially Yahoo's original content is mostly non-threatening (job listings in Hotjobs, personal ads, etc.), over time there will be the temptation to replace content it licenses with content it develops (as Bloomberg, Microsoft and others have done over the years). It will be a careful balance. Those who eschew Yahoo will find that they are missing out on lucrative potential markets, while those who provide unconstrained access to all their content are sure to have many sleepless nights.

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