Last week Yahoo agreed to spend $90 million on Associated Content. While we sniffed at the quality of Associated’s two million-plus consumer-written articles, the deal has serious implications for the media business. Here’s how it impacts four different constituents.
For Yahoo
I think we can safely say that it depends on post-deal execution, as it usually does with these things. On the one hand that $90 million could prove to be a big ol’ waste of money: Associated’s content isn’t high-value stuff, CPM’s for lower-value inventory will inevitably keep being driven drown by the proliferation of supply and the reduction of friction in the buying process, and both Associated’s network of Joe and Jane Doe contributors and its technology platform could’ve been replicated by a company with Yahoo’s resources for a lot less than $90 million.
On the other hand if it can focus this army on providing the types of content demanded by advertisers — particularly local and niche advertisers who’ve yet to be effectively mined as a source of display revenue but could be extremely lucrative — while finding better ways of vetting the content for quality and building greater demand for brand advertising online, that $90 million could end up looking like a small price to have paid.
For media dealmakers
Dealmakers will read this as another positive indication that the media M&A market is coming back. I’ve only spoken to one lawyer and one banker on the topic, but both seemed confident this was good news for them. We’ve already seen an acceleration of the pace of dealmaking in the technology sector and the banker’s theory was that this deal would trigger more activity in the digital content space.
Obviously if you’re an entrepreneur looking for crazy multiples, you’d still rather you had invented some instantly scalable, must-have mobile software, but the fact that Yahoo — which has at times tried to distance itself from the media business — is snapping up content and talking about why it wants to be a media company must be a good sign for media owners who create original content. Right?
For media owners
Not everyone sees it that way. One person I heard speak on the topic said “if I was a traditional media owner, I’d be crying into my cornflakes right now. $90 million for a lot of stuff created by consumers. That’s got to hurt.” Obviously his point was that this isn’t the same kind of original content most media owners produce, in that it’s dirt cheap to create. In that sense, a $90 million deal is a validation of the demand media model championed by Tim Armstrong at AOL or Samir Arora at Glam Media, a model that some see as antithetical to old-school creation of content by those peskily expensive professionals. Still, at least Yahoo, AOL and Glam want to create and own content. Sure that might be content that’s created chiefly to please an algorithm, but at least it’s a vote for digital content as a display ad vehicle — there’s some (small) solace to be found there for the cornflake-criers.
For ad networks
Things are getting tough for ad networks, and this deal just underlines the increasingly tricky situation in which they find themselves. On the one hand they’re getting squeezed by the demand-side platforms that are springing up at all the media agencies, allowing the online buyers to purchase across multiple ad exchanges and publishers without giving a share to the ad networks.
On the other hand, as ad networks they don’t own the media and therefore have a harder time implementing the customized ad programs and brand-integration deals that advertisers expect to be a big part of their higher-value programs. In its pronouncements on the deal, Yahoo several times referred to the fact that owning this content would allow it to do ‘creative’ things for advertisers, which speaks directly to the latter point. And, of course, creating a load more pages very cheaply will also help Yahoo if display advertising comes to be dominated by demand-side buying platforms.
