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Yahoo, newspapers tie up for Internet revenue

Yahoo Inc. has agreed to help more than 150 newspapers mine the Internet for additional advertising revenue in an alliance of recently beleaguered businesses.
/ Source: The Associated Press

Yahoo Inc. has agreed to help more than 150 newspapers mine the Internet for additional advertising revenue in an alliance of recently beleaguered businesses.

Under the deal announced Monday, seven companies that collectively publish daily papers in 38 states are betting Yahoo’s technological prowess and huge Internet audience will help them turn online advertising into a lucrative opportunity instead of a dire financial threat.

“We think Yahoo will open many, many doors that we need to have opened for us,” said William Dean Singleton, chief executive of MediaNews Group Inc., one of the publishers in the newspaper consortium.

Sunnyvale-based Yahoo, in turn, is hoping the newspapers will help close the widening financial gap separating it from Google Inc., which has leveraged its leadership in Internet search to build the Web’s largest advertising network.

“We believe every business in the United States should be customers of this network,” said Daniel Finnigan, a Yahoo senior vice president who runs the online help-wanted service where newspapers will initially concentrate their advertising efforts.

Yahoo and the participating papers plan to split the revenue generated by their partnership. The precise terms weren’t disclosed Monday.

Although its profits are still rising, Yahoo’s growth has been tapering off — a slowdown that has battered its stock and intensified the pressure on the company’s management to make a dramatic move.

Monday’s news didn’t excite investors. Yahoo shares fell 19 cents Monday to close at $26.72 on the Nasdaq Stock Market. The company’s stock price has plunged 32 percent so far this year, wiping out nearly $20 billion in shareholder wealth.

Only four of the newspaper companies working with Yahoo are publicly traded. Among that faction, Belo Corp.’s shares shed 18 cents to close at $18.33 on the New York Stock Exchange, where shares of The E.W. Scripps Co. declined 38 cents to $49.12. Trading on the same exchange, Lee Enterprise Inc.’s stock price gained 4 cents to finish at $28.71 and Journal Register Co.’s shares added 3 cents to end at $8.26.

The privately held publishers working with Yahoo are: MediaNews, Hearst Newspapers and Cox Newspapers Inc.

Some of the major papers involved in the partnership include the San Francisco Chronicle, The Atlanta Journal-Constitution, Denver Post, Houston Chronicle, St. Louis Post-Dispatch and The Dallas Morning News.

Despite Monday’s cool reception on Wall Street, newspaper analyst John Morton praised the deal as a “hopeful development” for the industry.

“I’m used to the newspapers being very reactive, and here they’re stepping out ahead for a change,” Morton said. “Here, I think they’ve become much more agile in trying to adapt to things that are happening.”

The industry tumult already has claimed one of the nation’s newspaper publishers and thrown the fate of another into limbo.

Knight Ridder Inc. agreed to a $4 billion sale to McClatchy Co. in June after dissident shareholders confronted management about its inability to cope as more readers and advertisers go online. Another major publisher, the Tribune Co., also is on the sales block, partly because of financial pressures posed by the Internet.

This marks the second time this month that newspaper publishers have sought help from a major beneficiary of the online ad boom.

Mountain View-based Google recently started a three-month experiment to help sell print advertising for 50 of the nation’s largest newspapers.

Yahoo’s newspaper partnership is limited to online advertising, although it could cover several different formats. Besides working with Yahoo’s HotJobs service for employment advertising, newspapers also hope to work with the company on posting both text-based and graphical ads around their news, entertainment and sports coverage.

Singleton, chairman-elect of The Associated Press, said the newly formed newspaper consortium hopes to persuade even more publishers to work with Yahoo.

But Merrill Lynch analyst Lauren Fine warned the Yahoo partnership could end up alienating the newspaper industry’s three largest publishers by giving HotJobs a boost at the expense of CareerBuilder, an online employment ad service owned by McClatchy, Tribune and Gannett Co.

“We ... wonder if the Yahoo partnership splinters the newspaper industry, precluding newspapers from forming a national, industrywide consortium and migrating onto common platforms,” Fine wrote in a Monday research note.

The deal also could hurt Monster Worldwide Inc., another HotJobs rival. Yahoo has been rumored to be considering a potential acquisition of New York-based Monster, but that now seems unlikely to come to fruition, Goldman Sachs analyst Peter Appert wrote. Monster’s shares rose 15 cents to close at $44.94 on the Nasdaq Stock Market.