Newspaper Alliances Help Yahoo! Expand Ad Reach

The alliance between newspaper publishers and Yahoo! that was unveiled last November has now grown to 17 publishing groups representing over 400 daily papers, reports Red Herring. Hearst, the publisher of 12 daily newspapers including the San Francisco Chronicle, Houston Chronicle, and the Seattle Post-Intelligencer, said the alliance has already generated millions of dollars in additional revenue this year.

The partnerships, which are currently based around job classifieds with Yahoo!'s HotJob's service, allow newspapers to greatly expand their audience. "Most newspapers' web sites reach between 10 and 20 percent of their audience in their local market. Yahoo!'s reach in the same audience in local markets is 70 to 80 percent," Hilary Schneider, executive vice president of Yahoo! marketplaces, said at a conference this week. The alliance will expand to search advertising on the newspapers' websites later this year, and display advertising during 2008.

While the alliance may help Yahoo! compete with Google, who is in the the process of acquiring DoubleClick in part to bolster its display advertising business, it is the classified ad tie-ups that may turn out to be the best part of the deal. Internet ad spending in the first quarter of 2007 was $4.9 billion (a year-over-year increase of about $100 million). Search ads continue to dominate, followed by display ads, but the fastest growth was in lead generation and classified ads.

While Google's DoubleClick acquisition will give them access to industry-leading software, Yahoo!'s strategy of partnerships with premium media properties gives them access to top dollar advertising space. JP Morgan analyst Imran Khan upgraded his rating of Yahoo! last week in large part because of these partnerships.

And the tie-ups don't have to stop with advertising and classifieds, according to analysts. Greg Sterling of Sterling Market Intelligence told Red Herring, "Social media, community tools, shopping, and maps mash-ups could all be tapped into. Newspaper sites could really benefit from these tools." These alliances could really help push Yahoo!'s non-search products to a wider audience, and in turn ultimately help their overall brand (including search).

What are your thoughts? Can alliances with newspaper publishers and other media sites help Yahoo! take on Google in advertising? Or will Google's search dominance equate to continued dominance of the online ad market?