Yahoo Woos the Tech User

With a new technology channel, the Web portal takes aim at a profitable niche where has been a powerful player

Web portal Yahoo! (YHOO) made a move to fill a glaring hole in its information lineup on May 1. It launched a new channel called Yahoo Tech aimed squarely at technology buffs -- and the major tech news portal, (CNET), operated by media company CNet Networks.

The signs that Yahoo had CNet in its cross-hairs have been around for months. Before joining Yahoo in 2002, Yahoo Chief Operating Officer Dan Rosensweig served as president of CNet Networks. Last May, he persuaded CNet's editor in chief, Patrick Houston, to come on board. A year later, Houston pulled the trigger with Yahoo Tech. The site is the first new content channel for Yahoo in five years, says Charlene Li, an analyst with consultancy Forrester Research.

The new site, offering a wealth of gadget reviews, represents a major push by Yahoo to grab a piece of online tech advertising dollars -- one of the biggest and fastest-growing areas of ad spending, and one that CNet has dominated for years. Last year alone, CNet's interactive revenues grew 26%. And Yahoo would like a larger slice of this high-growth market (see BW Online, 04/27/06, "Tech Giants' Internet Battles").


  "Technology and telco advertising was already one of the largest ad categories at Yahoo, without having a real home," explains Houston. Now that there's the dedicated Yahoo Tech, the portal hopes that its tech-related ad revenues will explode, partly because advertisers will be able to target Yahoo's users better. A recent Nielsen//NetRatings survey showed that CNet's users were four times more likely to buy a consumer-electronics product in the next 30 days than Yahoo's audience. Clearly, that's not what Yahoo's tech-related advertisers want to hear (see BW, 05/08/06, "The Counterattack on Google").

Perhaps Yahoo Tech will fix this imbalance. The new site already boasts high-profile advertisers like Hewlett-Packard (HPQ), Panasonic, and Verizon Wireless, a joint venture between Verizon Communications (VZ) and Vodafone (VOD). Mark May, an analyst with Needham & Co., believes Yahoo Tech could generate $50 million in ad sales in two years, and soon after reach as much as $200 million in annual revenues. While that might not seem like much for Yahoo, which booked $5.26 billion in sales last year, that revenue level would establish Yahoo Tech as a major competitor to CNet Networks, which reported $353 million in sales in 2005.

CNet says it's not worried, as Yahoo Tech targets the mainstream consumer while CNet's audience tends to be more tech-savvy. "We are clearly going after a different audience," says Joe Gillespie, executive vice-president of CNet Network's CNet division. Still, analysts believe Yahoo Tech could eventually start poaching CNet's advertisers. "It should be viewed as a serious competitive threat," says Needham's May. Yahoo's new site will also go up against other online sites that court tech users and advertisers, including BusinessWeek Online, part of the McGraw-Hill Cos. (MHP).


  However, the threat to CNet is the greatest, say analysts, and it comes at the worst possible time. Already, faced with competition from tech blogs like and a slew of other sites for hard-core techies, CNet's traffic growth has slowed in recent quarters. In the first three months of 2006, the site's average daily page views -- a key measure used to determine advertising rates -- rose only 4% from a year-ago quarter, to $98.7 million. And according to consultancy Hitwise, CNet's share of Web traffic going to tech-related Web sites has fallen steeply since December, from about 12% of all traffic to 8.8% in March (see BW Online, 02/07/06, "Needham Ups CNET").

While Yahoo Tech is not even close to CNet in the amount or richness of content, it could get there, and fast, says Forrester's Li. Yahoo says it has collected reviews and ratings for more than 300,000 products in 19 categories, ranging from cell phones to MP3 players. It will aggregate reviews found in the Consumer Reports, PC World, PC Magazine, the "Dummies" series of how-to books -- and, yes, even CNet. (Yahoo can publish CNet's content as part of a prior distribution agreement, says Gillespie.)

In the next several weeks, Yahoo Tech will also roll out a recommendation engine, telling users, in Amazon-like fashion, that they "might also like" another product. The site is looking to incorporate more social-networking capabilities that are now part of Yahoo 360, says Houston. And, of course, the site hopes to vastly expand its library of content by featuring original user reviews and posts from four well-known columnists, targeting everyone from moms to Baby Boomers shopping for gadgets.


 CNet, for its part, says it won't stand still. The company has one of the largest libraries of tech-related video content on the Web, as well as a wealth of original stories and reviews. "To be dominant in this space, you have to be devoted to original programming," says Gillespie. CNet has recently launched several key tools, including one allowing users to register and track all consumer-electronics products they own. That tool will then supply them with help and support phone numbers for each product. The site also lets users to enter products on their wish list, so CNet will track and deliver related stories and reviews.

The bottom line is that Yahoo Tech has a lot of growing to do before it can become a serious threat to CNet. Clearly, though, CNet veterans Rosensweig and Houston -- now part of the Yahoo team -- know the competition very well.

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