Dailies Strike Back At Web

This just in: Newspapers and Yahoo! in talks to reslice the ad pie

Major newspaper companies and three online giants are deep in discussion about the future of newspapers on the Web.

Yahoo! (YHOO ) and a loose consortium of newspaper publishers are mulling a partnership that would encompass Web classifieds, local news, and content packages based on general themes, like travel. This could drive more traffic to Yahoo's help-wanted site HotJobs (YHOO ), which trails its key competitors, and bolster future Yahoo moves into local offerings. Newspaper companies would build a network within what is one of the Web's top destinations and win a crucial concession in today's search-engine economy: getting a cut of the ads sold around search results of their content. It's a sore spot for publishers that this doesn't happen now.

"Help-wanted is the quick cash," says one executive involved in the discussions, "but news search is the long-term future." At least one newspaper executive involved in the discussions says he nurses hopes that Web surfers eventually will pay small fees -- micropayments, in Web parlance -- for some newspaper content. And there's a push to get the newspapers an equity stake in the venture. But another newspaper executive who is familiar with the negotiations says the focus is on more immediate concerns. "In a more search-centric world, how do you guarantee better distribution?" he asks. "That's what a number of these talks are about."

SPEARHEADING THE DISCUSSIONS -- though by no means the only participants -- are executives from Hearst Newspapers and MediaNews Group, both of which run daily papers near Yahoo's Sunnyvale (Calif.) headquarters. (MediaNews owns the San Jose Mercury News and other area dailies; Hearst publishes the San Francisco Chronicle.) In a previous interview, MediaNews Group Chairman and CEO W. Dean Singleton hinted broadly at the contours of the companies' thinking without divulging any specifics. "The industry needs to come together to find a search-engine model so that we begin to monetize news," he said recently. Singleton added that related discussions were active "on several fronts." The Yahoo talks began last October. Another company involved in early overtures to Yahoo, executives say, was McClatchy Co. (MNI ), but its recent purchase of Knight Ridder curtailed its involvement.

If the notion of newspaper companies creating an online classifieds network sounds familiar, it's because one already exists. Jobs site CareerBuilder was founded and is owned by Tribune, Gannett, and the just-sold Knight Ridder. It may sound like the new network is gunning for them, but the companies talking to Yahoo are having similar discussions with CareerBuilder and employment site Monster.com. (The recent strong traffic growth at CareerBuilder may be piquing Monster's and HotJobs' interest in partnering with newspapers.) Monster, Yahoo, Hearst, McClatchy, and CareerBuilder declined to comment or did not return calls.

Should a deal get done, it would would be the newspaper companies' boldest attempt yet to make more money from their offerings on the Web, which have been slammed by competition from everyone from cars.com to craigslist. The discussions suggest a surprising level of next-generation thinking and an openness to new approaches by a medium that has rarely been accused of either.

The situation remains fluid and complex. The many parties and potential partnerships involved make the talks resemble an ever-shifting game of three-dimensional chess. Cynics may sense in all this maneuvering echoes of the ill-fated New Century Network, a mid-1990s attempt by newspaper companies to create joint businesses on the Internet. That effort was done in by a failure to bridge conflicting interests, among other things. But in 2006, online competition for newspapers' readers and advertising dollars is no longer theoretical. It's a fact of life, as are flat revenues and shrinking stock prices. And potential partners for those looking to spur significant change are in place. Meanwhile, of course, the clock is ticking.

For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia

By Jon Fine

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