Yahoo!'s Dangerous Newspaper Deal?

Desperate for digital revenue, newspapers are sharing their advertisers with Yahoo!.

As newspapers around the country struggle to develop strategies for growing revenues online, more and more of them are turning to an unlikely ally for salvation: Yahoo!.

Last week, five struggling newspapers including the San Diego Union-Tribune and the Orange County Register joined the Yahoo! Newspaper Consortium, an online advertising partnership between the Web publisher and the print publishers. The group, launched in 2006, now counts 814 papers as members, or 51% of the entire U.S. newspaper market as measured by Sunday circulation.

At first glance, linking up with Yahoo! ( YHOO - news - people ) seems a no-brainer. By joining the consortium, the papers will be able to supplement the advertising they sell to local clients--mostly display ads in the papers and on their Web sites--with expensive ads targeted by geography and user behavior on Yahoo!'s collection of heavily-trafficked Web sites.

In exchange for access to Yahoo!'s ad inventory, papers turn over half of the revenue from ads they sell on the portal. Since joining the consortium, the Atlanta Journal-Constitution expanded its local reach, the proportion of the regional population who hit its Web site in a month, from 15% to 85%, Yahoo! says. The Evansville Courier Press, an Indiana daily with a circulation of 60,000, sold $1.1 million in Yahoo! ads in a week-long "sales blitz." Yahoo! won't discuss the specifics of the revenue-sharing agreement, but newspaper partners confirmed the 50-50 arrangement.

But the partnership could have an even bigger cost for newspapers. In the offline world, newspapers have traditionally dominated advertising sales to local businesses like retailers, car dealerships and supermarkets. By introducing their local advertisers to Yahoo!, newspapers run the risk of turning over their best customers to a digital powerhouse as they try to rebuild their own businesses online. (story Link)