Yahoo! Here comes the new news

It’s been an interesting week in the new business, both globally and here in Australia.

At home some new start-ups, including another import from the UK. This time it’s the Daily Mail announcing an Australian edition. One Twitterati quipped that this would at least provide some much-needed competition in the right-wing junk journalism stakes currently dominated by The Australian.

But on the downside, one or two less happy stories of ailing start-ups and mooted closures.

On the world stage, it seems that Yahoo’s new business model is taking shape, following the surprise announcement that the NASDAQ-listed search and mobile App tech-giant has hired a group of well-known and high-profile journalists and editors to staff its own news portal.

The key hire is the award-winning and sometimes controversial Katie Couric, who will leave the American ABC network to join Yahoo. According to Yahoo, Couric will host a monthly interview program on the portal, but few details are available beyond that.

But why would a second-ranked search engine and internet portal want to buy into news and serious journalism?

The investment in Katie Couric and senior reporters from The New York Times signals that Yahoo wants to move into Web TV and take on the the giants of American network and cable television, and perhaps even Netflix, which is rumoured to also be looking at an Australian launch next year.

In recent months Yahoo, which is valued at around US$35 billion, has made a series of takeovers, mainly of Internet start-ups like the picture-blogging site Tumblr. But analysts think that it is still figuring out how to turn a profit from these acquisitions.

Tellingly, Yahoo’s share of online advertising (about 7%) is still behind Facebook (8%).

Recruiting Couric to be the new face of Yahoo’s news operation is an attempt to get a stock market bounce and attract eyeballs, which in turn should attract advertisers.

The key question though is where will those eyeballs be? In recent statements Yahoo CEO, Marissa Mayer, has said the company’s future is in mobile delivery.

However, mobile is “the right path” to be on according to Mayer, rather than an instant boost to advertising revenues. Digital plays take a while to turn from money sinks into profit centres.

Australia: following the leader?

Australia is following the bigger US and UK markets in seeing a wave of new start-up news providers both entering and leaving the market, which is creating both excitement and apprehension among journalists looking for new opportunities and among news consumers looking for something a bit more palatable.

Here at home this week, a new news start-up arrived and one recent entrant is in difficulties. In the past ten days or so, three new news publishers have announced their arrival in the Australian news market.

The biggest fish to enter the Australian news pond, since The Guardian six months ago, is the British-based conservative tabloid, The Daily Mail. Just this week it announced the imminent arrival of dailymail.com.au. It is a joint venture with Nine Entertainment, the Mail’s online arm dmg media and mi9 (a digital spin-off from the Nine group). There’s been very little said so far about who will head up the Australian operation, but its reported that up to 50 editorial positions will be created.

Two smaller and homegrown publications are launching into the Australian market; The New Daily and The Saturday Paper. The Saturday Paper will feature long-form journalism and will be published by Morry Schwartz (pubisher of The Monthly). Schwartz hopes it will be profitable with an initial printed circulation of between 80,000 and 100,000.

The New Daily recently launched entirely online and is financed by three major players in the Australian superannuation industry. The managing editor is former Fairfax and News Limited editor, Bruce Guthrie. The New Daily is running an advertising model and, like the imported Daily Mail, is not going behind a paywall. The New Daily’s backers hope it will be profitable within three to five years.

On the downside, Politifact, a fact-checking and independent journalism venture founded by former Fairfax editor Peter Fray has announced severe downsizing and possible closure as the sponsors who came on board during the 2013 federal election wind-down their commitment to the project. Politifact was based on an American model that calls out politicians for mis-statements and gives them a “truth-o-meter” rating. If it sounds like a gimmick, maybe it was, as the site only lasted seven months in Australia. Politifact is currently running on a skeleton staff and seeking new sources of funding.

The digital dilemma: How to make money from content

The question of how profits can be made from online news has several answers, but none yet a proven winner.

A recent American news start up NSFW Corp, which billed itself as “The Economist written by the Daily Show”, has this week closed its print edition and folded its digital business into another company, which is, itself, still reliant on angel investors from Silicon Valley.

And here lies the dilemma for the big global brands like Yahoo and The Daily Mail and for the more modest local start-ups, particularly those with a focus on serious journalism. NSFW Corp attempted to combine serious with hip and ironic, but that hasn’t worked out and perhaps the market for serious journalism is not where we think it should be.

On top of that uncertainty, the process for monetising the digital click-stream, whether on the desktop or via mobile devices, is still a large known unknown.

Television still dominates the global advertising market, while print advertising is in decline. On the other side of the ledger, digital revenues are not yet strong enough to support a reliable profit stream. NSFW Corp was offering a niche product and it was behind a paywall; not quite the same as ad-supported content, but another example of trial and serious error when it comes to financially-modelling new news.

Yahoo has a model that relies on volume-selling online and mobile advertising, but at a fraction of the price that print or broadcasting can command. The difficulty is that when you do this, the slice of total revenue you take from the cake has to be substantially bigger than your rivals if you are to survive and make a profit.

So far, no one has come up with a content formula that stacks the eyeballs high enough to satisfy all comers; with or without a paywall. The booking agents currently have the upper hand in setting prices for online advertising.

Over at Yahoo, Marissa Mayer is a smart CEO, she has a strong track record in the digital economy (she was formerly at Google) and her sense is that this expanding digital giant will eventually make money from its investment in Couric and news content. However, it is not a given that her vision will succeed.

There are nervous investors, from Nasdaq to Australian superannuation schemes, that hope she’s right about Yahoo, because their fortunes will also hang on the uncertain success of this bold experiment and others like it.

[This is a slightly longer and edited version of a piece I wrote for The Conversation, published 30 November 2013]

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