I usually don't like to make "winner and loser" type of predictions. And
I tend to be doubly cautious when I'm basing my opinion solely on what I
read and observe, as opposed to direct, first-hand knowledge.
However, this time I'm making an exception. As I'll explain below, Yahoo's
strong broadband distribution, and its competence in online advertising and
content/navigation, put it in a strong position to be a broadband winner,
and a big-time threat to lots of established players in the current media
value chain.
Yahoo Gets Broadband Distribution
Yahoo has pulled off a huge coup by inking deals with both
SBC and
Verizon.
These are in addition to its deals with Rogers and BT, with others sure to
follow. These broadband service providers have obviously come to the conclusion
that it's better to point their users to a co-branded Yahoo start page than
to go into the portal business themselves. Just between Verizon and SBC, Yahoo
is in front of 8.7 million DSL users, with that number poised to grow dramatically.
But the real action with these telco partners is with their fiber-based
deployments which are now underway in the 42 states that these two goliaths
cover. Reading these recent press releases (disclaimer - never believe everything
you read in a press release) -- Yahoo is highlighted as the key content partner.
As a result, Yahoo has the potential to become the de-facto IP-based programmer
to a large chunk of US homes plus the 90 million wireless customers that
Cingular and Verizon Wireless serve.
Equally powerful is Yahoo's appeal as a marketing partner to the telcos.
If it executes in the content and advertising areas as I've described, it
offers the potential to bring tens of millions of its loyal online users
to the telcos' networks.
Yahoo's DNA is Online Media
The advertising business is in the early stages of a huge disruption brought
on by radically changing consumer media behavior. The traditional model pursued
by established media companies is broken. The shifting of ad dollars from
offline to online media will only accelerate.
This is Yahoo's edge. Its DNA is in online media. Yahoo's been in the online
media space longer than anyone else. Successfully monetizing Yahoo's various
media properties' traffic in a rapidly evolving online ad market requires
discipline and creativity. Based on Yahoo's recent Q4
financial results, and those of previous quarters, it appears that Yahoo
has both. Continuing this earnings momentum will be key to providing the
company with the breathing room to experiment in emerging areas.
I believe that when it comes to figuring out how to sell advertising in
the fast-growing world of IP- based video, Yahoo's deep online media expertise
will be a big advantage. While others who come from TV backgrounds puzzle
over untested ideas for delivering advertiser value in an on-demand world,
Yahoo is learning daily what works and what doesn't.
A perfect example is the video advertising that Yahoo runs before The Apprentice
videos in Yahoo TV. Big brand advertisers like Intel, Staples and Nescafe
have bought these spots. I think they're just the tip of the iceberg for
how advertising in a broadband world will work.
Yahoo Knows Content and Navigation
Finally, if you haven't checked out
The
Apprentice mini-site within Yahoo TV, it's well worth the visit. Yahoo
did a
deal directly
with Mark Burnett Productions (hey, where's NBC?) to build The Apprentice's
companion web site, while splitting the ad revenues. The site is extremely
appealing and highlights exclusive video not seen on TV.
With the recent addition of Lloyd
Braun, an ex- ABC exec, and the opening of a big
Santa Monica office, Yahoo will be tempted to pursue expensive, Hollywood-style
programming projects. I think they'd be smarter to focus on doing more
Burnett-type deals. Yahoo brings reach and web expertise to any program
producer wishing to extend their brands online.
Further, these deals offer a window into some of the exciting potential Yahoo has in broadband video.
Look how Yahoo offers "Apprentice Video via RSS". (Side note - if you're
not familiar with RSS, click
here to learn more). If you are familiar with RSS, then you know that
droves of internet users are adopting RSS "readers" to organize the mounds
of information that interests them on the net.
The same scenario will unfold for online video, when there's a plethora
of it floating around the net. Consumers who have deep attachments to their
favorite programs will personalize their RSS readers to pull in all the video
available on the net that they would love to see, but aren't going to take
the time to repeatedly find (think TiVo "Season Pass" on steroids). Yahoo
is now promoting its own RSS reader as a feature in "My Yahoo". Coupled with
Yahoo's video search, Yahoo is in a prime position to become the de facto
personalized video aggregator of the web.
Going a step further, when tens of millions of people have video pulled
into their My Yahoo start pages, Yahoo is in a position to offer them all
a collaborative filtering feature (e.g. "if you enjoy subscribing to The
Apprentice video feeds, you may also enjoy subscribing to The Contender video
feeds"). The result is a broadband video cross- promotional powerhouse.
The next step is to enable easy synching of all of this personalized video
to portable video players. These "video iPods" are just starting to hit the
market, but they are useless without valuable content. When "My Yahoo" video
feeds can be seamlessly transferred from the PC to the portable, then voila,
these portable players have a much stronger value proposition.
Stay Tuned
It's a pretty daunting vision with lots of moving parts. But all the pieces
are there. If it does all come together, the ripple effects that will be
felt across the advertising, television, cable and broadband industries will
be dramatic.
(Disclaimers:My predictions are worth what you've paid for them, I don't own any Yahoo stock, and I don't have any privileged information.)
