How Yahoo Is Using Tumblr To Increase Revenue
Yahoo (NASDAQ: YHOO) CEO, Marissa Mayer wants to reverse the company’s decline in advertising revenue. She thinks the best way to do it is through a stable of digital magazines on a variety of topics including food, technology, movies and travel.
Mayer’s goal is to get people to make Yahoo a daily destination, a place they go to, stay awhile, read a feature article and find themselves exposed to what are known as “native ads”. Native ads are posts that look and act like feature articles, but are actually sponsored by companies like Best Buy and Ford.
The idea comes from Tumblr, the microblogging site Mayer and Yahoo bought last year for more than $1 billion. Tumblr has used native ads to generate ad revenue and now Yahoo wants to spread the wealth.
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According to AdAge, the first advertisers to sign on would include Procter & Gamble, Toyota, and Lions Gate Entertainment, the studio behind The Hunger Games: Mockingjay – Part 1.
As for the philosophy behind the basic content platform, The New York Times quoted Mayer in an interview at Yahoo’s headquarters in Sunnyvale, California several months ago.
“We think that digital magazines can be a great advance, creating a different category of content consumption, “Mayer said. “You can layer in video. You can change the content. You can bring in the social aspect. You can tell someone, ‘Oh, by the way, your friend also read this article and thought it was interesting.'”
The cost to Yahoo to develop the digital magazines has been high – in the millions of dollars according to The New York Times. Much of this has been spent on recruiting celebrities to host video segments (Katie Couric) or edit content (Bobbi Brown). Other expensive big names brought on board include Joe Zee, formerly of Elle, and technology guru David Pogue.
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Unfortunately for Yahoo, content consumers have moved away from personal computers, where the company’s traditional strength has been, to smartphones and tablets, where Yahoo has had a much smaller presence.
Ben Schachter of Macquarie Capital told The New York Times, “Yahoo’s problems are fairly deep, and just having some relatively new content initiatives is not going to solve their structural problems.”
Mayer, however, clearly hopes the combination of classy digital magazine content and Tumblr native ads will help the company turn the corner on the revenue front.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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