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Yahoo Wants You to Linger (On the Ads, Too)

Yahoo Wants You to Linger (On the Ads, Too)

By Vindu Goel, The New York Times | Updated: 23 June 2014 14:06 IST

Four editors were deep in debate at Yahoo Food's offices in Manhattan: Would Yahoo visitors click on a feature about foods of the ancient Silk Road, or would they prefer a guide to cheese fries and other snacks that go well with ranch dressing for the Final Four basketball games?

Rachel Tepper, the resident history buff, said people would be interested in how wheat and millet spread throughout the world millenniums ago. Julia Bainbridge, who joined Yahoo Food last year from Bon Appétit, had her doubts.

"I don't see our readers clicking on, 'What's the deal with the Silk Road?'" she said.

Such choices - ranch dressing versus food history - are the stuff on which Yahoo's future now depends.

The Internet pioneer still attracts a huge audience, but advertising, its prime source of revenue, is steadily declining. Marissa Mayer, the chief executive, has decided that one way to reverse that decline is to turn the company into a media empire with a constellation of what it calls digital magazines on topics like food, technology, movies and travel.

Mayer says she wants to make Yahoo a "daily habit" for its 800 million users. But she doesn't want people to come to Yahoo just to read email, post photographs on Flickr or get the latest sports scores. She also wants Yahoo to be a place where they curl up and spend some time, whether they are into haute couture, the latest gadgets or tabloid gossip.

And curling up right beside them would be the advertisers.

Built using technology acquired last year as part of the company's $1.1 billion purchase of Tumblr, the new publications combine original articles and material licensed from other sites, as well as big photos and videos into an endless page of tiles aimed at enticing people to linger. Mixed into that stream is a different kind of advertising - so-called native ads or sponsored posts - which look almost exactly like all the other articles and videos on the page except that they are sponsored by brands like Knorr, Best Buy and Ford Motor Co. These ads, Yahoo hopes, will attract the attention of more readers and make more money for the company.

In some cases, Yahoo editors even help to write that advertising - a blurring of the traditional lines between journalists and the moneymaking side of the business.

"We think that digital magazines can be a great advance, creating a different category of content consumption," Mayer said in an interview a few months ago at the company's headquarters in Sunnyvale, California. "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.'"

Mayer has spent millions of dollars on this push, much of it to recruit celebrity talent. The newest magazine, Yahoo Beauty, which went online this past Monday, is edited by Bobbi Brown, founder of the cosmetics line that bears her name. The company has also snagged big names like Joe Zee, formerly creative director of Elle, and David Pogue, a best-selling author of personal technology books and a former columnist for The New York Times.

For video, Mayer hired Katie Couric to conduct interviews and to host several programs; clips are shown both on the magazines and on Yahoo News. Each magazine has also begun its own video series.

But despite the bold hires and grand ambitions, the plan to turn Yahoo into a media giant has a been-there, done-that feel, and it is far from a sure thing.

Since its early days, Yahoo has repeatedly plunged into media - creating a celebrity gossip site, starting dozens of video projects and hiring journalists to do original reporting around big events like the Academy Awards - then faltered and retreated. Becoming a content powerhouse is even more challenging now.

Today, people get much of their news and entertainment through links from social networks like Facebook and Twitter. The Huffington Post and a host of smaller sites are masters at manipulating Google's algorithms to show up at the top of its search results. Apps on smartphones and tablets, where Yahoo has a minimal presence, are rapidly displacing the personal computer, the company's traditional stronghold. And viewers have learned to tune out display and banner ads, sending ad prices (and Yahoo's revenue) plunging.

The magazines certainly aren't generating much excitement among shareholders. Much of Yahoo's $34 billion market value comes from a stake in Alibaba, China's leading e-commerce company, which plans to sell stock to the public in the United States later this year.

"Yahoo's problems are fairly deep, and just having some relatively new content initiatives is not going to solve their structural problems," said Ben Schachter, an analyst at Macquarie Capital.

Still, Yahoo needs to do something different if it wants to reverse its long slide toward irrelevance. Mayer hopes the magazines will be a classier place to advertise and more lucrative for the company.

Mayer, an unabashed fan of glossy print publications like Vogue and InStyle, would like to see Yahoo's sensibility gradually move more upscale, even though its core visitors are more midmarket. Analysts and others in the industry are skeptical that this will work.

"A brand like Elle or Vogue is really luxury fashion," said a longtime magazine industry executive, who spoke on condition of anonymity because of continuing relationships with Yahoo. "That kind of content is never going to resonate" on Yahoo.

'Out in the Wilderness'
Jerry Yang and David Filo founded Yahoo two decades ago as a directory to the nascent World Wide Web. They soon added a better search engine as well as news, weather, sports and email, competing with mass-market sites like AOL to become the gateway to the Internet for the hundreds of millions of people just discovering it.

Consumer brands, seeking the best way to advertise to Web users, were initially drawn to Yahoo's large audience, and Yahoo raked in the ad dollars.

Then came Google. As more people began their Web forays with a Google search, advertisers flocked to it, siphoning much of Yahoo's search ad business. And a proliferation of specialty sites - and, later, Facebook - began competing for display ads.

When Microsoft made a $44.6 billion bid for the weakened company in 2008, many investors urged Yahoo to take the money and run. Yahoo's board rejected the offer but cut a deal to hand its search technology to Microsoft and share search ad revenue. Yahoo spent the next four years drifting without a clear strategy, going through four CEOs and losing tens of millions of users before Mayer was hired from Google in 2012.

She focused first on improving Yahoo's products and expanding its mobile team. The company revamped Yahoo Mail and the Flickr photo-sharing service and added smartphone apps like the Yahoo News Digest and Yahoo Weather to give the company a foothold in mobile.

(Also see: Yahoo revamps Flickr iPhone app to make it more Instagram-like)

But until recently, Mayer did little to court consumer-brand advertisers. Last year, Yahoo brought in $4.7 billion in revenue, down 6 percent from the previous year, as sales of both display and search ads, which together made up about four-fifths of Yahoo's revenue, continued to fall. Mayer concluded that the executive whom she had handpicked to lead advertising efforts, Henrique de Castro, was ill-suited to the job, and she dismissed him in January.

"From an advertiser perspective, they were out in the wilderness for the better part of a decade," said Bryan Wiener, chairman of 360i, a marketing agency that handles digital campaigns for brands like Coca-Cola, Oscar Mayer, Toyota and Oreo. "Other than a massive user base, they could not articulate a reason for being."

Mayer hopes that the magazines will bring back some of Yahoo's old mojo, attracting readers who will stay on the site longer and offering new ways for advertisers to make an impact.

While special advertising sections and "advertorial" articles have a long history in news media, sites like BuzzFeed and Vice are remaking the form, presenting this sponsored content as equal to anything produced by the staff.

Such native advertising has been considered and pursued by many other publications, including The New York Times, because research has shown that visitors are less likely to ignore these ads.

Leading the media push is Kathy Savitt, Yahoo's chief marketing officer, who was put in charge after de Castro's departure.

Savitt, a former public-relations executive who worked at Amazon and American Eagle Outfitters before forming her own e-commerce company, had little experience managing a sprawling media operation. But current and former associates say she has Mayer's trust.

"We have to give someone a reason to make Yahoo their daily habit," Savitt said in an interview. "'Magazine' is sort of an accessible term that talks about a place where you are passionate about a subject, where you can go to get that completely immersive experience."

Giving Ads 'a Point of View'
The magazines, which get little promotion from Yahoo's powerful home page and main news page, are off to a modest start. In May, Yahoo Tech had 9 million unique visitors on desktop and mobile devices in the United States, making it seventh among tech sites, behind rivals like CNet and Gizmodo, according to comScore, a research firm; Yahoo Food had 7.9 million visitors, making it No. 12 in the food category.

Food content is a noisy bazaar on the Web. Lifestyle magazine publishers own some of the juggernauts: Meredith, for example, has the top site, Allrecipes.com. Niche sites, cable channels (like the Food Network), celebrity chefs, amateur bloggers and general-interest sites like The Huffington Post also compete for readers. Even top brands like Kraft and Betty Crocker publish popular content.

For Yahoo Food to be heard in the cacophony, its editors are constantly striving to find the right mix to appeal to a wide range of readers, from recent college graduates who live on their smartphones to Yahoo's traditional audience of older readers who visit by computer.

Julia Bainbridge, one of the editors, says the magazine strives to be "the host of a cocktail party" - making sure that the conversation is interesting for everyone.

Sometimes that means serious posts, like an essay on cooking for the sick and heartbroken, In other cases, it's pure whimsy. The day after the debut of "Klondike," the TV mini-series about the 19th-century Canadian gold rush, the title was hot on social media. So Bainbridge assembled a post in which she embedded images of Klondike ice cream bars in photos from the show - a technique called photobombing. The post prompted the "Klondike" show to post its own ice cream photobomb on Twitter. Yahoo's post probably didn't hurt its standing with Unilever, a major advertiser, which owns Klondike, though Yahoo says the post was unrelated to that relationship.

The magazine's tone is also influenced by native advertising, which the editors help advertisers create. For example, Unilever, which also owns the Country Crock brand, sponsored a post on 10 breakfast options for people who hate breakfast. In keeping with native advertising's more subtle - or sneaky, depending on your perspective - approach, editors made sure Country Crock margarine was just a bit player in the post. The only place the brand was mentioned was in the byline, and only one breakfast suggestion even linked to a recipe that used the spread.

"That was our most popular story for two days in a row," said Sarah McColl, who was Yahoo Food's editor in chief until about a week ago, when she left to pursue graduate studies in creative writing.

"I think our involvement elevates the advertising," she said. "Our ability to bring editorial knowledge and finesse to advertising content makes it better and gives it a point of view."

Yahoo said it's up to the editors of each magazine to decide whether to get involved with advertising. Some editors, like those at Yahoo Tech, are adamant about keeping a strict separation.

Emily Bell, director of the Tow Center for Digital Journalism at Columbia University, said that such mixing of journalism and advertising could confuse readers and erode their trust unless the connection between the advertiser and the content was very clear.

"Not all advertiser-funded content is bad, but it has to be transparent," she said. "Where did this come from? Who is supporting this?"

Yahoo says its data show that its users click on native ads at roughly 10 times the rate they do for display ads on the site.

Rob Master, Unilever's vice president of media for the Americas and Europe, says he has been impressed by the format so far.

"We see ourselves as brands creating content, whether it's recipes or the latest in hair care - how to do up-dos," he said. "It provides us an opportunity to deliver our content that's not out of context."

Although he said Unilever saw some benefits from the Yahoo Food campaign, he declined to be specific. More important to him was that Yahoo is paying more attention to advertisers.

In recent years, Unilever's spending with Yahoo "dropped dramatically," Master said. Last year, Mayer met repeatedly with Unilever executives and asked how Yahoo could improve. When she shared her thinking about sponsored content for some new digital lifestyle magazines, Master said, "We put our hand up and said, 'We will do that.'" Unilever has since expanded its commitment to advertising on Tumblr and Yahoo sites.

Yet even with the big push and the wooing of brands, the magazines have attracted little advertising overall.

Yahoo Tech, in particular, has sometimes gone weeks without a single ad.

"It's hard for anyone to have embraced it yet because it's just starting," said Ned Brody, who heads Yahoo's advertising business in the Americas. "This is about changing the way an advertiser can interact with its audiences."

Drawing From Tumblr
Technology taken from Tumblr, which Yahoo bought last year, is the template on which the digital magazines are built. On Tumblr, there is no line between branded content and everything else. Rather than offering traditional ads, marketers create Tumblr blogs with posts that are often lighter and more humorous. Those posts can be shared by any Tumblr user, much the way a brand's Facebook posts can.

Executives at Yahoo and Tumblr are now pushing brands to pay to show those blog posts to a wider audience. Last week, they announced tools that allow marketers to run Tumblr posts as ads anywhere on Yahoo's network of sites.

One of the first brands to jump to Yahoo from Tumblr was Splenda, the artificial sweetener owned by Johnson & Johnson.

Yahoo worked with Splenda to build a Tumblr site to showcase one low-calorie recipe a day, said Kim Holdsworth, group brand director for Johnson & Johnson's nutritional products. In May, that material began appearing on Yahoo Food, where it was seen more than 32 million times in the first two weeks. Splenda is considering another campaign this year.

"The Tumblr platform was this natural fit for us," Holdsworth said. "It gave us easy-to-digest content."

This kind of advertiser hand-holding is labor-intensive, and Yahoo clearly can't keep doing it forever. But it may be necessary, at least for a while.

"I've been clear with investors that this will take multiple years," Mayer said. "We're doing the right stuff."

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