Yahoo Buys a Content Mill, So It Can Make Money off Google
Yahoo (YHOO) has been revenue-challenged for some time. Now it's found a new strategy: get help from Google. Yahoo announced that it will acquire mass content producer Associated Content. That's another way of saying that Yahoo will fuel traffic, and resulting ad display revenue, by appealing to Google search users.
Associated Content, like Demand Media and AOL, is what many in the industry call a content mill: a business that pays people low sums to acquire massive amounts of Web content. The concept is simple:
- Analyze search engine inquiries by consumers.
- Determine hot topics and correlate them with what advertisers will pay for.
- Offer people very low sums to write quick-and-dirty articles or shoot videos on the topics.
- Mass the results on Web sites whose pages rank well on search engines.
Content mills are a perfect marriage of the long-tail business theory and the so-called link economy. Cover the table with bets on millions of articles, craftily chosen, and you make money on ads consumers go from search engines to your sites. Given how specific the material can be -- how to carve a Halloween pumpkin, for example -- driving to the top of results is easier.
The problematic part is that a mill depends on turnover of would-be writers who collect piecework income. Associated Content is no exception:
Founded by Luke Beatty in 2004, Associated Content receives more than 16 million unique users per month, according to ComScore, and the editorial staff reviews more than 50,000 pieces of content per month, according to the company. Associated manages a network of freelancers, but has also built underlying technology that predicts what kinds of content consumers want, as well as surfacing that content through natural search on engines such as Google, Yahoo and Microsoft's Bing so the library makes money over time.Yahoo certainly needs some kind of help. Last quarter saw only a 1 percent year-over-year revenue increase. However, display ad revenue, an important segment for the company, was up 20 percent, and it could heavily benefit from pulling traffic from searches on Google -- or even Microsoft's (MSFT) Bing.
Yahoo probably didn't have the financial freedom to pick up Demand Media, which, at claimed annual revenue of $200 million and reputed venture investment of $355 million, is the Cadillac of the lot. Or, given the type of editorial it generates, maybe the Chevy. Depending on whom you ask, Yahoo will pay either $90 million or slightly more than $100 million for Associated Content. Somehow, it still seems like getting a bicycle to compete with Google's corporate jet. But then, Yahoo CEO Carol Bartz, who calls the acquisition a "game changer," has to take the dollars -- or the pennies -- where she can get them.
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