Papers try to halt ad losses to Net

Nov. 21--Increasingly anxious about losing business to the Internet, newspaper publishers are forming broader and deeper alliances with major Web players, including companies they once saw as their mortal enemies.

Two weeks ago, The McClatchy Co. of Sacramento and other publishers launched a pilot project with Google Inc. in which Google agreed to sell print ads on behalf of 50 papers, including The Bee and five other McClatchy dailies.

That was just a baby step. On Monday, the newspaper industry took a giant leap online. Seven chains said they're forming a groundbreaking partnership with Yahoo Inc. that will essentially marry Yahoo's giant advertising operations with the Web sites of 176 daily papers.

The goal, as the newspapers see it, is to recoup ad revenue that's been migrating to the Web. Starting first with help-wanted classifieds, Yahoo and the dailies will cross-sell advertising. Eventually they plan to share news and other content, including older, archived information, with each other. The arrangement includes such publishers as Denver's MediaNews Group Inc. and New York's Hearst Corp., which control practically every daily paper in the Bay Area.

McClatchy, the second largest U.S. newspaper chain, isn't part of the Yahoo deal. But analysts believe it won't be long before McClatchy enters into some kind of broad-based Internet partnership similar to what Yahoo announced.

John Morton, an independent newspaper industry analyst, said McClatchy's small-scale deal with Google could end up resembling a larger program similar to Yahoo's.

"I think the Google relationship will evolve into the same thing eventually," Morton said.

Chris Hendricks, McClatchy's vice president for interactive media, said the Yahoo agreement "is a logical and natural path for other newspaper companies to look at."

He declined to say whether McClatchy is in discussions with any big Internet company about a similar strategy.

Peter Zollman, founding principal of the Classified Intelligence consulting firm, which advises publishers like McClatchy about Web advertising, said the Yahoo program can help publishers stay afloat in the Internet era.

"If your core advertisers are going somewhere else, you can either watch and wave, or you can try and participate," he said. "This is a participation play."

The Yahoo announcement comes as newspapers are struggling to keep advertisers and subscribers from fleeing to the Web, helping depress profits and provoke industrywide soul-searching on an epic scale. Such concerns helped drive Knight Ridder Inc. into McClatchy's arms earlier this year in a $4 billion deal and have prompted Tribune Co. of Chicago to put itself up for sale.

Most publishers are reporting falling revenue this year. McClatchy, for instance, said total revenue fell 2.2 percent in October. Classified advertising, a major profit source, dropped 3.3 percent in October, McClatchy said.

While newspapers have their own fast-growing Web sites, they still represent only about 8percent of total revenue at most chains and aren't growing quickly enough to offset the decline in ad revenue plaguing the print industry.

Yahoo will "provide a better platform than we can do ourselves," MediaNews Chief Executive Dean Singleton, who took the lead in negotiating the deal, said in a conference call Monday with reporters and analysts. "Going it alone will just take too long. We can get there much faster doing it this way."

Once the program is fully under way, visitors who go to the Web site of, say, MediaNews' Denver Post will find links to various Yahoo features such as maps and directories, Singleton said in an interview. Visitors to Yahoo's news site will find complete news reports from the Post and other MediaNews properties, he said.

At the same time, advertisers can go though the newspapers to buy ads on Yahoo, and vice versa. "This is a revenue-sharing model," Singleton said. "We share what we sell on their sites and they share what they sell on our sites."

Singleton's company owns most of the newspapers surrounding San Francisco, including two -- the San Jose Mercury News and Contra Costa Times -- spun off by McClatchy after it took over Knight Ridder.

Other partners in the Yahoo deal are Hearst, whose papers include the San Francisco Chronicle; Belo Corp., whose papers include the Riverside Press-Enterprise and Dallas Morning News; Cox Newspapers Inc., which includes the Atlanta Journal-Constitution; E.W. Scripps Co.; Journal Register Co.; and Lee Enterprises Inc.

The first phase of the collaboration involves Yahoo's HotJobs help-wanted ad business. HotJobs is the third-largest online help-wanted company, trailing CareerBuilder -- which is 15 percent-owned by McClatchy -- and Monster.com.

But by partnering with the newspapers' Web sites, HotJobs could become the dominant help-wanted organization. On the conference call, George Irish, head of Hearst's newspaper division, said the new partnership will control 45 percent of the online job listings in Atlanta, for instance. CareerBuilder has 24 percent of Atlanta's market, he said.

But McClatchy's Hendricks said CareerBuilder, which has sales forces deployed around the country, can more than hold its own against the Yahoo alliance.

McClatchy's recent alliance with Google is a simpler arrangement than Yahoo's announcement. Six McClatchy papers -- including The Bee and the Fresno Bee -- joined 44 others in a three-month experiment. Google has agreed to sell print space to Google advertisers that generally don't do business in the papers.

Analyst Morton said the deals show how much newspapers have changed. In the late 1990s they refused to participate in a local-news operation launched by Microsoft Corp., effectively killing the program.

"Now the industry realizes there's transformation taking place," Morton said. "They'd better be a part of it."

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