Can Yahoo do content?

The Web portal's plan to become a major Internet content player is treading water, despite its Hollywood credentials.

Tech Culture
Early in Lloyd Braun's tenure at the helm of Yahoo's media group, he ran a quirky idea past his colleagues: a plan to add pizzazz to the company's Internet news site by creating a show anchored by animated puppets.

Braun discussed the puppets and other new ideas in hallway talks with executives from Yahoo's media team, according to people familiar with the conversations. Despite Braun's enthusiasm, however, the puppets were politely ignored.

After nearly 15 months on the job at Yahoo, there have been more awkward moments like the puppet-news pitch than success stories for Yahoo's media group and Braun, a marquee Hollywood executive who's supposed to be turning the Internet search heavyweight into an entertainment industry player.

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Though the 47-year-old executive may be a star in Hollywood circles--as chairman of ABC Television Entertainment he's credited with green-lighting hit shows like "Lost" and "Desperate Housewives"--critics say he hasn't figured out how to adapt his Hollywood know-how to the digital world.

As a result, Yahoo's plan to become a major Internet content player is treading water. Yahoo Media has lost ground to rivals in key areas and has yet to goose advertising sales with a runaway content hit, which many expected Braun to deliver when he arrived with fanfare in November, 2004.

Growth at the Web sites in Yahoo's media corral has been mixed, according to figures from ComScore Media Metrix, a New York-based research firm. Yahoo Finance and Yahoo Games, for example, both lost readership last year. In fact, Microsoft's MSN Money site now brings in more unique visitors than Yahoo Finance, though Yahoo Finance still leads on total page views.

"Yahoo's in a good position. But it still has a question about content," said a source familiar with Yahoo's media ambitions who asked to remain anonymous.

With such a mixed record so far, Braun's future with Yahoo has become grist for the rumor mill in Hollywood and Silicon Valley. While some claim Braun is on his way out, others say he still has time to find the crossover between the entertainment and technology industries to prove wrong his naysayers.

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Braun's struggles also raise larger questions about Internet media. Can a giant Internet portal like Yahoo or Google also create original content that people want to read or watch? Or are the portals destined to be like cable television carriers: Powerful content aggregators who dabble in their own stuff but are ultimately best at providing a platform for other people's material?

Yahoo spokeswoman Nissa Anklesaria said the company doesn't comment on the development process or on rumors about executives. Braun was not available for an interview for this article, she said.

"Lloyd has assembled a terrific team of senior leaders, and under his direction, Yahoo's media group has seen great success this year....We're in the early stages of this opportunity, and we're excited about the next year for this business," Anklesaria said.

The content future
For more than a decade, Yahoo has been an Internet search engine and portal that aggregates other companies' content. The aggregation strategy has by most accounts worked, particularly in recent years. Yahoo's revenue has jumped from $953.1 million in 2002--the first full year CEO Terry Semel ran the company--to $5.26 billion in 2005.

But Braun's job is about positioning the Sunnyvale, Calif., company for the future, when analysts expect a significant portion of traditional television advertising budgets will move to digital media. Yahoo, like every other big Net company, wants a slice of that pie.

Braun has managed to capture headlines through a string of high-profile hires, such as Neil Budde, founding editor of The Wall Street Journal Online. Braun also brought in former CBS Television Interactive Ventures executive David Katz, former AOL Broadband exec Shawn Hardin and ex-MSN video guru Scott Moore. Under Braun's watch, Yahoo has also launched smaller original projects like the multimedia news site "Kevin Sites in the Hot Zone."

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But for all the headlines, reader traffic is the real currency in the online world, because marketers use those numbers to sell ads at higher rates. And that's where Braun has come up short.

As head of the Media Group, Braun runs all creative and business aspects of Yahoo's music, games, movies, television, entertainment, finance, news, weather, sports, health, education and children's sites.

At Yahoo Finance, one of the network's more important moneymakers, page views fell from more than 800 million in January 2005 to just a tick above 500 million in January of this year. That comes as a surprise to some Yahoo watchers because the company hired several financial columnists in October, including Ben Stein, to write original material for the site.

Yahoo Games, still the most popular gaming site in the category, lost 2 million unique visitors in the same January-to-January period and had 21 million unique visitors last month. Page views declined more dramatically--from about 1.3 billion to about 800 million, falling behind AOL Games and EA Online, according to ComScore.

Growth was slow at Yahoo News, despite original content additions and a major technology upgrade that included RSS support. Yahoo added features from TV war journalist Kevin Sites, The Huffington Post, Gawker Media and Richard Bangs, an "extreme travel" journalist. The number of Yahoo News visitors grew only 2 percent from January 2005 to last month.

Anke Audenaert, Yahoo's vice president of research, points to Yahoo Music, News and Sports as success stories for the media group. But the "overall story is good," too, Audenaert said.

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Since its launch in January 2005, Yahoo Music, for example, led traffic among music services, including the No. 2 AOL Music and No. 3 iTunes software. The service also introduced original content from emerging musicians that includes interviews and performance video clips.

Audenaert said boosting user engagement is important at Yahoo and by that measure, the company has also succeeded. On a recent earnings call, Yahoo said it increased the average number of properties consumed by users by almost 24 percent in the last year.

For all that success, however, there is that niggling question about original content. For Yahoo, "nothing has really popped creatively," said Mitch Oscar, executive vice president of Carat Digital, an advertising agency. "Yahoo hired a marquee name, and like with any marquee name, you hope he can adapt to the culture and innovate. But generally, we haven't seen anything innovative there yet."

Slow on the deals
Yahoo optioned one of Braun's pet projects from his ABC days. Called "The Runner," the project is essentially a spy-on-the-run reality show expected to cost the company $10 million to produce. But after two years in production, "The Runner" is "in development and it hasn't been green-lit," Yahoo's Anklesarria said.

Yahoo has also reportedly been working with Mark Burnett Projects on another online reality show called "Treasure Hunt," which would have contestants pick up clues online to find a real treasure buried somewhere in the country. That show has yet to be announced.

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Meanwhile, the other big Net portals are also putting together original content. AOL recently announced that it's producing with Burnett an original online reality show, which is similar to "Treasure Hunt" but called "Gold Rush." And Google recently inked a deal with the UPN Network to let people watch a premiere of "Everybody Hates Chris" online. According to sources, Yahoo was in talks with UPN for the same arrangement.

"There's a difference of opinion about what Yahoo's real objective is here--whether it will be the HBO of the Web or not. Yahoo's strategy has always been to develop a little original content, and license a lot of other content, and focus on user generated stuff. And I haven't heard a clear articulation of what the agenda is," said Rob Sanderson, media and communications analyst at American Technology Research.

There have been other situations that, as much as anything, show the cultural divide between Braun's Hollywood and Yahoo's tech industry.

Earlier this month at a Los Angeles conference called "The Entertainment Gathering," a tech-meets-entertainment confab where self-promotion was supposed to be verboten, Braun took a shot at archrival Google. When he came on stage for a speech, Braun was asked by the conference host if he had seen a snake on stage earlier, referring to a gigantic boa constrictor brought on by a celebrity from The Discovery Channel.

Braun, who hadn't been there, said, "No. Was Google here?" Many in the crowd hissed.

Some Yahoo watchers see more than a little irony in Braun's struggles, given that Semel, a Hollywood veteran widely praised for turning around Yahoo, made the leap to the digital world that Braun is still struggling with.

"Terry's done a fabulous job re-creating Yahoo's business model, making it much more viable for advertising. From a pure media standpoint, Yahoo has come a long way," said Gary Adelson, a Los Angeles-based investment banker who runs the media, sports and entertainment practice for Houlihan Lokey Howard & Zukin.

But there's little doubt Braun has his work cut out for him. "It's a challenging mandate to integrate media and Internet technology to create a culture and following for programming. Is it a success yet? I don't think anyone expected results so soon," said Adelson.

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