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InContext / An inside look at the business of digital content

A tale of two legacy brands: The New York Times & Yahoo

February 11, 2016 | By Mark Glaser, Founder and Publisher – MediaShift @mediatwit

We all know the narrative that older media brands are struggling to reinvent themselves for the digital age, while upstarts have the advantage of being “digital natives” with no legacy burden. But what about the older “digital native” brands such as AOL and Yahoo? Looks like they might end up having an even more difficult road ahead.

Take the recent quarterly and year-end earnings reports from the New York Times and Yahoo. While the Times saw strength in digital subscriptions and native advertising, Yahoo struggled to deal with massive layoffs and “digital magazines” that weren’t gaining momentum. While both are considering streamlining their organizations, Yahoo has to take much more drastic measures.

Digital growth at the Times
At the Times, digital-only subscriptions grew 20% from the previous year profits were up nearly 50% from last year’s quarter. Print circulation, meanwhile, decreased by 6.9% for the daily and 4.4% for the Sunday edition, but circulation revenues were up 1.3% in the quarter due to an increase in delivery prices. When it comes to ad revenue, print decreased by 6.6% whereas digital increased by 10.6%. A growing strength, however, is mobile ads, which were up 74% in the quarter, making up 22% of all digital ad revenue (which itself is now 24% of all ad revenues).

CEO Mark Thompson said the Times’ T Brand Studio, which produces sponsored content, has become “a meaningful part of the business,” hinting at its importance in long-term strategic growth plans.

The results came the same day executive editor Dean Baquet sent an internal memo announcing an overhaul of the Times’ structure and strategy. “Does our system of powerful desks help us cover big stories that don’t easily have a home—like climate change and education—or does it sometimes get in the way? We deeply value the craft of editing, but in the digital era should we continue to edit every update of every story at the same level?”

The “desks” he’s referring to are the traditional Metro, National, International and other broadly named desks that help classify Times coverage—and thereby newsroom resources. Baquet revealed in the memo that he had asked David Leaonhardt, a recently named columnist and one of the founding editors of The Upshot, to help him examine the current newsroom structure and any necessary changes.

Yahoo’s retrenchment
Meanwhile, Yahoo CEO Marissa Mayer is feeling an even bigger burden of change, especially in the face of dwindling prospects nearly four years into the job. Yahoo’s loss in the quarter was $4.4 billion because of a write-down from investments that didn’t pay off. Without that charge, the company actually earned 13 cents a share. Compared to Google’s 31.9% profit margin in the fourth quarter, Yahoo’s profit margin was an embarrassing 2%. It’s now planning to close down five offices, and its board announced it was looking at “strategic alternatives” (in other words, a potential sale).

It doesn’t help that one way of streamlining costs—laying off 15% of Yahoo’s workforce—adds to a brain drain already taking place at the company. The New York Times reported in January that more than a third of the workforce has left in the last year, prompting Mayer to approve “hefty retention packages” to prevent people from taking job offers elsewhere. Yet most recently, entrepreneur Arjun Sethi, who helped Yahoo compete in the field of mobile chat apps, announced he was leaving.

Much of the criticism toward Yahoo is that its vision was poor from the start. “It’s very, ‘We’ll try this, we’ll try that, we’ll throw a bunch of money at that thing without a clear, coherent strategy around it,’” Jan Dawson, chief analyst at Jackdaw Research, told the Los Angles Times.

The problem with Yahoo is that its expectations are higher in the digital-native space, having to compete with the likes of Facebook, Google on the platform side and BuzzFeed and Vox on the content side. The New York Times has figured out that an older brand can succeed online with the right revenue mix: mobile ads, native ads, subscriptions and memberships. It’s not going to be easy, but they have certainly built up trust and credibility over the years.

While the ceiling is so much higher for ambitious digital natives, the bottom is so much lower when things go sour.

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