When the financial contributor web site Seeking Alpha parted ways with Yahoo! Inc. (NASDAQ:YHOO), on the surface everyone had a brave face. Behind the scenes the split, however, was not entirely amicable.


Did Seeking Alpha exit signal a deeper move to get content revenue generation

The questions beyond the obvious center on Yahoo.  Did the Seeking Alpha relationship exit signal a deeper move to get serious about content revenue generation? Is the content division saddled with a $6 million Katie Couric contract that, analysis shows, has very little chance of profitability in the online world?

Contrary to initial reports, Yahoo severing its relationship came as a surprise to investment website Seeking Alpha, who confirmed to ValueWalk that it was in fact Yahoo that made the decision.

“We valued the relationship for many reasons, not the least of which was that we were converting the traffic to real-time alert signups which are, and will continue to be, one of our most powerful levers for driving traffic organically,” said Colin Lokey, director of contributor success at Seeking Alpha, pointing to the primary revenue driver of converting traffic, a different metric than used in traditional mass media. (Seeking Alpha is a contributor driven content website in the past that was embroiled in controversy with hedge fund manager David Einhorn over its refusal to disclose the identity of a contributor.)

In an interview yesterday, Lokey speculated Yahoo was creating a contributor network to generate lucrative and cost effective financial website traffic, and his suspicions were confirmed.

Recently launched Yahoo Finance Contributors network

When asked about its plans, a Yahoo spokesperson noted that the search engine / content website “recently launched the Yahoo Finance Contributors network, made up of the most influential and credible experts from a variety of financial sectors that will regularly contribute their unique insights on Yahoo Finance via posts on Tumblr.”

In other words, Seeking Alpha was the competition and Yahoo! Inc. (NASDAQ:YHOO) is getting aggressive, driven perhaps by a desire to emerge from the financial shadow of its holding in Alibaba, which Wall Street prognosticators have credit with delivering most if not all of Yahoo’s stock price value.

But what does this mean for Yahoo! Inc. (NASDAQ:YHOO)? Profitability is a new metric that Wall Street has been starting to apply to Silicon Valley, how will they handle the challenge?

It is important to know one powerful value driver in online publishing is response and engagement. Profitability in online publishing often comes based on a user clicking on a link, engaging in a video or filling out a response form. While metrics for mobile and tablet are slightly different than that of traditional banner and display advertising, the revenue model is driven by engaged users who pay attention to advertisements.

By this standard, one problem Yahoo appears to have is Couric’s contract.

Couric’s salary package

Even using the most generous of calculations, Couric’s $500,000 monthly pay needs to generate more web site traffic than her television show in order to hit profitability, according to an independent analysis that considers average response rates and advertisement payments to the website publisher. The key point is that online, general consumers are far less valuable on the Internet than responses of those interested in financial products. In Yahoo paying up big for Couric, it likely showered money in an unprofitable direction.

And this leads into Yahoo’s next potential strategy.

Financial content is much less expensive to produce than a star-driven talk show. Many financial web sites breaking real news today are those with total editorial budgets far less than Couric’s $500,000 monthly pay, for instance.

Couric was expected to bring in big name interviews and make a splash. So far, outside a reasonably interesting interview with former New York Times Editor Jill Abramson, the interviews are basically mainstream gloss. Yahoo spokespeople counter by pointing with pride to interviews with US Supreme Court Justice Ruth Bader Ginsburg and Secretary of State John Kerry.  It is unknown the number of views and responses these guests delivered, but speculation is it didn’t come close to covering the cost.

Mainstream content that can be easily found on traditional media might not be the content audiences on the internet want — and it might be too expensive for the Internet to deliver. If one wanted mainstream,one would turn on the TV – where an eyeball pays the content creator a much higher rate than is found on the Internet.

Speculation is the content division at Yahoo came under increasing pressure to generate shareholder value post Alibaba (without Alibaba Wall Street had given stock price little value). Yahoo CEO Marissa Mayer is beginning to play hard ball like one of the guys. She has been called nasty names in the press for common male management tactics, but doesn’t appear to be backing down.

Driving her decisions are cold numbers, and if Yahoo can turn its financial content division profitable with a potential contest to SeekingAlpha, so be it.  Yahoo is making a move to become a serious player, perhaps seeing the success of Netflix, Inc. (NASDAQ:NFLX) and other online content creators.  The difference is that online content such as House of Cards has an edge, a different perspective not found in the mainstream.

Seeking Alpha, for its part is turning the event into a positive for its contributors, announcing it is providing two $2,500 weekly awards to contributors  “who have written up great ideas.”  These moves demonstrate our commitment to what is truly a dedicated base of talented contributors, Lokey said, but it could also be a move to stave off an attempt by Yahoo to encroach on their territory. “I think it’s reasonable to assume (given the timing) that it may well be related to the fact that they are launching their own contributor network,” he speculated.

Monetization of Katie Couric’s online and mobile traffic

A Yahoo spokesperson did not respond to all the specific issues raised in this article, particularly with regards to the monetization of Katie Couric‘s online and mobile traffic, but did issue a statement to ValueWalk.

“From time to time, we assess our content mix and add or remove publishers to ensure we are continuing to deliver quality content to our users.  In addition to working with a broad array of publishers, we also invest in our own top notch editors and writers, as well original video programming that delivers 24/7 expertise.”

In the battle of independent media and giant conglomerate, the winner is likely to be the one who has the most interesting content at the most competitive cost. The rules are different than in the mainstream media world. Applying traditional passive big media perspective to online media content is likely not a winning formula, but that remains to be seen.