The Newspaper Consortium's 'MicroHoo' Hedge

Everything's timing, and QuadrantOne's formal launch may be bolstered by the fortune of events, in this case the Microsoft bear shadowing Sunnyvale. Thursday, it announced the addition of Newspaper Consortium publishers -- adding 138 web sites (both newspaper and broadcast). ClickZ's Kate Kaye lays it out well, here.

The new ad network, announced last month, had been in the works for more than a year. Tribune and Gannett (GCI) had long tried to rally fellow news companies to consort together and not just with Yahoo (YHOO). They'd pulled in just two others as equity members, Hearst and the New York Times (NYT) for its regional newspaper group. The idea: a long-treasured one that trusted newspaper brand online advertising, networked across the country, could boost digital ad revenues, and allow the companies to keep a greater percentage of their sales.

A number of us (Content Bridges: Four Things About QuadrantOne) expressed the opinion that QuadrantOne might be too little (reach, ad technology, scale), too late (as the big four of online ad world -- Google (GOOG), Yahoo, MSN, AOL -- devour the lion's share of revenues, buying out companies to add to their own positions). And among several hundred online ad networks, how would QuadrantOne stand out?

My own skepticism has been further fueled by talking with several major advertisers who said a couple of things: 1) They didn't really have a need for such a network, finding the current buying choices adequate; and 2) They were surprised that QuadrantOne management, largely experienced Tribuneites, hadn't sought their opinions or given them a heads-up before the announcement. After all, they are the customers, here.

Those doubts are still there. Clearly, though QuadrantOne has more going for it today than it did yesterday.

As I've been asked about the Yahoo Newspaper Consortium, my reply has been: good idea, especially if you take the name "Yahoo" off the front end of it. The idea, which I saw expressed most cleanly today in the release is that the Newspaper Consortium is its own entity, having grown to accept the notion that the struggling US press is best off dealing collectively with the web world. I think that's a maturation, a sense that uniting to do the Yahoo deal was a good idea and should be extended. It's not that the Yahoo partnership hasn't been a good move. On the contrary, publishers report good upsell revenue both from the HotJobs recruitment products and lately from the ability to sell Yahoo inventory to their own local advertisers. But Yahoo is still just a part of the web, and for newspaper companies finally acknowledging that their own destination plays are not enough, Yahoo is only part of a much bigger move into the distributed Web.

Clearly, the timing is as much market-driven as internally driven. The signs that Yahoo will end up as part of MicroHoo are increasing. The questions seems to be when and at what price. Given the likelihood of the deal, newspaper publishers need a hedge. Sure, they can say that the Yahoo ad deal is about local and the QuadrantOne deal is about national. But targeting audience is targeting audience, and the lines between national and local are blurring. And, sure, in the long-term, a MicroHoo relationship could be a strong one for publishers.

In the next year, though, it may give them a big headache, and that's unacceptable if you've already got the flu. If Microsoft emerges from Sunnyvale soon, with Yahoo in its teeth, we'll see a year-long drama of 1) Yahoo staff exodus; 2) Sale "closing" delays with anti-trust reviews; 3) The dreaded "integration" of technologies and staff, which is never a pretty thing, and in this case will something like the sixth sequel in the "Alien" series. You don't want to see this mating on a big screen.

So newspaper publishers quite properly don't want to be left holding the bag, as the air filters out of it. QuadrantOne can be part of that hedge, with lots more needed including other paid search solutions, video/video ad solutions and monetization of emerging user-gen. We still know little about QuadrantOne's own technology ramp-up -- which is absolutely crucial as the audience-targeting business gets more finely tuned each day.

No one wants to talk publicly about how much of inventory the new affiliate sites are "guaranteeing" QuadrantOne. Initially, it had asked affiliates for about 5% of its inventory, as compared to the approximate 10% that equity participants were committing.

Similarly, we don't how much of this guaranteed inventory will end bringing in high CPMs and how much will simply buck up bottom-of-the-barrel remnant inventory pricing. In the ClickZ story, QuadrantOne's Dana Hayes' comment that, "It is not just below-the-fold, remnant-like inventory," is a curious one. Did he really mean the "just"? Yes, 30 to 40% of some sites' inventory is considered "remnant", but even doubling one-buck-chuck CPMs won't save the day.

On Thursday, McClatchy (MNI) online head Chris Hendricks, a new QuadrantOne affiliate, made the point that, "This is the first step for the industry to come together and work on the national advertiser area as a unified front." Left unsaid in that comment is McClatchy's own unacknowledged Real Cities ad network (which it got out of the Knight Ridder acquisition) and the very real revenue that Centro -- a major partner to most of the industry -- is bringing in every day. But Chris' point on "first step" with QuadrantOne is right.

Whether steps two through ten will match market needs and ad network competition will be the measure of any significant success QuadrantOne accomplishes.

Disclosure: None