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Published 20 June 2013 00:46, Updated 20 June 2013 07:39
During the 2013 Australian Tennis Open there were more than 6900 Fango ‘check-ins’ for the Bernard Tomic v Roger Federer match. Photo: Sebastian Constanzo
Yahoo! chief executive Marissa Mayer likes to sum up her business strategy by saying the company is heading in the right direction but needs “velocity”. From what the new CEO of Sydney-based Yahoo!7 says, that is true on this side of the Pacific too.
Certainly Yahoo!, the darling of Silicon Valley in the pre-Google, pre-Facebook era, has been changing at a breakneck pace since Mayer took the helm last July. Famously, Mayer didn’t even slow down to have her first child, taking just two weeks’ maternity leave then setting up a nursery in the office. With a slew of product upgrades, no fewer than 11 acquisitions and controversy over the end of working-from-home privileges, Yahoo! has rarely been out of the news in the past year.
What is less well-known is that Yahoo!7, the 50/50 joint venture between Yahoo! and Seven West Media, is also a company under new leadership and in the throes of transformation.
Stu Sayers was promoted to CEO of Yahoo!7 from his previous role as chief operating officer to replace Rohan Lund, who moved on to a wider role at Seven West Media. Sayers says Yahoo!7 is a net beneficiary of the work Mayer is doing at Yahoo!, though as an autonomous company it hasn’t been caught up in the teleworking ban.
Sayers collaborates closely with Yahoo!; both the Asia-Pacific chairwoman and the global head of product and engineering have visited recently. “There’s a steady back and forth – it would be rare for me to have a day where I’m not interacting with someone from Yahoo! corporate or Yahoo! regional,” he says. “They’re keenly engaged but they, and we, are both aware, as is Seven, that this is an autonomous JV.”
Australians have benefited from the improvements to flagship products such as Mail and Flickr and the development of the new weather app, while local advertisers are tapping into Yahoo!’s increasingly sophisticated data analysis and targeting tools. Sayers says Yahoo!7 is also looking at incorporating some of Yahoo!’s technology into its locally developed social TV product Fango.
“Yahoo! is really turning up the dial in terms of pace and quality of product,” Sayers says, pointing to Mayer’s acquisition of British-made app Summly in March for $US30 million.
“If you think about Summly, it was a pretty small acquisition of news summary articles, but in less than 30 days it was incorporated into the core product and out in the market. That kind of pace is starting to become the standard expectation for Yahoo!.”
“We are one of the few markets for Yahoo! with long-form content - being more than seven minutes,” Yahoo!7 chief Stu Sayers sayPhoto: Louise Kennerley
Yahoo! has been criticised for not making enough of its acquisitions but Sayers says that’s becoming “a harder and harder story to argue”.
He is relishing the bigger scope of the CEO role and has instituted changes such as greater investment in video and the restructure of the group-buying website Spreets. Yahoo!7 acquired Spreets in January 2011 in a deal reportedly worth $40 million. In its half-yearly results in February, Seven West Media booked a write-down of $60.2 million for its investment in Yahoo!7, which it attributed as “largely reflecting a deterioration in the results of Spreets”.
Sayers says Spreets no longer sources its own deals, instead using an affiliate model where it curates the best deals from other group-buying sites around Australia, including Cudo, Ouffer and Our Deal. As a result, Sayers says turnover is down but profitability is up.
“Group-buying as an entire category was, and still is, a very challenging space,” he says. “There’s no question there’s a strong customer need that it’s serving . . . but there’s almost no barrier to entry in that category and that leads to some irrational pricing. It makes the economics of the category very tough and that’s the reason we decided to move to a more affiliate model, which is closer to what we do [in our core business].”
Sayers has also been ramping up video capability, particularly for Yahoo!7’s growing mobile platform. The web network attracts 7.7 million unique users per month, while the mobile network has 5.4 million, up 60 per cent year on year.
Sayers says the investment in video technology was a “material” sum and the dividend will be improvements in speed, reliability, image quality and responsive design or “multiparse” that means web pages and video will render on any device. The results will be evident in the next three months.
Yahoo! Inc also has an interest in video, commissioning original content such as the Burning Love and Cybergeddon series and is reportedly bidding for TV-on-demand website Hulu. But the influence of Seven West Media makes television a much stronger part of Yahoo!7’s DNA.
“We are one of the few markets for Yahoo! with long-form content – being more than seven minutes,” Sayers says. “A lot of our downloads are full episodes of half an hour or an hour and that’s relatively unique in the Yahoo! space. There’s a desire on their part to learn from that to the extent that they get more involved in that space . . . so we’ve started sharing that with the region.”
The head of digital at media agency PHD, Peter Hunter, welcomes the investment.
“Online video is seeing rapid growth, and investment into multi-screen rendering has become pretty much a given for any publisher now,” Hunter says.
Yahoo!7’s television strategy also includes a range of apps including news, sport, food, TV guide and bespoke program apps such as one for My Kitchen Rules. The apps are preloaded on Samsung devices, thanks to a partnership announced in March.
Yahoo7’s social TV product Fango had more than 825,000 downloads as of May 2013. This is strategically important for the company because it taps into the “second screen” phenomenon where television viewers use social media while watching TV, particularly during ad breaks.
During the 2013 Australian Tennis Open there were more than 6900 Fango “check-ins” for the Bernard Tomic versus Roger Federer match and an average of 3000 per day during the tournament. Kia Motors extended its sponsorship of the Australian Open with a tennis-like game for Fango. The average time each player spent on a game was 111 minutes.
There are a number of companies involved in the battle for the second screen.Zeebox is offering social TV apps, whileTwitter is also making a concerted push into this space. Claiming 95 per cent of public conversation about TV happens on Twitter, it has announced TV amplification products that allow brands to target users who tweet about shows. It is opening a sales office in Australia and, among other roles, is advertising for a head of media partnerships to work with TV companies and has key global partnerships with media agencies in place.
Sayers says Yahoo!7 will focus on its competitive advantages. “We have some great content from Seven and that allows us to do some things that only we can do,” he says. “What we did with the tennis was something that only we and the Seven Network could do.”
PHD’s Hunter agrees, saying Twitter and Fango occupy “quite different spaces and user experiences” in the social TV space. “The interesting twist and the real game-changer in the second screen will come once mobile devices, apps and TVs are synced. Fango and Zeebox are leading this charge currently,” Hunter says.
“Advertising dollars will follow the platform that gains a critical mass in reach and engagement to a given audience.”
The other jewel in the Yahoo!7 crown is catch-up TV service Plus7, which includes Seven programming and content from Sony Pictures Television. Plus7 is available as a streaming service from the website, an app on Samsung devices and is coming soon as an app for other platforms.
“On the online video side and the second-screen engagement side, demand far exceeds supply,” Sayers says. “We are sold out for months in advance for online video and Fango. It’s an audience that is very aspirational for advertisers to get involved with.
“[Video] is a significant percentage and growing fast – in the total online ad market, video is growing about 30 per cent per year and we are exceeding that,” he says. “It is ballpark 10 to 20 per cent of our total revenue.”
In Seven West Media’s half-yearly results announced in February, it reported that Yahoo!7 delivered revenue of $54.1 million based on 100 per cent of the business. It also reported Yahoo!7 had an EBITDA margin of 35 per cent but did not disclose net profit or statutory profit margin.
Data from the Standard Media Index reported in TheAustralian Financial Review suggests Yahoo!7 booked $24.2 million in advertising between January and the beginning of June this year. Yahoo!7 has a small direct component but mostly sells through agencies. Its closest competitors are Mi9 and Fairfax Digital, which sold $30.1 million each in the same period.
A senior equity analyst at Morningstar, Tim Montague-Jones, who covers Seven West Media, says the finances of Yahoo!7 are largely opaque and lumped in under “other” in Seven’s accounts. “It’s not a massive component of their business,” he says.
Be that as it may, Yahoo!7 is strategically important to Seven West Media, judging by the focus on it at an Investor Day in early May. Chief operating officer Rohan Lund described it as an “important piece of the puzzle” and Tim Worner, then the chief executive of Seven Network Television and now of Seven West Media, spoke about it at length. “At our joint venture partners Yahoo! they are now marching with great purpose to this brave new world of personalisation,” Worner says.
“They are tailoring content for the consumer so that it becomes part of their daily routine, the absolute holy grail in media consumption – a habit.”
The head of digital at media agency Mitchell & Partners, Rebecca den Braber, says Yahoo! has good product and takes a collaborative approach to working with advertisers. “The combination of the content strength from Ch7 and the technology strength from the global web giant Yahoo provides them a great competitive advantage,” den Braber says. “Their core strength is being able to deliver quality content through their data and targeting product.”
It seems Yahoo! and Yahoo!7 are gaining velocity, but it remains to be seen whether they were right about the direction.