In the end, the deal that Yahoo! announced on Monday, that Verizon Communications would buy its internet business for $4.8 billion, looked more like an escape than an exit. Yahoo!, once at the centre of the consumer web, had been pushed to the margins, overwhelmed by direct competition and generational change.
There is no doubt that Yahoo! made a valiant turnaround effort in recent years. Under the leadership of Marissa Mayer, the company made numerous attempts to improve its core business, with a steady run of acquisitions and investments in new apps and services.
But one central aspect of Mayer's strategy - putting major money and attention into Yahoo!'s media properties, a wide range of news and entertainment publications and video projects - always seemed curious. And few people knew why this was a risky strategy better than Mayer herself. At Google, she had preached the coming challenges of making media on the web; at Yahoo!, she lived them.
In 2009, Mayer, then the executive at Google overseeing search products, was invited to testify before the Senate Subcommittee on Communications, Technology and the Internet. The subject: "The Future of Journalism." Her message: Fundamental changes are underway, and navigating them will not be easy for media companies.
Her prepared remarks explained, in clear terms, what Google offered to publishers (traffic to their websites) as well as what Google took from publishers (control over the audience that arrived through Google): "Because our mission is to organise the world's information and make it universally accessible and useful, high-quality content is incredibly important to Google. Our most basic goal is to connect users with high-quality and reliable information. Credible, factual, trustworthy content - that is, journalism - is critical to the millions of users who search for news stories on Google."
Over the years, media companies tailored articles and videos to game Google's opaque search algorithm. Google encouraged that, because it improved their search results. It also helped drive traffic to news sites. But Mayer outlined a situation in which most websites were almost entirely replaced as distributors of information, by Google, or Google-like companies. This, she admitted, was a hardship for publishers: "When producing an article for online news, the publisher must assume that a reader may be viewing this article on its own, independent of the rest of the publication. To make an article effective in a stand-alone setting requires providing sufficient context for first-time readers, while clearly calling out the latest information for those following a story over time. It also requires a different approach to monetisation: Each individual article should be self-sustaining. These types of changes will require innovation and experimentation in how news is delivered online, and how advertising can support it."
Even web media companies, she acknowledged, depended on their ability to capitalise on distribution - to be able to sell their sites, and their audiences, as publications. To concede a direct relationship with readers to Google is to turn your product into someone else's inventory, and to risk accelerating any media company's nightmare: full commoditisation.
Mayer was describing the state of the media, and much of the web, from the perspective of the dominant search engine. She had used this formulation before, in an interview from the Knight Foundation; it was echoed, in December 2009, in a commentary written by Eric Schmidt, then chief executive of Google, for The Wall Street Journal: "Now the internet has broken down the entire news package with articles read individually, reached from a blog or search engine, and abandoned if there is no good reason to hang around once the story is finished. It's what we have come to call internally the atomic unit of consumption."
This distinctive terminology describing how internet users would get information was in equal parts prophetic and motivated. How Mayer and Schmidt described the power of major online platforms would have provided a useful way to think about the dominance of Facebook, Instagram, Snapchat and Twitter since.
Mayer's more specific prescription for how the web of 2009 should develop to accommodate Google, on the other hand - by creating constantly updated and growing "living stories" to replace articles and web pages - didn't quite come to pass, as search results were superseded by fast-moving social feeds for news and entertainment. Google now has plenty of competition as a major online media distributor. The "atomic unit" she described remains just that.
Mayer's media investments at Yahoo! gave it some unique advantages compared with most media companies. Yahoo! was, when Mayer took over, a marginal but large search engine itself, and its home page, driven by millions of email users, was able to direct viewers to articles, videos and other properties in the Yahoo! ecosystem. It had invested heavily in advertising technology, developing into something between a platform and a home page. That it might have an edge over other websites, at least in its ability to make money from online media, holding its "atomic units" together in some sort of coherent and therefore more lucrative whole, was still plausible.
But Yahoo!, positioned as an enormous new media company, was still not able to break from the pack. It was unable to monetise the true platform that it acquired, Tumblr. An early partnership with Snapchat fell apart.
Nonetheless, according to Yahoo!'s and Verizon's public statements about the value of the acquisition, Yahoo!'s media operations were a crucial motivator for Verizon, which acquired AOL last year.
"As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities," Mayer said in an email to employees on Monday. "With more than 100 million wireless customers, a shared view of the importance of mobile and video ad tech, a deep content focus through AOL, Verizon brings clear synergies to the table."
In other words, Verizon, like Yahoo!, thinks it can regain some control over media distribution. The logic is appealing but the path is unclear.
It's true that as a mobile carrier and internet service provider, Verizon has its advantages. It knows a lot about where its users are, and what they do on their phones. It can also assert itself over handset manufacturers, to some degree, to include extra apps and software on mobile phones. But how, exactly, Verizon plans to turn such abilities into lasting advantages, especially against the powerful and unified distribution systems of social platforms, is not clear. "Imagine the distribution challenges we will solve," Mayer said in her note, without elaboration.
Again, the problem has been identified, but the solution remains to be seen.
©2016 The New York Times News Service
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