Embracing Original Content   

As fewer and fewer people use portals to access the Internet, AOL and Yahoo! are hiring journalists and posting their own material in an effort to bolster Web traffic.

When they went calling on professional sports leagues for help in expanding their online news network four years ago, officials from the online portal Yahoo! barely got a foot in the door.

"We flew to New York and met with one major league commissioner and asked if he would supply video to our site, and he said: 'I don't really think I want our content associated with your content,' " recalls James A. Pitaro, vice president of Yahoo! Media. (He declined to name the sports executive.)

But today, Yahoo!'s push into the online news business―and a parallel effort by rival portal AOL―are sparking both fascination and concern in the nation's newsrooms. The two companies are flexing their muscles, poaching journalists from big papers like the Los Angeles Times and New York Times and using controversial Web technology to identify potential news topics to make their sites more engaging.

"There's no question AOL and Yahoo! are a threat to mainstream publications," says Jim Brady, a former executive editor of washingtonpost.com and onetime AOL executive who in August launched the local news Web site TBD.com (see Drop Cap, Summer). "They have a boatload of money to pay talent, and they are willing to experiment and take risks to go after an audience."

To be sure, news coverage by Yahoo! and AOL now pales in comparison to what the big metro dailies offer. The online giants focus mostly on sports, consumer, entertainment and national political news. And both companies say they don't aspire to be comprehensive news sources and will continue to partner with third parties.

However, Yahoo!, which has an editorial and support staff of about 200, and AOL, which employs 250 full-time editorial staff members, have been beefing up their ranks and building on their early success in sports journalism.

In January, AOL paid $36.5 million for the video company StudioNow to complement its custom news video content service, Seed.com, which is run by former New York Times reporter Saul Hansell. AOL also said it will hire more than 100 journalists this year and is planning to pour $50 million into Patch, its recently acquired hyperlocal news operation.

Meanwhile, Yahoo! agreed to pay about $100 million in May to buy Associated Content, an enormous online factory for text, photos and video that pays producers a minimum of up to $15 per assignment, plus additional fees based on Web traffic the material generates. Two months later, the company unveiled the news blog The Upshot, which has two editors and six reporters publishing pieces on everything from the Gulf Coast oil spill to ballooning state and local budget deficits.

Both online news operations have grown so much in recent months that AOL sports columnist Kevin Blackistone, a former columnist for the Dallas Morning News, says he encounters rivals from Yahoo! as frequently as newspaper and broadcast journalists. He said he ran into three Yahoo! sports staffers when he was in Johannesburg this summer covering the World Cup.

"For a while, I was pretty much the only full-time sports journalist at AOL," Blackistone says. "But AOL has made a tremendous investment hiring new people. I don't see them turning back."

AOL and Yahoo! are plunging into the original content business for one very good reason: Their core business is declining. The portals are no longer the starting points for millions of Web surfers connecting with the Internet each day from their desktops, laptops and smart phones.

Portals provide access to a wide array of digital destinations. They also typically offer services such as topic searches and e-mail. Portals make money mostly from display and classified ads.

But the average time spent on portals and topic search sites has decreased 21.7 percent compared with last year, says Chris Bulger, data product manager for Compete.com, a media research and consulting site near Boston. Meanwhile, the average time spent on social media sites like Facebook, Twitter and YouTube has increased 18.2 percent in the last year, he says.

"Portals used to be the place that everybody would go when they first started their Internet session―when they wanted to get a lot of information quickly," Bulger says. "However, the popularity of social media has increased dramatically over the past couple of years. I think people now get a lot of their news there."

Yahoo! and AOL say the key to turning things around is to expand their menus of original news content. Previously, the sites largely aggregated content from wire services and other news outlets.

"Our hallelujah moment was when we broke the Reggie Bush story," says Yahoo!'s Pitaro, referring to a 2006 scoop reporting that the football player accepted improper benefits from sports agents while at the University of Southern California. "As we started to gain more credibility and positive reaction to our stories, we decided to apply the [sports] approach to other areas...and hire more talented writers and break even more news."

David Eun, president of AOL Media and Studios, says his company is taking a similar approach. "We've made the decision to bring in people...that really understand how to shape a story," Eun says. "I think you want to break a story and go deeper on it than your competitor."

Indeed, AOL and Yahoo! are not simply posting stories, photos and blogs and hoping for the best. Instead, they are combining news with Web applications, video and other Web services in hopes of engaging readers more deeply than their 
rivals do.

For instance, Yahoo! links some of its sports coverage to its Web site's fantasy league games for football, baseball and other sports. Similarly, AOL's Engadget technology news blog distributes software to Web site visitors to display stories on all four major mobile phone platforms, not just Apple's iPhone, as a few newspapers have started to do. And both AOL and Yahoo! allow investors to track their investments online while they read financial news stories.

In other areas, however, AOL and Yahoo! present their online news in ways similar to newspaper Web sites, with stories organized into traditional categories:―front page, world, business, entertainment, sports, politics and opinion.

On AOL News' homepage ( www.aolnews.com), much of the political news is supplied by the company's Politics Daily unit, led by Editor-in-Chief Melinda Henneberger, a former reporter for the New York Times.

Henneberger is supported by a staff of more than 40 editors, reporters, columnists and bloggers, including Walter Shapiro, a former USA Today columnist; Donna Britt, a former metro columnist for the Washington Post; and Lynn Sweet, a former Washington bureau chief for the Chicago Sun-Times who covered Barack Obama's 2008 presidential campaign. (See The Beat, August/September 2008.)

AOL FanHouse, with 20 full-time staff members, and AOL News, with about 25 editors, writers and bloggers, are similarly well-staffed with veteran journalists. Besides columnist Blackistone, the sports staff includes columnist Lisa Olson, who was an award-winning columnist at New York's Daily News; and Terence Moore, a former San Francisco Examiner and Atlanta Journal-Constitution columnist who frequently appears on ESPN.

Among those covering consumer news at AOL's WalletPop are Mitch Lipka, an investigative journalist for consumer issues who formerly wrote for Consumer Reports and the Philadelphia Inquirer; and consumer editor Beth Pinsker Gladstone, who formerly worked for Inside.com and the Dallas Morning News.

Lipka won a New York Press Club award this year for his consumer reporting, including a story detailing faulty flashlights sold at Target stores. The story led to a federal recall of the product and thrust AOL into a rarefied group of press club award winners that included the New York Times, National Public Radio and Newsweek.

Contributions to AOL's main news page also come from AOL's celebrity blog, PopEater, the DailyFinance business news site and the tech site Engadget. AOL has even covered some international news, keeping freelancer Emily Troutman in Haiti for more than six months to cover the country's devastating earthquake and its aftermath.

Compared with AOL, Yahoo! takes a more targeted approach to news, assembling what amounts to a SWAT team of about 75 journalists to report, but also comment on, the top stories of the day at its main news site, news.yahoo.com. In sports, Yahoo! has a staff of about 50 writers, including former Sports Illustrated NFL writer Michael Silver.

Yahoo!'s stable of non-sports journalists includes Chris Lehmann, the onetime editor of Bookforum, who has written for Congressional Quarterly and the New York Observer; and Michael Calderone, a media writer hired from Politico. Jane Sasseen, a former BusinessWeek Washington bureau chief, has that same role at Yahoo! News as editor-in-chief for politics and opinion.

While both companies have focused most of their attention on national and sports news, Yahoo!'s Pitaro and AOL's Eun say they want to do more local coverage. They say they see that category as a significant area for growth.

AOL is further along. By late August, it had editors and reporters chronicling small town life in about 100 communities in 20 states. Among the local AOL reporters is Andrew Brophy, a 44-year-old former Connecticut Post reporter who covers Fairfield, Connecticut, with the help of a police scanner, a personal computer, a BlackBerry and contributions from about four freelancers. As a virtual one-man band, Brophy acknowledges that "you occasionally miss a typo or repeated word" without editors looking over your shoulder.

However, he says the tougher challenge is the production demands. While Brophy says he got a pay raise when he joined AOL, he says he must now write two to three times as many stories a day as the one or two daily stories he produced at the Connecticut Post. He also says he must supply still photographs, audio and video as well as police the reader comment section area to ensure civility. "It's a lot more freedom, but it can be a lot more demanding dealing with the technology," Brophy says.

Yahoo! is gearing up a similar local news effort in the wake of its purchase of Associated Content but has not worked out the details. Still, while both companies' efforts remain works in progress, analysts say they reflect real innovation in an area of online news where many newspapers have been slow to venture.

"The Internet has changed everything, and most people who are sophisticated know that the notion of traditional news cycles and deadlines and focusing on stories as they are assigned to reporters — all of those things are out the window," says Scott Kessler, an Internet equity analyst for Standard and Poor's.

The good news, experts say, is that that Yahoo!'s and AOL's entry into the original online news battlefield suggests that quality journalism still has value in a digital age when many experts had predicted news would be a commodity. And some news executives say the new competition from AOL and Yahoo! could do the industry some good.

"I'm glad any time somebody is hiring reporters," says John Drescher, executive editor of Raleigh's News & Observer. "And competition is a good thing."

Milton Coleman, a Washington Post senior editor who is president of the American Society of News Editors, echoes Drescher's view that competition from the two portals "is good news for consumers of news." But he adds that it remains to be seen whether AOL and Yahoo! pose significant threats to the already beleaguered newspaper industry.

"The fact that technology enables a lot of people to enter the market is good; but we don't yet know what that means in terms of additional news coverage," Coleman says.

Still, AOL and Yahoo! enter the online news business with significant financial and strategic advantages over their newspaper counterparts.

Yahoo! is already the most popular news site, with nearly 40 million unique visitors in June, according to Nielsen Co. AOL ranks No. 4, with nearly 20 million unique visitors in the same period.

By contrast, the highest ranking newspaper online site, the New York Times, drew 16 million unique visitors in June, according to Nielsen.

Yahoo! generated revenue of $6.5 billion and net profit of nearly $600 million in 2009. AOL, which was part of cable and publishing giant Time Warner last year, did not separately release financial figures for 2009. But in the first quarter of 2010, the company had revenue of $664 million and net income of $35 million.

In addition, the two online giants aren't burdened by the huge capital costs of operating printing presses and physically distributing their product to consumers' doorsteps.

Instead, AOL and Yahoo! have developed expertise in two key areas needed to succeed in today's online world: the ability to monetize heavy Web traffic and the ability to quickly deploy new content and new technology to get readers' feedback, determine their interests and engage them.

AOL and Yahoo! "have a profoundly more efficient model for creating and delivering content than print does," says Alan D. Mutter, a former newspaper editor who blogs at newsosaur.blogspot.com. "Newspapers are saddled by enormous capital investment. They are also used to working in an environment where they were either a monopoly or near monopoly and could, therefore, charge what they wanted. The new model now is a 24/7 Internet with computers that never go on break."

Both Yahoo! and AOL incorporate topic search technology into deciding what to cover (See Traffic Problems, June/July 2010). For instance, both companies say they compile data from search engines and other sources to predict the topics, videos and photos that Web surfers are likely to click on. The result, AOL and Yahoo! say, is news that is more topical and better customized to users' needs. The two companies add that the technology is supplemented by real editors and professional writers.

"The technology works for us," AOL's Eun says. "We don't work for the technology."

However, critics say that approach skews coverage toward celebrity news and scandal and leaves complex social, economic and political issues undercovered. "There is a risk, if you cover the news based on rough proxies of past interest, that you will be covering the conversation rather than reporting what's new that's happening out in the world," says Tom Rosenstiel, director of the Project for Excellence in Journalism.

Important news could also slip under the radar at AOL and Yahoo! because part of the content produced by the two companies is written not by the professionals hired from newspapers and magazines but by a cadre of part-timers.

AOL has about 40,000 content contributors thanks to its Seed and StudioNow networks, according to the company. Meanwhile, some 300,000 people have contributed to Yahoo!'s recently acquired Associated Content unit.

Last December, technology writer Farhad Manjoo wrote on Slate that Associated Content is "a wasteland of bad writing, uninformed commentary, and the sort of comically dull recitation of the news you'd get from a second grader."

Manjoo cited a December 2009 Tiger Woods story produced by Associated Content that read like a bad English translation of a foreign language:

Alleged Tiger Woods mistress pictures of Rachel Uchitel might have spawned the TMZ Tiger quote of having to get a "Kobe Special" from Zales. Now that Gloria Allred joined the fray, will it hurt or help Tiger Woods?

Yahoo! spokesman Brian Nelson says Associated Content "is an open platform where anyone can contribute, on just about any topic. It's not accurate to say everything they produce, that we would consider it journalism."

Nelson added Yahoo! has not yet fully determined how it will incorporate contributions from freelancers into its news pages. However, he says that the company has hired many professionals to exercise strong editorial oversight.

For all the waves Yahoo! and AOL are making, however, some doubt the two companies will have staying power in online journalism. Both online giants dabbled in the field before, only to be sidetracked by bigger corporate challenges.

Until last fall, for instance, Yahoo! had been preoccupied with avoiding a corporate takeover by software giant Microsoft. The sparring ended when the companies completed a search partnership in February. Similarly, AOL is trying to regain its footing after being spun off by Time Warner in December 2009 following a disastrous eight-year corporate marriage.

In its first three months as an independent company, AOL revenue plunged 23 percent and the company undertook some belt-tightening. Despite the turn in business, AOL's Eun says the company remains committed to online journalism and is still "in hiring mode. We will hire more than a hundred journalists over the next several months."

Yahoo! is in stronger financial shape but has held fast to its geek DNA, even as it expands its newsroom. For instance, Yahoo! News is led by Mark Walker, a Stanford Law School grad with an engineering background who has worked mostly in the entertainment and venture capital industries.

Walker did not respond to an e-mail and phone call seeking comment. But Yahoo! spokesman Nelson says Walker was highly qualified for the post. He explains that Walker's role at Yahoo! news is more akin to the business oversight exercised by a publisher than the editorial oversight exercised by a newspaper editor.

Beyond their reliance on technology in the editorial process, Yahoo! and AOL approach journalism differently from mainstream newsrooms in other ways as well.

Neither company, for instance, responds to annual surveys distributed by ASNE seeking employment figures. Many of the nation's newspapers participate in the survey. However, Yahoo! took the unusual step two years ago of joining several other Silicon Valley firms to convince the U.S. Labor Department that their employment statistics were trade secrets and should not be disclosed to anyone.

Some say that's a departure from many news operations that pride themselves on uncovering secrets, not keeping them.

Richard Prince, a part-time Washington Post copy editor who writes a blog on the Maynard Institute Web site (mije.org/richardprince) about diversity in the news media workplace, says AOL and Yahoo! "are not as transparent as newspapers." Prince, who has featured several stories on the refusal of some online news outlets to disclose employment numbers, says the two giants "are from a different culture."