Why Yahoo Could Become the Next Major TV Network

YNBC380As the world waits to see if Yahoo will succeed in bringing Hulu into the Sunnyvale fold, it’s worth asking a long-term question about Yahoo and video. That question is this: Could Yahoo ever become the next major TV network — alongside ABC, CBS, Fox, and NBC?

I think the answer is yes. And it’s especially likely when you throw Tumblr and Yahoo’s potential big mobile acquisitions into the mix.

To understand why, let’s start with the big changes in TV. If you’ve only skimmed the latest literature on where TV is headed, you’re familiar with two major trends. The first is the growth of cord-cutters: People who part ways with pay TV in favor of online and other video sources, like Hulu and Netflix. Cord-cutting numbers are heading north of a million viewers; there’s also a healthy population of cord-nevers — viewers who enter adulthood without ever getting pay TV at all.

The second major shift is in the TV experience itself. Simply put, the TV experience is growing closer to the online experience every day — between TV sets that easily integrate with social media and apps and the rise of addressable TV ads that target viewers directly, the way many online ads do.

The upshot is that we’re heading into a world where the Web and TV basically merge into a single premium video channel — or, at the very least, into two channels that overlap and interact tremendously.

Two kinds of businesses today are poised to do well in that new world:

  • The current TV giants — which, if they manage things right, can keep hold of their advertiser relationships into the future of TV.
  • The online companies whose businesses already closely mirror TV — and who can grow strong TV-like online ad sales businesses into bona fide next-gen TV businesses.

In that second category, Yahoo is clearly the winner.

What’s unique about Yahoo is that it’s the leader in online premium inventory — the high-value ad opportunities that reach huge audiences with a single media buy. That’s the online media inventory that’s most closely analogous to TV. And with property like its home page, long the standard as the most expensive ad unit on the Web, Yahoo seems to have gotten the process down for selling expensive inventory online. All that puts it in a great position to sell super-premium inventory like original long-form video with mass audience (a.k.a., tomorrow’s TV).

It’s also worth mentioning that, while there are decades of infrastructure behind TV buying, digital media is an unstandardized mess — making premium digital buying notoriously inefficient. If Yahoo can forge such deep agency partnerships in these chaotic early stages of premium digital advertising, think how well positioned it will be as TV infrastructure really starts taking hold in online sales.

In all of this lies a path for Yahoo to take the future of television: Leverage its current standing as the leader in premium online inventory into leadership in the next generation of TV.

That’s not to say that Yahoo is a sure-fire hit to become the next big competitor to ABC. There are definitely holes that need to get filled before that can happen. The first hole: if Yahoo wants a TV-level audience to command TV-level ad budgets, it needs the kind of content that can command massive viewership. Hulu, of course, could start to close that gap.

Second, Yahoo needs to reach a younger, cooler crowd — both as a way to entice more ad dollars and as a way to secure its future as the young cord-cutters grow up. Tumblr is definitely the beginning of a solution to that youth problem.

Third, Yahoo needs a better footing in mobile as more video viewing goes to the third screen. Tumblr has the mobile reach to become a mobile “in,” and, again, Marissa Mayer also seems to have more mobile acquisitions on the way.

And so a lot of Yahoo’s future as a leading premium network depends on Yahoo’s success at major acquisitions. Of course, Yahoo’s acquisition track record is spotty, to say the least. And while Mayer is incredibly talented at building technology, she has mixed reviews at best from major agency media buyers — the very partners she would need to help Yahoo grow from big online property to a TV-type network.

So none of this is a sure thing. But if Yahoo plays its cards right, it seems to me that a huge stake in the future of premium media is Yahoo’s game to lose.

That’s a very bright future. And it’s a lot for Marissa Mayer to work hard to not screw up.

Bill Wise is CEO of Mediaocean. You can follow him on Twitter at @billwise.

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