Fourth Time Lucky?

Summary: CEO Marissa Mayer has a plan - but Yahoo! has been there before...

Yahoo! CEO Marissa Mayer at 'Crunchies Awards' February 2013.

David Pogue, the popular freelance gadget columnist for the New York Times, and his video team are joining Yahoo! Here is his announcement:

A Note from Pogue - Goodbye-and Hello

I'll be writing columns and blog posts each week, of course, and making my goofy videos. But my team and I have much bigger plans, too, for all kinds of online and real-world creations...

This is a company that's young, revitalized, aggressive - and, under Marissa Mayer's leadership, razor-focused, for the first time in years. ... So I'll be starting there in a few weeks. (I'll still keep up my NOVA specials on PBS, my 'CBS Sunday Morning' stories, my Missing Manual books, and my Scientific American column.)

Foremski's Take: Yahoo! has tried several times to build a media business.

CEO Marissa Mayer understands the importance of star-power and hiring David Pogue is a good move. She'll likely follow up with a few more media stars to have enough for a compelling cast - and one that can quickly be built into a media brand such as Buzzfeed with its star writers.

Dismal economics...

While Ms. Mayer understands the value of star power, after all she stars in her world, does she understand the dismal economics of a media business? Hiring editors, reporters, producers, videographers, etc is easy but running a profitable media organization is tough and Yahoo! has repeatedly failed:

- In the late 1990s it ran a TV studio producing top quality finance news online- it was good but didn't make it through the dotcom bust and closed following what must have been a substantial investment.

- Yahoo! hired Patrick Houston in May 2005, former CNET editor-in-Chief, as VP of Content and Programming. Mr Houston built a content division with original stories in tech gadgets and tech news. In February 2008, Yahoo gutted the media group.

- In 2010 Yahoo! tried again. MediaWeek reported:

Yahoo is on the verge of hiring more traditional journalists as it plans to aggressively beef up original content for its top verticals, including news, business and entertainment... including former WashingtonPost.com editor Russ Walker, the site's new politics editor; Andrew Golis of Talking Points Memo, who is assembling a team of news-hungry bloggers; and ABC News veteran Anna Robertson, now Yahoo News' director of multimedia and social media.

Russ Walker lasted six months before going to Politico and then King 5 News; Andrew Golis left after 17 months to join Frontline and is now at The Atlantic as entrepreneur in residence; Anna Robertson is Head of Yahoo! Studios, and manages more than 100 staff.

New venture...same lesson

Ms Mayer expects the new media venture to bring lots more traffic and boost its commodity web services - it's not a bad idea. Everyone seems to be building sticky walled gardens/malls with anchor tenants. However, I can guarantee that Yahoo! won't like the costs of building a media business and the sticky long-term commitment it requires.

Companies such as Yahoo!, Google, Amazon, etc, don't understand how media is created, how news stories are produced, and they don't understand the costs.

Employing stars such as David Pogue costs a lot, at least $500K to $1m in salary. With other stars and their teams, staff costs will be expensive, which sets a higher bar for success.

Engineer v Editor...

Yahoo! understands software engineering and how to scale a business that runs on servers and software. A media business runs on people - lots of people. To scale that business requires lots more people.

What's the best use of expansion capital: invest in engineers, or reporters?

Investing in software engineers will always be more profitable for Yahoo! because it knows how to scale their work across its entire platform and hundreds of millions of users.

A single star columnist and their support staff can cost the equivalent of ten to 15 software engineers; while the work of a columnist scales across just a couple of dozen monthly web pages and videos. When corporations periodically resize operations, the cuts fall on the least productive business groups. It's hard to see how a media business can compete on ROI against the rest of Yahoo!

However, every few years Yahoo! forgets that the economics of a media business (now, even more dismal) are too dismal to pursue, and yet another Yahoo! media venture bites the dust.