I hitched my star to the Yahoo (NASDAQ:YHOO) bandwagon last May due to the Alibaba (NYSE:BABA) IPO. However, the main focus of this article is not how accurate my prediction was about the Alibaba windfall. I already did some profit taking but I remain long on YHOO because of Yahoo Finance's decision last July to put up its own Contributors Network.
I opine that Yahoo's decision to launch its own finance-focused Contributor Network is one of the best decisions made by Marissa Mayer. The company has heeded the call of millions of investors who intensely disliked the previous situation where Yahoo Finance was being paid to publish links to alleged pump and dump finance websites.
It is open knowledge that many finance/investment websites are full of deceptive and/or manipulative investment ideas authored by self-serving anonymous authors or stock promoters/attackers.
Even though Yahoo made good money from making paid referral links to articles published by disreputable third-party websites, Yahoo Finance did right in stopping the practice.
I opine that Marissa Mayer is thinking of the long-term when she decided to forgo the lucrative revenue from link referrals. Yahoo Finance's action improved its reputation among small retail investors.
Authors, Readers, Advertisers Will Defect To Yahoo Finance
Unfortunately, Seeking Alpha is one of the third-party websites that were kicked out of Yahoo Finance's news feed. I do not believe that Yahoo will use some of its Alibaba windfall cash to acquire Seeking Alpha or The Motley Fool.
I am predicting that the Tumblr-only Contributors Network will eventually grow to a more complex version that will rival the popularity of Seeking Alpha's crowd-sourced investing ideas business model.
Yahoo Finance is actively recruiting finance professionals to join its Contributor Network and I opine that many top authors of sites like Seeking Alpha and The Motley Fool will eventually lose their most-read writers to the Yahoo Finance Contributors Network.
Just like Seeking Alpha, Yahoo Finance is now catering to anonymous finance writers. Many current and former Motley Fool and Seeking Alpha contributors have defected to the Tumbr-powered Contributors Network of Yahoo Finance.
The Motley Fool let go most of its paid contributors after the company was dropped by Yahoo.
Why It Matters To Yahoo Shareholders
From a investor's perspective, an in-house Contributors Network is good for Yahoo's long term advertising business. Big-spending advertisers will (in due course) prefer to do business with Yahoo (over Seeking Alpha or The Motley Fool) because Yahoo Finance will eventually have the most reputable investment/finance authors.
The more investment authors there are, the more readers there will be for targeted advertising.
Finance and investment related articles are one of the most profitable content for Google AdSense farmers. Banks, brokers, mutual fund groups who used to be clients of third-party websites (who got hit by Yahoo Finance's ban hammer), will seek another site to put their ads on.
As a contributor of Seeking Alpha, I can attest to the devastating effect of Yahoo's decision to stop accepting links to Seeking Alpha articles. Alexa's charts below also confirm just how big the drop was for the web traffic of Seeking Alpha and The Motley Fool when Yahoo Finance stopped accepting their paid referral links.
I'm a retired employee of the advertising industry and the charts above clearly say Yahoo Finance Contributors Network has a good chance of stealing the finance-related ad money from its rivals. If the trend continues, Seeking Alpha and Motley Fool will get less and less preference from big buyers of online ad space.
My Recommendation
It is my strong belief that investors, who are discouraged by Yahoo's current weak web advertising business (compared to Google (NASDAQ:GOOG) or Facebook (NASDAQ:FB)), should appreciate Marissa Mayer's long-term plans for the new Yahoo Finance Contributors Network.
Yes, the future revenue from finance/investment advertisers is not as big as the amount that Yahoo could make from the sale of its remaining Alibaba shares.
However, the future ad sales generated from a strong in-house finance/investment Contributors Network website, is worth evaluating into when analyzing the future growth potential of Yahoo's web and mobile advertising.
Disclosure: The author is long YHOO, FB.
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