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Yahoo, ABC Television Extend Deal to Include More Content - Analyst Blog

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Shares of tech giant Yahoo! Inc.YHOO rose 1.06% to $42.95 yesterday, following the announcement of extension of its working relationship with Walt Disney's DIS ABC Television Group to expand collaborative content. The financial terms of the deal were not disclosed.

Scope of the Renewed Alliance

The expanded partnership, which will be effective from Mar 16, will include content from ABC entertainment programming, promotion of clips of ABC's shows, including ABC and ABC Family shows such as "Scandal," "Dancing With the Stars" and "Pretty Little Liars", on Yahoo's online video streaming services Yahoo Screen and Yahoo TV and the debut of "Yahoo Your Day", a new daily segment on "Good Morning America."

Yahoo Your Day segment will feature experts of the website from different fields like health, style and food. The companies also mentioned further extension of the alliance on news events like the forthcoming 2016 presidential election. Also, content contributed by Yahoo global news anchor Katie Couric will be distributed across ABC.

Moroever, Yahoo's social media platform Tumblr will be incorporated into "Social Square" segments on "GMA." Furthermore, its photo-hosting site Flickr will provide pictures used in weather reports on the morning program.

Synergies

Yahoo and ABC have been partners since 2011. As part of the collaboration, so far, ABC News content featured on Yahoo. ABC claimed that this helped to expand its presence to mobile devices. According to the comScore's data, their content serves unique 129 million users a month.

As the original partnership approached its expiration date, Yahoo engaged in talks with other potential partners including ABC's major rival, NBC. But the two companies ended up extending the alliance.

The partnership is expected to benefit both companies over the long term through deeper user engagement. Under the renewed content and promotional pact, the partnership will add several new elements thereby taking it beyond their news divisions. This expanded collaborative effort is expected to further increase ABC's online audience, nearly doubling traffic every day.

On the other hand, for Yahoo it is an effort to focus on areas other than its search business. As the company has virtually bowed out of the search market, this partnership clearly indicates that CEO Marissa Mayer is not ignoring other growth areas. She is looking to protect Yahoo's share in the display and video ad market, by creating and reviving content of the site spanning style, health, food, and technology.

Our Take

Video is deemed to be one of the Yahoo's key growth areas, along with mobile, native ads, and social. So the move will aid the company's efforts to boost its video content, thereby benefitting its advertising revenues.

Good content is vital for a company serving ads as the number of users it attracts to its properties is directly proportional to the ad revenues it generates. We believe that Yahoo! will continue to pursue this kind of content sharing deal in order to boost its online user base going forward.

Yahoo has been putting in efforts in this area for quite some time now. Last year, it began a series of digital magazines revolving around topics like food and technology in a bid to augment its share of advertising revenues.

Other Stocks to Consider

Currently, Yahoo has a Zacks Rank #3 (Hold). Better-ranked stocks in the technology sector include LivePerson Inc. LPSN and STMicroelectronics NV STM , both sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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