How people watch television is changing, but it’s more than just a shift from cable to streaming services. People literally are doing more while they watch. A recent Nielsen study found that 70% of tablet owners and 68% of smartphone users use their devices while watching television. Why aren’t more companies looking to capitalize on the new second-screen experience? Many aren’t. But Yahoo (NASDAQ:YHOO) is, and its recent acquisition IntoNow is giving Yahoo a leg up in what could be a lucrative new stream of advertising revenue.
Here’s Yahoo’s plan for making money on second-screen viewing: The new IntoNow app for Apple‘s (NASDAQ:AAPL) iPad listens to what you’re watching on TV and automatically loads relevant content on the tablet. If you’re watching Monday Night Football, IntoNow brings up player stats and commentary. If you’re watching the news, IntoNow trawls Yahoo’s news database and other sources on the net to bring up other stories related to the current subject.
Providing parallel content to the audience is an effective sales tool — just look at Amazon‘s (NASDAQ:AMZN) success with its “Recommendations” back in the ’90s — and it’s common in television. Netflix (NASDAQ:NFLX) and many other services track users’ viewing habits and make automatic content suggestions based on that information.
IntoNow is something else entirely, though, creating a whole second stream of content for the audience that lures them in using the same principle as “recommendations.” The audience, then, can see multiple advertisements simultaneously. IntoNow is a dream product for a company whose $1.62 billion display advertising business is outpaced by Facebook.
The IntoNow app is an exciting product for Yahoo. It is arguably the first unique product the company has offered in a decade, and if it’s successful, that innovation could restore investor confidence in the company and give Yahoo new, much-needed direction. IntoNow already has strong partners looking to make unique content for the service. Pepsi (NYSE:PEP) built a campaign for the IntoNow iPhone app — a social networking app that lets users “check in” online to tell friends what they’re watching — in April, giving away a coupon when the app recognized the audio from a televised Pepsi commercial.
The app also fits into Yahoo’s larger push in television. Despite a rocky year, Yahoo scored key partnerships for its Yahoo TV Internet television service, namely Disney (NYSE:DIS). The Yahoo TV software also comes prepackaged in televisions made by Sony (NYSE:SNE), Vizio and Samsung (PINK:SSNLF). If the IntoNow iPad app gets unique content when paired with Yahoo TV-equipped televisions, Yahoo will find itself in an enviable position in the budding Internet television market, in addition to cornering the still-new second-screen market.
Of course, the risk for Yahoo is that the IntoNow app is an excellent idea that is easily imitated and thus will be quickly devalued. Apple is said to be preparing its own line of HD televisions for release in the next year, and given that company’s new emphasis on audio recognition technology and the popularity of its tablet and smartphone, its hard to imagine it won’t provide an alternative. The same can be said of Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT), whose Google TV and Xbox TV projects also are likely to interact with their respective mobile platforms, Android and Windows Phone 7.
But just because these other companies can adopt similar technology as IntoNow doesn’t necessarily mean that they will. Time will tell. But for now, Yahoo seems somewhat revitalized thanks to the forward-thinking IntoNow. Now, Yahoo has to figure out how to keep it unique and at its most profitable before its competitors catch up.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at�@ajohnagnello�and�become a fan of�InvestorPlace on Facebook.
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