Papers Embrace Enemy

When it comes to the rise of Web giants like Google GOOG and Yahoo!YHOO, newspapers are teaming up in reciting an old adage: If you can't beat 'em, join 'em.

Separate deals announced recently by both Internet companies show that major newspaper publishers across the country are forging relationships with the Web titans in hopes of tapping into the massive online advertising market that has largely left them in the dust.

That said, the willingness on the part of Google and Yahoo! to cut revenue-sharing deals with publishers that have been written off by some investors as a dying breed is evidence that daily papers, and their expensive news-gathering operations, still provide indispensable content for their local audiences.

"A core part of our investment thesis in newspapers is the growing opportunity of the Internet," says Charles Bobrinskoy, vice chairman with asset manager Ariel Capital, which has holdings in Lee EnterprisesLEE, Journal RegisterJRC, Gannett GCI and TribuneTRB.

"Most of our newspaper holdings are showing 25% to 30% growth in interactive revenue," he says. "[Monday's] Yahoo! announcement shows that leading Internet companies also value the content which newspapers control."

On Monday, Yahoo! said it will team up with a consortium of print publishers to use its technology to sell advertising and offer search functions on the Web sites of 176 newspapers in 38 states.