Will Katie Couric Provide More Firepower in Yahoo's Fight for Ad Dollars?

Marissa Mayer may no longer be the most famous woman at Yahoo.

Journalist Katie Couric inked a deal today that will have her join the internet company in early 2014 as the face of Yahoo News. Her official title will be global anchor. For the past two years, Couric has been an anchor for ABC News.

At Yahoo, Couric will be working as part of a growing team of correspondents and reporters overseen by Yahoo News editor-in-chief Megan Liberman, according to a statement released by the company. She will report on breaking news and conduct interviews with prominent figures. "News is a definitive daily habit for our users -- and Katie will work with our talented editorial team to pioneer a new chapter of digital journalism," Marissa Mayer, Yahoo's chief executive, said in the statement.

It's an interesting hire for a company whose core business, display advertisements, is eroding. Yahoo's third-quarter earnings, released last month, show that its display ad revenues are continuing to fall, decreasing 7 percent to $452 million since the third quarter of 2012. Even so, they comprised nearly half of the company's $1.08 billion in revenue for the quarter. That figure represented a 1 percent year-over-year drop in revenue, while net income plummeted 24 percent during the same period.

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That's important because, despite how many tech startups Yahoo has acquired this year, at bottom it's a media company, says Andrew Frank, an analyst at Gartner. "Yahoo is certainly not going to walk away from display even if it's eroding for them, but I think the real play is to catch more high-end brand spending, whether it's video or display or even search for that matter," Frank says."

In that light, Couric's hiring makes sense. She is an established brand in her own right, and she lends old-media seriousness and prestige to Yahoo as it fights for advertising dollars. "What Yahoo has been struggling with is to establish a level of credibility that is on par with mainstream media," says Frank. "They have the audience, they have plenty of content, but brands have not perceived that content to be of the same quality that you find on television."

In a post on Yahoo's Tumblr page, Mayer highlighted Couric's highly visible track record. "From pivotal coverage of natural disasters and historic elections to the Royal Wedding and the Olympic Games, groundbreaking interviews with heads of state and leading tastemakers, [Couric's] experience is unmatched," she said.

But there is cause for skepticism about Yahoo's strategy. "It's hard to see the economics of building a high-quality news operation on a diet of internet advertising alone," Frank says. For example, Bloomberg News, a prestigious digital journalism venture, is backed by Bloomberg LP, whose highly profitable business model revolves around selling subscriptions to financial information terminals. "It's going to be very, very difficult to compete with the CNNs and Bloombergs of the world."

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One possible solution, Frank suggests, is to explore new models for distribution and syndication of content, so as not to rely entirely on ad revenues to support the news venture. For instance, Yahoo could license its news programming to local broadcasters or distribute it through Hulu for a fee, he says.

Regardless, Couric's hiring represents not a seismic shift for Yahoo but rather the continuation of an established strategy, says Scott Kessler, an analyst for S&P Capital IQ, a division of financial services firm Standard & Poor's. Yahoo has established itself well in certain verticals as a provider of original content, particularly sports and finance. Yahoo Finance produces four digital programs in partnership with CNBC, including Talking Numbers, which focuses on stock trading, and Off the Cuff, which features interviews with business leaders.

And last month, Yahoo hired tech writer David Pogue away from The New York Times, presaging what Mayer called "a major expansion of consumer tech coverage on Yahoo."

"Yahoo is very much focused on premium content," says Kessler. "There are certain verticals in which they've been doing this successfully for some time."

But it remains to be seen whether prestige hires can "reignite growth and generate notable gains in revenue," Kessler says, "which has been lacking without question."

Although Couric's relationship with ABC News is ending, she will continue to host her syndicated daytime talk show, Katie. Couric's agent, Alan Berger of Los Angeles-based Creative Artists Agency, declined to comment.

Related: Marissa Mayer's Smartest and Dumbest Moves at Yahoo

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