• Reuters, Friday, October 12, 2007 12:32 PM

Reuters warns against the recent alliance between Yahoo and hundreds of newspaper sites. Under the deal, forged last November and amended in April, Yahoo will deliver ads across the network of sites, and feature certain stories in Yahoo News. The alliance was intended to boost readership and bring in more advertisers, but Reuters' Robert MacMillan says the partnership "will saddle [the newspaper publishers] with unproven technology and cost them some independence and flexibility."

On the other hand, what else are they going to do? Smaller publishers are losing the battle for eyeballs to blogs and major online pubs like the New York Times and Wall Street Journal. Some see the partnership as their only option: "They have woken up to the fact that their hegemony in the local market is fading, and therefore they need a partnership," said Goldman Sachs analyst Peter Appert.

However, MacMillan points out that little has been revealed about the terms of the deal--what the revenue split is or the extent to which Yahoo is in the driver's seat. After all, the Web giant is serving display ads, a business that has come under intense scrutiny from Wall Street and investors for under-performing. The worry, MacMillan says, is that Yahoo doesn't improve upon on its technology, and the smaller publishers will be locked in. The other concern is that newspaper content will become just another component of Yahoo News, giving readers little reason to visit the smaller newspaper sites.

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