Yahoo Takes On We7’s Ad Sales, Could Take More

We7

Online media operators may have been scrambling to shore up their free, ad-supported services with premium options lately – but some are still intent on making advertising work.

Music service We7, which this month followed Spotify by launching paid-for options including a mobile app as economics and labels began to command more guaranteed returns, is outsourcing its display advertising sales to Yahoo.

The arrangement only covers visual ads and was to give the service more clout, CEO Steve Purdham tells me. “We’ve moved all of the main function to them. We’re hiring a new sales director to manage the relationship and media sales guys to sell the radio and audio ads mechanism; Yahoo (NSDQ: YHOO) won’t be doing that.” We7 had only three people on ad sales before the move and will remain on three after the rejig.

Though the focus seemed to have been moving toward premium, Purdham says: “There is a significant subscription opportunity that’s out there – but the new digital economy is about how the spectrum of models can work together, not in isolation.

I don’t believe you can use ad-funded as a model to drive premium subscription. It needs to stand on its own right. The deal with yahoo is a big step toward that. We feel we can make the ad-funded economics work.”

Aside from banner ads, We7 was offering seven- and 10-second audio ads inside its streaming radio service. It will soon also add “full, radio-format, 20- and 30-second ads”, Purdham says.

We7, originally funded by Peter Gabriel, initially launched with a model of embedding audio ads inside track downloads but has had to tinker with the model as the market has become clearer.

The Yahoo ad deal could be the start of something bigger for We7. “It’s primarily an ad sales deal, but we’d hope to deepen it over time,” Purdham says. “We’re hoping to provide elements of content in a deeper relationship as time moves on.”

That could be an interesting arrangement for We7, which is trailing in public perception to Spotify but has now built a decent web-based platform, and for Yahoo, which, on Yahoo Music, has outsourced its LAUNCHcast streaming offering to CBS Interactive (NYSE: CBS) in the U.S. and whose Rhapsody-powered track streams (at least at my end) just don’t work.

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