Yahoo’s local news sites will put its partners in Dying Old Media in a pickle.

In his post today, Alan Mutter puts the pieces together following Yahoo’s announcement of its plan to buy Associated Content. Expect Yahoo to create its own local news sites, and expect newspapers to sell ads into their undertaker’s undertaking.

Up to now, Yahoo’s partnership with hundreds of local newspapers has proved mutually profitable — the newspapers were able to sell targeted online ads at a price point which they otherwise could only have dreamt about, and Yahoo got access to the newspapers’ local business relationships and their local on-the-street sales teams.

Going forward, newspapers that continue partnering with Yahoo will find themselves increasingly cannibalizing their own resources to benefit their competition. Their payoff: pocket change and anopther day on life-support.

It’s all about behavioral targeting — something Yahoo knows a lot about, something newspapers (which never cared to know very much about their readers in any event) know very little about.

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