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Tsavo Media To Pay Yahoo $4.8M For Sending ‘Low Quality Traffic’, President Quits

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Tsavo Media, which operates a network of roughly 300 websites and blogs as an indirect subsidiary of Canadian online publishing and advertising company Cyberplex, is being retroactively charged $4.8 million “over a reasonable time period” by Yahoo for sending the latter company’s advertisers “low quality traffic” in 2011.

To boot, Cyberplex president Ted Hastings (formerly Tsavo Media’s CEO), apparently jumped ship.

It’s a curious story, to say the least.

Tsavo Media, once led by former MySpace CEO and previously AOL SVP Mike Jones, was acquired by Cyberplex back in May 2010, for a reported $75 million.

The company’s network of Internet publications includes crappy websites like LumaGardening.com, ThinkFashion, TechSerious, WealthyGeek, Twirlit, DiscoverFame and KidGlue.

Now, according to a press statement released earlier today, a Special Committee of the Board of Directors of Cyberplex has been appointed to “review the status of Tsavo Media and strategic alternatives available to create shareholder value out of that division, which is currently heavily encumbered by debt under Tsavo Media’s credit facility with American Capital”.

I bet this wasn’t what they had in mind when they acquired Tsavo Media. But then again, what good could have come out of buying a crappy content generation machine anyway?

Cyberplex had this to say about the sticky Yahoo situation it now finds itself in:

The Company reported today that Tsavo Media has been engaged in discussions with Yahoo! to address concerns regarding the quality of traffic provided to the Yahoo! advertising base, and Tsavo Media’s reliance on Yahoo!’s traffic quality reporting system. Tsavo Media has now been informed that it will be required to pay to Yahoo! approximately $4.8 million over a reasonable time period currently being discussed, notwithstanding prior information that indicated good quality traffic at that time.

This amount may be partially offset by achieving certain performance incentives and anticipated improvements in average revenues per click, but the Company noted that there can be no assurance as to how much, if any, of this payment to Yahoo! would be offset through these incentives and improvements.

Translation: unless a miracle happens, we’re going to have to cough up some serious dough, and we can only hope we don’t have to pay everything all at once and in the near future.

The Company noted that Yahoo! provides bi-weekly quality reports to Tsavo Media, which are extremely important to Tsavo Media in the management of its systems, analysis, forecasting and ultimately its day-to-day business decisions. Yahoo! recently communicated to Tsavo Media that notwithstanding the good quality score reports that had been provided throughout most of 2011, Yahoo! would retroactively charge Tsavo for what Yahoo! is now saying was actually low quality traffic, ranging back over many months during 2011.

While the Company and Yahoo! remain in discussions on this issue, the Company now expects that Yahoo! will enforce its decision to charge back this amount citing its right to do so pursuant to the terms of Tsavo Media’s agreement with Yahoo!

Translation: first Yahoo says we did a good job last year, but now they say we did a bad job, and according to the deal we agreed upon they can actually retroactively charge us for it.

“We are very frustrated by the timing of these events after spending almost one year rebuilding the Tsavo organization while negotiating a settlement with American Capital”, said Geoffrey Rotstein, CEO of Cyberplex.

“These events are disappointing given all of the hard work the Tsavo employees have invested to rebuild the organization and because they continue to take away and distract from all of the other positive developments and momentum being created within both Tsavo and the other divisions of Cyberplex.”

Translation: Oh FFF******CCCKKK.