Fortune columnists Adam Lashinsky and Tim Arango have thrown their hats into the how-to-save-Yahoo ring, citing four options: 1) buy AOL, 2) sell to Microsoft, 3) merge with eBay, 4) stay the course.
Buying AOL makes sense, I think, but it won't fix anything. Selling to Microsoft would be a disaster (Microsoft can't fix MSN--how would it fix Yahoo?). Merging with eBay doesn't make strategic sense to me, although I do think eBay should sell Skype to Yahoo, for equity and a long-term traffic deal. Staying the course, meanwhile, would be as successful as strategy as it has been for the US in Iraq.
What should Yahoo do to get out of its current mess? I'm with IO reader "Still Inside." It should FIX SEARCH.
Search is where the money is. Yahoo is still a big player in search queries (30% market share). If Yahoo can figure out how to jack its search monetization up to near-Google levels--a challenge that, given the appropriate focus and resources, should not be consuming the two years that Yahoo's invested so far (and counting)--the cash will roll in, the stock will soar, and the company will be in a prime position to get fat and lazy again.
Bottom line? No deals required. Just get the darn cash-register working.
You're absolutely right. They MUST fix search if they're going to remain viable
Posted by: Victor | November 21, 2006 at 01:51 PM
Oh, how about this option (since i think all the merger options you mentioned are terrible): why doesn't Yahoo just get Google to do its ads? Google is way better at making money from searches (one analyst calculated Google makes 12 cents per search where Yahoo makes 4). Then Yahoo can focus on the quality of their user experience, at which they're at least doing reasonably. Their ads team should all be cashiered, which would be a huge savings to the company
Posted by: Victor | November 21, 2006 at 01:54 PM
Oh, and one thing that strikes me with buying AOL is why? Google still has the contract to provide ads, so all Yahoo would be doing is paying for traffic.
Posted by: Victor | November 21, 2006 at 02:09 PM
Search as a function is essential but its also a commodity.
Why try to compete directly with Google/MSN when Yahoo has so many other great opportunities. Merging with Ebay or MSFT is down right silly. Targets like Linden Research, perhaps even Blizzard Entertainment (battle.net) make significantly more strategic sense.
Yahoo is not just search its a community. Txt based advertising has soooo much hype around it right now but web savvy users don't purchase products through txt based advertising; and the savvy segment of internet users is growing. If anyone wants to discuss this further I would be happy to.
I think Yahoo should just focus on being a community. Yahoo should continue expanding its products such as fantasy sports (best of breed), email, online games (should really expand this area) etc...and at the core of everything expand Yahoo profiles (think social networking). Yahoo profiles should become the center of the business. Everything could branch from your yahoo profile ie....your music tastes, instant messaging, video game profiles, email, local weather, pictures, bookmarking, blogging, groups etc.....I think Yahoo should buy the underlying technology from a vendor but should building the social network on its own, from its own huge community.
What's the deal with the Yahoo AT&T partnership...That should be canned, its a login disaster....
And to monetize this community Yahoo should continue to develop an intuitive txt, banner, and video based ad platform along with some select membership fees (unlimited music ie). They should continue to form partnerships with traditional media. Google is trying to become the Ad-exchange but the problem is Google is hoping that search is going to be the center. I think a community like Yahoo has the potential to be a much better ad-exchange.
Google is definitely right though about Ajax, everything should be coded in Ajax
Posted by: Josh | November 21, 2006 at 03:15 PM
You are correct that the ability to monetize search is the whole problem, but this is not easy for Yahoo's current management team to address. Terry Semel is unfortunately just not a guy with the background necessary to get to the bottom of whether the 'Panama' they currently have in development can be made to work well enough. Nor does it seem that he can identify people capable of getting on top of that issue for him. He has consequently been just skating along on top of a raft of technical problems, of which this one has, predictably given the nature of the business, turned out to be the lethal instance.
I expect they will now be obliged to look outside for a solution. Finding one will not be easy. Two possible candidates with the necessary combination of experience and intellectual horsepower: Meg Whitman and Scott Cook.
Posted by: ZF | November 21, 2006 at 06:02 PM
I agree with Josh, somewhat. Yahoo's best acquisition in my opinion was del.icio.us. It had (still has) the potential of being the core of a community, and coupled with flickr, would have really jumpstarted that. YouTube would have been a natural addition, but its too late for that now. Perhaps, something like dabble would be a good start.
Yahoo also really needs to do something about interface design.
Posted by: Deepak | November 22, 2006 at 01:47 AM
Re: Y! selling to MSFT.
MSN + Yahoo = HUGE online content property; the biggest. Y! do content well and could help the MSN content proposition which has not flown to date.
Windows Live as a platform for Yahoo and MSN web services = world's largest web services platform. They already interop on IM.
adCenter to replace Overture and monetise combined Y! and Live / MSN Search queries better than either could individually. A real competitor to Google rather than fighting between themselves.
Makes sense.
Posted by: Richard Davidson-Houston | November 22, 2006 at 06:26 AM
Richard, I agree.
In May this year there was this rumor about MSFT wanting to buy EBAY, and I commented that nothing should be deemed impossible.
http://www.internetoutsider.com/2006/05/microsoft_for_e.html#comment-17940703
I am still of the opinion that MSFT should best partner up or form a strategic alliance or joint venture with Yahoo (or anyone else for that matter). Basically, I believe something of that kind is going to happen, soon... real soon.
The magic words here are Synergy and Positioning. The first is for the operational and corporate strategy while the latter is for the marketing, sales, promotion and branding strategy. A JV of MSFT and YHOO would be extremly powerful and solve almost all problematic issues. It is as simple as it sounds. (Well, maybe not that simple).
Posted by: Neal S. Lachman | November 22, 2006 at 08:01 PM
Most important to fixing Yahoo: GET A CLEAR AND ACTIONABLE STRATEGY. Buying a mixed bag of random 1-off small companies doesn't move the needle at all. Seriously, when I was there, the top execs couldn't agree on the strategy, nor did most even have an ability to articulate one. Also, make the place a true meritocracy: fire everyone in strategy and corporate dev (ask anyone who has ever been at yahoo: that team is a total mess but nobody has the balls to say anything about it since their leader, Coppel, is pals with Terry. As long as Coppel stays in place with ZERO accountability, it clearly shows Terry's weakness), and have the guts to go for the win in key areas rather than, dare I say, take the peanut-butter-approach that Garlinghouse writes about.
Posted by: former yahooer | November 23, 2006 at 12:32 AM
To clarify (underscore?) my own remarks from last week somewhat, I need to add that there's two sides to the search equasion.
First, there's monetization problem. Sure. Ok. Panama is supposed to fix this. We'll see.
Second, there's basic consumer demand of the Yahoo search engine. Of the two, this is the one that matters.
If YHOO does not win the brand battle for consumers, better monetization will only yield an increasing percentage of a shrinking business.
Search is at the center of the universe because it is one of the two things that EVERY Internet user uses (the other being email, but the monetization potential of email is about 5% of what search is).
MSFT has shown us the power of "everybody uses this" (although not lately they haven't). Google will show us that too if YHOO and MSFT can't compete on the basic product that every user on the Internet uses.
I still don't think they've tried very hard, and as a company, I still think YHOO is mired in the forest/trees problem that people here are mired in: looking at a sum of YHOO parts and trying to fix many of the problems, or suggesting that they focus on something else they are stronger in.
No other problem matters: unless Yahoo can convince people to stop "Googling" for stuff on the Internet, and search "Yahoo Searching" for stuff, then the game is over. Like MSFT's control of the core operating system allowed them to essential exercise absolute control over the software market, Google's ownership of search would leave YHOO and MSFT fighting for ad dollar scraps (viz. they will get "Borland'd").
Anybody that says, "its impossible, Google is a verb in everybody's vocabulary" doesn't remember the days when people would "get on Netscape and check out the latest websites", or "go get the numbers off of the IBM". Google's core product, as other people here have agreed, is a commodity. It's Coke vs. Pepsi. Sprint versus Verizon. Sony versus Toshiba. YHOO can win this one if they had the focus (or, at least, not completely lose). Ditto for MSFT.
My point before was thay if the execs at YHOO continue to guage the business by the latest MySpace-like-thing-that-is-a-hit-with-the-teeny-boppers they've won/lost then by all means, sell the morons short (and buy GOOG).
SI
Posted by: Still Inside | November 25, 2006 at 04:34 AM
There was a time time when someone who was making a copy would be "Xeroxing"...times have changed
But why does Yahoo have to win search? Search is only one aspect of Yahoo. Is advertising that much more effective in search then on the side banner of Yahoo Financial or in the Yahoo Games section?
Posted by: Josh | November 25, 2006 at 04:16 PM
Search is in fact "that" much more effective than the Y! Financial section (although from a demographic standpoint, I suspect that section in particular is many times more valuable than most content).
Again, two things about Search:
1. It's got 100% coverage of all Internet users. Not just finance types, not just teenyboppers. Everybody.
2. Rule of Internet (human?) behavior: when you are looking for something, you are often looking to *buy* something. When you are not, you're not. When I am looking for car parts for my old Chevy on the Internet, an ad for the CarPartsWarehouse.com is a welcome part of the experience. When I am reading the morning news, it is an intrusion.
As for the Search War, I'm not saying that YHOO has to win it outright, but in business you usually don't make it to a respectable second place by actually GOING FOR SECOND PLACE. This doesn't have to be winner-take-all, but its starting to look like winner-gets-it-all-by-default-because-everybody-else-is-sitting-on-their-ass. This is a multi-decabillion dollar prize that nobody wants to spend more than a hundred million or two to get. Yahoo needs to position Search as THE core strategic push for the company (ask most people what Yahoo is and they'd say, "an Internet search engine"). If they lose this, they lose the company. The rest of the company's assets will fall like dominoes.
If I were a YHOO stockholder (and I'm not), I'd be happy with Search marketshare not erroding any further than it already has in the next two quarters, and at least showing some signs of it making a dent in the currently-in-favor brand of the day. Starting with the (daunting, but not impossible) task of de-Xeroxing Google, they need to insert themselves as the alternative brand.
Either that, or give up, and sell the company to whomever comes along. The lower YHOO stock goes, the easier that's going to sell the company. Terry's current deal might make such an outcome the most advantageous for him for all we know. Are there any major stockholders of YHOO that give a fuck anymore? The next 12 months are going to tell us.
SI
Posted by: Still Inside | November 27, 2006 at 12:45 AM