What Yahoo Must Do to Survive
Internet search and advertising giant Yahoo! has been a household name almost from its inception in March of 1995. During the dot-com bubble, Yahoo! shares sold at a record $118.75 a share. Thirteen years later, Stanford alumni and Yahoo! co-founder Jerry Yang has lost his position as the CEO, over a thousand employees have been laid off, and the company missed its opportunity for a great exit. In order to survive and restore its position in the market, Yahoo! must now undertake drastic measures and survival tactics.
Yahoo! has seen a deep corrosion of its core business over the past few years. To make matters worse, the boon in market share that Google has enjoyed seems to have been cut directly from Yahoo's market share. MSN/Live, Ask, and AOL have seen small gains or remained fixed for the most part.
To remain a profitable business, Yahoo! needs to refocus on the search market. The primary revenue generator for both Yahoo! and Google is search and its highly coveted advertising space. The search market, in other words, is the lifeblood of the company's business model. With its search market share dropping sharply, the company and its investors have every reason to be alarmed.
With Jerry Yang gone, the board of directors in upheaval, and employees demoralized after a round of layoffs, the company clearly lacks the bold leadership that it needs in this moment of crisis. Worse yet, the company seems to be everywhere at once, investing in a dizzying array of services that do little to enhance its search standing:
What does a search and advertising company need with Flickr, Yahoo! Greetings, Yahoo! Personals, Del.icio.us, Yahoo! Pets, Blo.gs, Upcoming.org, Yahoo! Music, Yahoo! 360, or Webjay?
These services have, thus far, offered little value to Yahoo!. The company has spent its time and resources maintaining services with a huge, financially unjustified overhead; all the while, its search market share continues to dwindle. In contrast, Google, realizing its product line was stretched too thin, has spent the past 2 years aggressively vertically integrating its various product offerings as features ported across its services. While Google has certainly expanded its horizon, advertising and search technology remain its unwavering focus.
Yahoo! needs to reassess its position and eliminate services that do not complement its core business, or increase value through growth, or add dollars to its bottom line. With the majority of its income coming from search advertising, it is difficult to see how many Yahoo! services justify the brand disambiguation it has created. Yahoo! needs to sell off its various products or vertically integrate them within its core business -- just as Google did.
Yahoo! needs to refocus on the search market. The digital dinosaur is simply not in the position to continue experimenting or investing in markets that it doesn't already have a significant command of. By spending time and money building a gamut of Web 2.0 services, Yahoo! is unnecessarily competing with hundreds of companies, when it should be competing with just two: Google and Microsoft. The company should let users build the content and focus instead on helping others effectively find it.
Should Yahoo! continue to lose market share in search, the company will be unable to continue its operations elsewhere. Shutting down or selling off ineffective segments of its operation, such as Yahoo! Music, would go a long way towards retaining profitability and reigniting the search effort. Such cuts would undoubtedly require significant staff reductions; unfortunately, though, with dwindling profits and a bad economy, Yahoo! simply cannot afford to continue operating like the bloated behemoth it is today.
To survive, Yahoo! must approach the problem tenaciously, with a willingness to slice off the fat. This degree of bold change will require bold leadership. Leadership is unfortunately a quality that Yahoo! appears to be lacking at the moment, and unless the company is able to streamline its operation, the future looks grim. This is not to say that Yahoo! is doomed. Apple found itself in much the same situation around 1997, only to see a resurgence under the leadership of the resurrected Steve Jobs. Yahoo! is in desperate need of fresh direction under a leader like Jobs if it is to win the battle against other giants. Yahoo! does not need a new religion. In fact, it needs to rediscover what it lost to ambition. It isn't too late yet, but Yahoo! needs to get off its butt and start fighting for its life.
About the Author
Jawad Shuaib is a Web 2.0 software developer and marketer currently serving as the Senior Web Developer at Achilles Media LTD. He also teaches at Canada's leading technology institute, Humber College.
Image taken from Yahoo.com
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To succeed in the search field, Yahoo would need to do something that is obviously different or obviously better than the market leader. There probably isn't much room for improvement.
Yahoo! is better off competing on a different playing field. Now comes the challenge of creating revenue from all of these other services...
You forgot to list Jumpcut, which has gone into decline since Yahoo took over, to the surprise of nobody.
I agree with @Steve that competing head on with Google is a non-starter. I don't see people in the next 5 years saying "Yahoo it". Google has won search.
What Yahoo needs to do is to focus on great content verticals that get people to the site where they can serve ads or provide search by convenience.
To do so will require 5 things:
1] Decide on the content and services they can deliver well and people need most.
2] Jettison all other content and services ASAP.
3] Integrate content and services into the Yahoo experience.
4] Properly staff up every initiative. As a Yahoo content partner, I can tell you one serious issue Yahoo has is giving people far too many varying responsibilities. The result is maintenance (barely), not innovation.
5] Establish the new brand and identity.
Easier said than done but the current plan is failing miserably. With the exception of Finance I don't use Yahoo for anything else. Soon enough, even Finance is going to become irrelevant.
Happy New Year,
George
From my point of view, Internet search and advertising giant like Yahoo! needs more focus, can't just let google take over the search engine completely, there has to be someone to compete with google, else big g is going to be so proud about it.
I disagree with this article. People go to Yahoo! (and indeed have Yahoo! as their homepage) because of its portal. It's just as much about content and services as it is search. As unpopular as the concept is to some Web 2.0 fanatics, people still want professional content written by professional writers and editors.
The problem is that so much of what they offer currently is, well, crap. Who goes to Yahoo! to sell their car? There are some things that all-purpose 'portals' just aren't meant for. AOL seems to have learnt this lesson when it kept Weblogs Inc.'s distinctive brands, and branded its male-oriented channel as Asylum.com.
The only company that I can think of that has pulled off a jack-of-all-trades name is Richard Branson's Virgin Group. And even they were once capable of integrating Virgin Cola and Virgin Radio into the buffet cars and headsets on Virgin Trains. (Which all in all made for a thoroughly unpleasant trip.)
Are we talking about the same company? YHOO, which in the most recent reported quarter (Sept 2007) reported $1 billion in gross profits? And regularly reports $1 billion on quarterly profits? I'd love to have a "failing" company that generates $1 billion in quarterly gross profits. That is a company you can fix.
Sure, $70 million in net income is anemic. But the problem is a lot more about poor decision making (or no decisions made) than it is about how well it can compete in search. Everyone I have spoken with - current and past employees - tells me the same story. No one is willing to make any of the tough decisions.
Yahoo has always been about being a brand online, not about being a search technology company. Yes, one can make money from search. But there are a lot of other ways to make money online. With the right leadership, Yahoo can use the incredible cash engine that it has to build the businesses of the next decade, instead of fighting a losing battle against Google for the business of the last decade.
The notion that Yahoo "must" focus on the search market alone is insane and completely uninformed. The only way to dislodge Google will be through disruptive innovation -- obviating the need for search, or radically changing the business model in some way.
Dead wrong. This focus on Google is what's hurt Yahoo. This is the same sickness that McNealy gave Sun (in regards to MSFT) and Noorda gave Novell (also regarding MSFT).
Yahoo needs to focus on the fact that they are a destination site for tens of million of people every day. How can they serve those people better? Where the visitor is hitting a Yahoo service and leaving it, why? How can they deliver things that Google can't or doesn't?
If Yahoo cannot build a thriving business from tens of millions of people visiting their site, they should go out of business... and will. But competing with Google in search with an eye to the #1 spot is delusional. Should the focus on search as A core business? Yes. Should they focus on search on the only core business and bet the company on it? Only if they want to file Chapter 11.
Hi, thank you everyone for commenting.
Competing with Google in Search does not mean providing the same service. It is easy to forget that Yahoo still commands a significant share of the search market and there is room for improvement.
In fact, Yahoo! has recognized room for innovation. Their recent efforts to open up Yahoo! search to developers could be a game changer depending on the reach.
I can't help but compare Yahoo! to Apple in 1997. Yahoo! is facing the same challenges that Apple once did:
(1) Poor product leadership (Terry Semel, Jerry Yang, Sue Decker and the board of directors)
(2) Products that do not compliment each other
Yahoo lacks focus. They lack cross-product branding. They are neither earning revenue advertising dollars off these products nor bringing back the traffic to their homepage. Focus and leadership is key to Yahoo's success.
- Jawad Shuaib
I completely disagree with the author of this post as well.
What Yahoo needs is strong and fearless leadership. Letting top quality talent like George Oates from Flickr only points to their lack of executive understanding of the resources that they actually have.
Many of the services mentioned that Yahoo should get rid of are about the only forward-looking things that make Yahoo interesting. Now, that doesn't mean that Yahoo shouldn't consolidate outmoded or relics efforts, just as they did when they moved Yahoo Photos into Flickr (about the smartest move Yahoo made in recent memory).
But this notion that Yahoo should compete with Google on search is ludicrous. I'm interested to see how their vitality and social efforts play out over the next year. If you want to know who Yahoo should compete with, it's Facebook, not Google.
Posted by: factoryjoe.com
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January 1, 2009 2:24 PM
It seems more like they need a mission. Some simple and believable reason why this particular corporate entity should continue to exist rather than being broken up for spare parts. Mission then strategy then tactical choices that inform day to day work.
Posted by: Adewale Oshineye
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January 1, 2009 2:41 PM
I have to agree with the post here, Yahoo is simply shooting itself the day they started adding extra stuff to their homepage.
If they simply left the searchbar for the homepage and a link for all the other stuff such as news and e-mail, they'd get a lot more search traffic, where all the money is.
It's a sad thing that NOONE who works at Yahoo realizes this while some people (like me), are writing a whole book about Yahoo's failure and Google's simplicity.
Perhaps I might be wrong but if I am right, Yahoo could be making billions more simply by removing everything except "search" on their homepage.
Everytime I ask people nowdays, "What do you do on Yahoo?"
People answer, "Read the news, check E-mail, that's about it."
Everytime I ask people the same question about Google, I get back, "I search on Google."
It's a rather simple solution to a complex problem.
Less is more, more will always kill your "search".
You can read more about this here on my blog:
http://zedomax.biz/blog/make-money-online/guerilla-brand-marketing-know-how-revealed/
Yahoo seems to have fragmented their vision, as you have indicated. However, focusing on search? I'm not too sure about that. And Del.icio.us is a must-keep for them - it augments search very nicely in the direction of social search
Yahoo seems like a giant without a head - and that is their biggest problem. Great leadership will be able to reinvigorate and refocus the company in whatever direction they may choose - not necessarily search.
I hope 2009 is the year that Yahoo gets its act together. The internet needs a strong Yahoo.
Yahoo is a good alternative to G and it is here to stay. Fair enough, Yahoo has lost ground to G but still a viable business.
If Yahoo focus on real search and non manipulated search, everywone goes to Yahoo.
When I do a search I wont to find what I wont and not what others pay for me to find.
...Do the real search and make money on the side bars with advertising...
Jawad my old friend,
An insightful post and appropriate for the new year too. Yahoo has actually amazed me over the last couple of years with their inability to make a go of competing with Google. I am primarily "wowed" by them due to their continued number one ranking as a destination, and their lack of ability to capitalize on this.
I see that you have interested some of the RWW thinkers here, and though I do not agree in total with the individual comments, obviously there is a grain of truth in what everyone is saying. For me two cents, Search is definitely not the way to engage Google (at least not by Yahoo), and here is why.
Google is not leading the pack because of its search capability. Google has won the branding war, and simply has more traction and momentum because of its popularity. Yahoo has failed to increase its brand value, and is now deadlocked into the number two position not because their search sucks (because the relevance and effectiveness compared to Google is minimal), but because the Google brand is now synonymous with search.
The average Internet user is not a tech blog reader, njor are they geared to even see the difference between engines. We are all plagued by what you might call "the curse of knowledge" in evaluating the search war and the popularity of these companies. Think about Google as a name and a brand, and it becomes apparent what Mr. or Mrs. everyday user (the ones that make up 99 percent of the Web) are doing with these two entities. People go to Yahoo as a destination and use Google tools like search for their specific value.
In order for Yahoo to close the gap with Google, there needs to be A - a refinement of the Zahoo destination to approximate Google's minimalist look and feel, and B an ad revenue scheme that is better than Google.
Brand and monetization for publishers and site owners is the real power behind Google. As soon as anyone comes up with a better plan, gains traction for their name and enthralls the geek community as Google did, then we will see Yahoo or another company gain traction.
Microsoft is approaching things from the angle you suggest in buying Powerset and engaging Google on the search front. IN this scenario, you ca see how brand versus brand atop search coolness and relevance might effect market share. Aside this development, no one but Yahoo has a chance against Google. The point is, unless Yahoo is not as strong a brand now, and any search value beneath absolute artificial intelligence (and the PR that goes with that) will be useless.
The only scenario I can think of that might serve Yahoo as you suggest would be to buy hakia or invest in Search Wikia to create the buzz and potential value it will take. There is another way that I will not get into, but my team can actually suggest or help create just the right interjecting force to upset the Google apple cart.
I have always admired you Jawad, and it is good to see you contributing to Richard's fine outlet. As you know, super geeks like yourself actually made Google what it is today. Maybe engaging super geeks once again will help the next great brand gain traction. As for Yahoo, they need to contact me :)
Always,
Phil Butler
1) Keep email and charge for the service.
2) Keep Flickr and charge for the service.
3) Dump the rest.
I'm glad to see that there are already plenty of comments pointing out that all the "Woe Is Yahoo!" commentaries are just loads of, to put it politely, nonsense. The only "problem" Yahoo has is that everybody insists on comparing it to Google. Yes, Yahoo doesn't have the portion of the search market that Google has, but it's still a profitable company - unlike so many others at this point in our economic history.
Yahoo doesn't need to "refocus on the search market", search isn't the only "monetizable" kind of web content. Yahoo gets millions of "eyeballs" every day, everything from mail to flickr to fantasy sports. And they still have many opportunities to drive traffic to their search engine that Google doesn't have: all those services that you claim offer "little value". It may be a cliche, but what you call a "problem" (lack of focus, other services) is really an "opportunity".
They need to create something that no other search engine has created, something fresh / new.
If Yahoo abandons its portal, web users will see no reason to visit them instead of Google. Yahoo seems to have recognised this itself and is nudging its portal users to try its search (you'll often see links to Yahoo Search in their articles and automatically incorporated into UGC like Yahoo Answers). As much as assigning credit to Yahoo isn't fashionable right now, it's not a bad idea. If a user is on the portal they obviously have little problem with the Yahoo brand, and they get to see the service for themselves. Even if the portal were losing money (it isn't), the traffic it provides is worth keeping. (Of course, I can't say that Yahoo is particularly good at running loss leaders *cough* Yahoo Music Unlimited).
I disagree with this article.
Yahoo is doing the right path. Yahoo is a portal. It should never follow what Google is doing. In fact, google got loads of junk as well.
People use google is now more relate to consumer behavior (just got used to use google) rather then really compare the search accuracy. I found that Yahoo, Goolge, windowslive... are pretty close in search accuracy.
Yahoo doing diversification strategy about offering serveries surround Gen Y, Gen Z users. That's the future.
Look at the new Yahoo Mail and compare Gmail. (you need to take off the halo-effect in your mind of Google).
What Yahoo need is more funding while it is planning the mid-long term goal.
In terms of innovation in search that will benefit consumers and business alike, I'm very much in favor of strong competition. Ideally, Google, Yahoo, and MSN would be at parity, competing for consumers' searches.
Unfortunately, Yahoo's strength is not in search. They are not in a position to take on mighty Google on its own turf. Yahoo does, however, have areas of strength.
Take Flickr for example. Despite its shortcomings, Flickr is the largest repository of photos in the world and, more importantly, among the most active user communities in the world. Google's Picasa offers online photo editing and sharing, but they have not developed a community with any scale like Flickr. Yahoo does have a challenge in determining how to turn this into value for its shareholders, but the potential is there.
Flickr is just one of the areas in which Yahoo could succeed. I agree that Yahoo needs focus. They cannot afford to dabble in many areas like Google. They need to pick a battle, fight it and win. Then they may be able to move on to other areas. Right now they're not winning any battles that deliver value to shareholders.
@Mark
Most classical conglomerate are jack-of-all-trades not just Virgin brand. Would like to make two points here -
1. We Need Yahoo. Google alone may not be a good idea.
2. Focus on Few Stuffs. About the rest - give'em a Wikipedia twist i.e. not-for-profit run by public.
Its easy to be a good player when times are good and your team is winning. Likewise, dirty players resort to dirty tricks when times are bad and their team is losing.
During these bad times Yahoo has revealed itself as a very dirty player using unethical dirty tricks in the domain game. Baiting buyers with a $2.99 domain offer then "auto-renewing" the domain for another year at $34.95. Far above the market price for a .com domain reg.
They got me on this scam a few months ago. Search query results show I'm not the only one. Like any dirty player, in any respectable game... Yahoo cannot be allowed to win.
well my say here is shut them down thay are not worth saying nuthing to we the people told yahoo about problums with yahoo messenger and it still aint safe its capture is usless and dont work and thay dont listen to how people feel so why should we care how thay feel i think the number 1 people to make conserns to is the consumers we the people should have a say in this time of crisis we were in a crises and thay never listen to us in till thay had no choice and there reporting abuce is a crock also nobody can get a reply from them exsept we have resived your complaint and we get back to u in 24 to 48 hours well no ansure geuss its never ben a consirn intill now thay are pleading poverty and now the people anit listening to yahoo and i feel u bite the knife and u get hurt u never bite the hands that suport u and by ignoring them is biting them and now thay get it back it hurts well i say yahoo i was for you 1 time before now i say no no no u need a spanking and it needs to hurt maby u should start asking people for forgiveness and do what your people need from u that is the number 1 thing SAFTY and sorry but yahoo is far from that granted i dont think google is just as good there email servis sucks if u have your email hijact and get it back its to ezy to get it hijact agen yes its nice its ip identifieng software is cool and there email would be nice if thay make it safer and harder to identify the info well i honestly dont see google lasting long eather thay identify to mutch privete info about people and that should clasify in vilashon in the privecy act and thay shouldent keep so privete in contacting them when we have a problum of hijact names thay should respond without a hassle aND IT SHOULD BE BY CHAT I SAY 1 GOOD THING ABOUT YAHOO IT CAME OUT WITH A CHAT HELP LINE WELL ITS ALL GOOD BUT IT NEEDS IMPROVEMENT LIKE THE ABUSE THAY SHOULD HAVE 1 ALSO HOW DO WE NOW THAT YAHOO IS COMPLAINING TO ANYBODY AND WE NEVER GET A RESPONCE WELL I REST MY CASE I FEEL NONE OF THEM ARE PREFECTING ANY GOOD I LIKE MICROSOFT AT LEAST U CAN CONTACT THEM AND THAY DO A REMOTE ASSIST TO HELP U DO ANY OTHER COMPINY NOPE GOOD JOB MICROSOFT U GOT ME NOW ON THAT PART KEEP IT UP AND CARE FOR YOUR PEOPLE AND U MAY BE THE ALTIMETE COMPEDITOR AND PL MAKE YOUR MESSENGER MORE SAFER TY LOVE PEACE SAFTY FOR ALL
I agree with Diamond that it would not be enough for Yahoo to simply refocus on search, they would need to bring a new vision to their search that isn't just what Google already does better - whether that's vertical, semantic, etc. I'd be curious to read a follow-up article.
Dear Sir,
I do not think that yahoo has to leave all its features those atracts people to yahoo. Ups and downs are parts of business. One day some one in the top and the next day some one else.
Google is now at the top and yahoo was in the past. Nobody knows who will be the next. Business is dynamic.
Thanks,
Jyoti Kothari
http://vardhamangems.webs.com/
http://vardhamangems.webs.com/productsandservices.htm
http://vardhamangems.webs.com/apps/webstore/
Is it just me or did anyone else notice that TOMBOY came from a myspace page.
Just sayin...