Yahoo! 2.0: Its Reorganization and Future
Yahoo! is changing. Terry Semel's resignation and co-founder Jerry Yang's return to the CEO position is one of the most visible changes. Yahoo! has always been harshly criticized for not being a technology company and lagging behind Google. They have even been criticized for not having the foresight to buy Google early on when the opportunity arose and missing a big opportunity. But in my opinion, Yahoo!'s mistakes should be viewed with more understanding. After all, Yahoo! was one of the first companies to experiment with the Internet industry at that level. Their field was all new and full of uncertainties. In time, with more data, things have become more quantifiable and able to be analyzed. Google was lucky to be able to follow Yahoo!, although they also had what turned out to be a better approach. But the important point is actually to learn from past experiences - and Yahoo! seems to have learned and is starting to apply those lessons for the future of the company.
Let's take a look at what has changed at Yahoo! over the last few years...
Yahoo! - first to understand wisdom of crowds
The Del.icio.us and Flickr acquisitions were proof of this. For Yahoo!, Flickr is not just a photo hosting service and del.icio.us is not only about bookmarking. Yahoo! recently announced that Flickr is now integrated with Yahoo! Search. And similarly, del.icio.us is fast becoming an integral part of their web search service. These pushes, combined with stronger algorithms, may help bring Yahoo! leadership in search. They are certainly already the leader in image search due to Flickr.
My real question is why Yahoo! insists on not implementing video to Flickr - that could certainly distract Flickr's focus on photos, but since video and photo are very relevant to one another I would guess most Flickr users would prefer to use the same service for video hosting too - eventually this could bring the same advantages to Yahoo! in the video space as well.
Yahoo! is now decentralized
Yahoo! learned one big thing from their late 90s purchase of GeoCities: rebranding kills. People don't like to visit soulless sites, it's very important to figure out what brought success in the first place and keep these elements intact. Yahoo! now applies its past experiences to Flickr and other acquired sites, such as MyBlogLog. These newly acquired sites remain as separate properties with integration taking place at deeper levels only. This is something that Google learned from Yahoo! - take a look at YouTube, for example, it's still basically the same web site.
Yahoo! focuses on money making properties
Yahoo! hopes its Panama strategy and the RightMedia acquisition can take the company to the next level by boosting advertisement revenues and ensuring a solid financial structure. This is not new to Yahoo!, as they acquired paid search provider Overture in 2003 for the same reason.
Yahoo! is getting chic
The Flickr and OddPost acquisitions brought some Javascript mastery to Yahoo!, and along with the del.icio.us and Upcoming.org acquisitions, a whole lot of web 2.0 cred.
Yahoo! now speaks to the top of the PR pyramid: geeks
Early adopters sit atop the PR pyramid, and carry a lot of weight and influence. Most early adopters in the Internet industry are either active open source users/contributors or at least, open source aware people. Google was the first to leverage this niche in its global expansion and now Yahoo! seems to be doing the same by releasing comprehensive APIs and open sourcing most of its Javascript stacks under very liberal licenses.
Yahoo! is innovating
With their San Francisco development lab, Brickhouse, Yahoo! has created an atmosphere where a group of talented people are encouraged to think outside the box and freely innovate. This can foster creativity in all areas at Yahoo!, bring good PR and cut the dependence on external acquisitions to some extent. Yahoo! Pipes was just a beginning, so we will see how it goes.
The future
And finally let's take a look at what the future may hold for Yahoo! The company's billion dollar bid for Facebook shows that Yahoo! foresees a future where the web will consist of social interactions. In other words, they seem to realize that in five years, most of us will be starting the new day from our favorite social networking site, and launch the applications and services we need from within that site using the default search box and so on. They may have missed the Facebook opportunity, but the recently acquired sports community Rivals.com can still be a good niche to attack and grow out of.
Conclusion
So it's not all doom and gloom for Yahoo!. There are actually a number of positive and promising signs at the company, although they have certainly missed the boat at times (e.g. Google, Facebook) and seemed muddled at others (search, Yahoo Photos vs Flickr). What do you think about Yahoo!'s future as a technology company? Can they turn it around?
Yahoo! office photo from Flickr user PålLøberg.
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I had 2 conclusions but didn't want to include in this article (since they are pure speculations) :
* The conclusion and the fifth argument makes me think that Digg can be a serious target of Yahoo in the following days.
* The conclusion also makes me think that Yahoo may want to enlarge its social actiities in women demographics too. And in that case, PopSugar may be the target.
Emre,
I agree with almost every point here, and that's why I went long YHOO a few days after the Semel departure dust settled. Yahoo understands the power of people and crowdsourced leverage better than any other major internet company. Now that Yahoo has a more net-native CEO running the show, I feel comfortable that they will start to integrate their various properties better in a way that keeps the core properties decentralized but ties together features and functionality better (ie del.icio.us tags in Flickr, or MBL profile pics powered by Flickr, etc)... It's going to be fun to watch over the next year.
I think Yahoo!'s biggest problem is that they lost mindshare. Everyone is obsessed with Google and what it is doing and forgetting all the other companies. In a way, that's why I like R/WW as it helps me keep tabs on everything out there (although you do like Google a tad too much for my taste ;) ).
Back to Y!: They need to win a couple of big search contracts for sites like CNN or Time magazine. They landed Verizon recently (IIRC), so they're on their way. The key with these deals is to make sure their brand is visible by all the users. Their technology is really good and the results will do just fine.
From another angle: Y! is positioning itself to be a key player in mobile, more so that Google or MS. If they play this right, this could be the key driver for future growth and hopefully be enough to push Wall Street to take notice.
But as they say, time will tell.
Pierre
Once I would have agreed that Yahoo! understood the importance of online community stewardship better than Google. The acquisition of Flickr/Ludicorp in March 2005 was a savvy strategy, meeting photo-printing services of other domains with a sticky photo community. Co-founders Stewart Butterfield and Caterina Fake seemed to espouse a user-led environment in which admins were 'people too'. Stewart went on to become Yahoo!'s Director of Product Management, and Caterina the leader of the Technology Development Group.
In recent weeks, however, with the unannounced introduction of censorship via the different language versions of Flickr, I would argue that they know how to kill a community. Most of my contacts are migrating to other platforms, which is a tremendous shame. Had they remembered to consult the community, this churn may not have occurred. At least Google strives not to be evil (although they are equally guilty of acquiescence to governments at given times...)
@felix I would not give up so fast. It's almost impossible to satisfy everyone in such a large community - show your reaction, petition, but don't underestimate their ..
"At least Google strives not to be evil (although they are equally guilty of acquiescence to governments at given times...)"
Google, not evil? No one is evil, everyone is trying to do business, "do no evil" was just a PR mantra, invented by one of Google's early engineers (seen on The Google Story by by David Vise and Mark Malseed)
I think Yahoo's single biggest issue is its tendency to buy properties then leave them sitting there without active development. Overture is a perfect example - they went YEARS after acquisition without improving it, while Googles competitive product was constantly being upgraded.
I completely agree with the above comment.
In fact in my opinion Yahoo is becoming a sort of a Timr Warner company, a company that own every second company but is not immensely recognized by itself.
Richard, an excellent analysis, as always. I have an interesting insight, being part of the company yet with some distance and independence to the mother ship.
The situation is fundamentally this: Yahoo grew by 10,000 employees in 3-4 years. To manage this growth, they implemented a matrix organization. It's the only way to coherently manage this kind of growth and imho it was managed extraordinarily well. The problem is that it's difficult (almost impossible, actually) to truly innovate inside such a structure, and on the internet if you don't innovate rapidly, you don't last.
The challenge is to re-introduce rapid innovation into a structure that's not geared for it. To this end, recent management decisions are all about handling this structural change (witness Brickhouse).
It's a fascinating time, for sure, and even more so being part of it from the inside...
Sorry Emre, I thought it was Richard's post... good stuff!
Thanks Salim, Yahoo had obviously dealt with one of the thoughest management problems. Hope to see more to come from Brickhouse. Cheers,
Interesting points and facts.
But I want to see if they will continue to play catch up or actually do something to compete.
They should first try competing by opening up their text ad [alternative] to adsense to public.