How Yahoo! got bogged down in peanut butter
Monday June 25, 2007
Yahoo! made the mistake that most media companies have made online: they thought of the internet as another medium. But it’s not. It’s a place, a tool, a means, not a medium.
I’ve said before in this space that Yahoo! is the last old-media company, for, just like a publisher or broadcaster, it has relied on controlling content, marketing to attract eyeballs, then bombarding those eyeballs with ads, arbitraging our attention for as long as possible. In Terry Semel, Yahoo!’s just-bounced CEO, the company got the essential media man and model. The site, he said once, is “all about content” and distribution. But the internet isn’t. The internet is about people, connections and networks. Google knows that; that’s how it won. Google is a platform, a distributed service. Yahoo! is a portal, a destination, a thing.
Semel’s media strategy succeeded, for a time. He multiplied audience, revenue and shareholder value. But that took the company only so far, and Google dashed ahead. So Yahoo! acquired cool companies – Flickr for photos, del.icio.us for bookmarks, OddPost for mail – in the hope that it could buy a little Web 2.0 to average out all the 1.0 in it. But that only added up to Web 1.1. Yahoo! was left behind. It started looking like – pardon my harshness – the next AOL.
Now Yahoo!’s founder, Jerry Yang, is in charge. In the early days of Yahoo!, when it was a directory, Yang told me that his job was to get people in and out, to their destinations, as quickly as possible. That changed as Yahoo! tried to hold on to users for as long as it could. What is his new vision? I see no sign of it in his public statement, concocted from randomly generated buzzwords: “My immediate and overarching priorities are to realise Yahoo!’s strategic vision by accelerating execution, further strengthening our leadership team and fostering an even stronger culture of winning.” That could be a mission for a sprocket company.
What is Yahoo!, anyway? A notorious leaked “peanut-butter manifesto” written by a vice-president warned management that Yahoo! (like too many old-media companies) was spreading itself too thinly and lacked “a focused, cohesive vision … We want to do everything and be everything – to everyone … We are scared to be left out.”
What should it do next? Yahoo! could sell out to another company that also watched Google whiz by: old-media conglomerates, for whom Yahoo! would seem like a younger second wife; Microsoft, always in search of a media strategy it doesn’t need; cable companies, seeing their exclusive hold on content torn from them by the internet; AOL, because they can fade away together. Or it could split itself into three mediocre companies: content, services, ads.
But Yahoo! needs a radical new vision. Perhaps, instead of continually trying to be the second ad network – at a distance – behind Google, it could become an open-source ad network where anyone can buy and sell ads: a transparent and true marketplace. (Note the interest in such a network signified by this month’s venture investment in the UK company OpenAds.) Or Yahoo! could become the infrastructure for local communities. Or, as I suggested on my blog, it should splatter itself across the internet as the ultimate widget company: take anything there and build your own sites and companies on top of it.
The morning after I wrote that, we read rumours that News Corp was considering merging MySpace into Yahoo! for 25% of equity – if true, a brilliant, cagey move by Rupert Murdoch, who would snare a 2,000% return on his $580m investment in only two years. The second half of the rumour has Yahoo! surrendering to Google and outsourcing search to them. This could, indeed, turn the merged company – Myhoo – into a social media company. It would have services – email, Flickr, del.icio.us, chat, personalization, RSS – that could become applications feeding MySpace and beyond. Its content could also become modules to be distributed socially. I’d argue that these should be distributed anywhere – on blogs, on news sites now needing to focus on what they do best, on local social networks, on advertisers’ sites. The audience is your distributor. This becomes Yahoo! turned inside out, the exploded portal. Thus could Yahoo! become a platform, like Google.
Note well that this also starts to demarcate Google’s limits: Google doesn’t own social as it owns search and advertising. Its own social network, Orkut, has not taken off worldwide. So now Facebook and Myhoo could fight it out to be the organiser of our connections and content, the Google of people.
The odds of this happening are about 0.1%. As the peanut-butter manifesto made clear, Yahoo! is too large and lumbering – and, at a mere 14 years, already too old – to move decisively. These days, it doesn’t take long to become an old-media company.