Where now, Yahoo?

Let's say you're the new CEO of Yahoo. You, the new CEO, are on the hook to fix the problem of Google...

Let's say you're the new CEO of Yahoo. You're running an outfit that's maybe one of the oldest brands in the portal marketplace, but your company has been eclipsed in revenue and stock performance by upstart Google. You, the new CEO, are on the hook to fix the problem. What do you do?

There are a lot of tempting comments that could be made about making your brand more attractive, building your dominance in search advertising, buying this company or that, getting into the desktop software business, taking on Microsoft and IBM and Google and maybe the Republicans and Democrats and a few world governments.

All of them might create a moment's glitz, but none are likely to change Yahoo's fortunes. They all smack of what's called (with apologies for the inherent political incorrectness of a hunting analogy) "shooting behind the duck." Anything Yahoo does to fix its position in the market has to reflect where the market is going, not where it is. The good news is that there are some tried-and-true principles that could help Yahoo reinvent itself successfully.

Principle No. 1 is to make your competitors' strengths into weaknesses. Archrival Google has a stranglehold on search advertising, one that's not broken overnight and may not even be breakable. So don't rush out with announcements of your own search advertising strategy, Mister Yahoo, and shore up the very position where Google is strongest. Instead, look at some reality -- two realities in particular.

The first reality is that there is a lot more to advertising than the Internet. Yeah, sure, Google has worked to expand itself outside click-ads, but think outside the box here, Yahoo. For example, is it not true that search ads manipulate a different kind of buyer activity than TV ads? You can't stimulate impulse buying with search ads; do you expect the consumer to do random searches in the hope of finding an interesting product? Then there's the fact that providing click-ads related to product searches becomes less valuable as the customer settles on a storefront of choice. I don't look for products on Google or Yahoo, I look for them on Amazon.

There's also the fact that as you stick more paid ads into search results, you get users more frustrated with what they find. Do searches end up displaying three or four pages of paid-for, irrelevant ads before they get to something a user might actually want to see? Could it be that there are better ways to integrate advertising with search? If so, find them and devalue the basic Google click-ad paradigm.

The second reality is that Google has been chest-butting with the both incumbent LECs and cable companies on net neutrality. OK, we all want everything to be free -- Internet, content, BMWs, nice vacations . . . you get the picture. Realistically it's not going to happen. Why not be the portal company who embraces "net reality" instead? Work with access providers, Internet core players and others to secure some premium-experience deals that can be invoked on selected media or other types of delivery. Create a partnership with the infrastructure players that will make the Yahoo content look better, arrive faster. Make Google defend a net-neutral stance or be forced to abandon it. Then rub its nose in the result.

The second basic principle is to play to your own strengths. What does Yahoo have going for it? A good reputation with business, good relationships with the US. RBOCs, and a great mashup strategy with Yahoo pipes. That's a lot of positive turf to own, in some key areas, and why not exploit it?

My research shows that mashups are now the No. 1 tool enterprises propose to exploit to improve worker productivity. Aren't the people inhabiting Yahoo's business pages workers? Might they not be interested in ways to improve productivity through creative application of pipes? But go to one of the popular business pages, like the Finance tab of the Yahoo site, and you'd never know that mashups or pipes existed. Why not promote the notion of piping news and other data where the data is already presented?

Then there's the linkage with the service providers. Could Yahoo pipes be used to pipe media, to pipe collaborative videoconferences or other collaborations? Could users mash a lot of other applications, and a lot of services, with pipes? Might these service mashups then not be suitable for premium enhancement through a relationship with those service providers with whom Yahoo already partners? Could you pipe a video with a leading ad (which the industry calls a preroll) and offer it over priority service paid for by the advertiser? Providers like BT have already exposed some voice-oriented service APIs; can multimedia be far behind?

Yahoo, you have the opportunity to build a bridge between the Internet, traditional media, business productivity and premium (meaning pay-for) services. That is a very powerful opportunity to have, and your rival Google has already come down on the wrong side of many, if not all, these key topics. Google's weakness and your strength align well here, and the thing I find most surprising is that you haven't leveraged these critical spaces better already. That's the bad news. The good news is that you have an opportunity now, and perhaps an even better one. Business is moving in mashups. The carriers are publishing APIs and starting to encourage developers to use premium services. The iron, as the old cliche goes, is hot. So strike!

Right now, Google is No. 1. If Yahoo wants to be No. 1, then things have to change. Earth to Yahoo; you don't get things to change by advocating sameness.

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Thomas Nolle

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