Fortune and Blodget On Fixing Yahoo

Nov.21.06 | About: Yahoo! Inc. (YHOO)

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.

See also: Yahoo: Find Your Strategic Advantage Against Google