Recipe For a Yahoo Turnaround

Red Herring included the possibility of a buy-out of Yahoo (YHOO) this year among its top predictions. Business Week rated Terry Semel recently as one of the highest paid Chief Executives with one of the worst returns to shareholders. And yet, I have said for a long time, that Yahoo is a superbly underleveraged asset that if played properly, could return gold.

Techcrunch reported on one of Yahoo’s big (and rare) wins versus Google (GOOG): Yahoo Answers. It is indicative of an area in which Yahoo still remains strong: Content and Community, versus Google’s stronghold: Search.

So, the first order of business for Yahoo is to understand that brand advertising - CPM based banner ads - is ALSO big business, and concede the broad CPC-based Search business to Google.

Then, focus on the 3C : Content, Community, and Commerce.

And, they need to be segmented 3C. Not the haphazard, all-over-the-place 3C that Yahoo has today, which makes it impossible for a Sales Rep / Account Manager to have a structured conversation with an advertising customer. If I am a Nike Brand Manager, and I want to market to 3 segments : College Kids, Teenagers and Pre-Teens, Yahoo’s properties are not organized in a way that allows me to understand how to distribute my money amongst these properties. And Yahoo’s Sales Reps cannot explain. They don’t know themselves.

For all its morale boosting effect, the Yahoo! Answers property is yet another horribly understood and explained ad vehicle which does not at all clarify how I am to reach my desired segment using it. This puts it in the category of junk CPM, in the order of 50c. But it doesn’t have to be this way, and Yahoo! Answers could just as easily fetch $30 CPMs.

This brings us to the 4th C: Context. In what Context am I asking the questions? Is the Community that is relevant to that Context, around me, so that I can actually tap into their knowledge?

I would submit, that Yahoo hardly needs to do anything drastic, except, that it needs to reorganize its entire portfolio into Segments and Lifestyles, and align the 4Cs of each segment, so that the people interested in advertising to a particular segment can reach the community in a focused way, in Context. If they want to sell Groceries to people reading recipes, they should be able to reach them right there. Or, if they have Gadget Geeks researching a cell phone, they should be able to access that eye-ball, in Context.

And this would be the point to bring back Search. Constrained domain Search. Vertical Search. In Context Search. And, Search with a Customized UI that is specific to that segment. Example: I am a petite woman, looking for designer Jackets by Armani, Yves St. Laurent, or Gucci. Give me a Search Engine interface that allows me to put sizes, colors, brand, etc. in, not just free-form keywords. I am interested in precision. I am interested in personalization.

Yahoo: You can give me Context. You can give me Personalization. You can give me Content, Community, Commerce, and Vertical Search.

But you don’t. You keep disappointing me. You keep chasing Google’s tail, investing where they are strong, rather than where you are strong.

What a wastage. What a colossal wastage.

I am shaking my head.

Comments

[Harvitpal A...:]

Search is all that matters. If Google remains number 1 in search, Yahoo will continue loosing advertisers to the google universe. Aggregating content via search is a lot easier and makes more economic sense than going and acquiring it like yahoo is doing. Yahoo's presentation is a mess, they are all things to all people. Thats a colossal mess, so the very asset you talk about is one that was built over years but is highly fickle and as Google universe of search advertisers and tools improve, Google's market reach will increase and it wont matter what you want to find or who you are, you will get there via Google because of their ability to search the most appropriate content for you. That might point you to Yahoo or anyone else that does what they do best.

Also private equity will not touch Yahoo. To complicated, not as easy as other industries where you go and improve the various business (supply/cost/distribut... etc) chains.

A merger between Yahoo and Ebay. I think not! Ebay will loose its focus and become diluted in the Yahoo mess. Ebay will be smarter to go down the amazon,Google base, craigs list, improve Paypal's reach and skype ubiquity path.

2007 Feb 20 09:01 AM