Yahoo Investors, Partners and Customers Getting Nervous

Jun.12.07 | About: Yahoo! Inc. (YHOO)

As Yahoo (NASDAQ:YHOO) realizes that it can no longer compete with Google (NASDAQ:GOOG), it is declaring that the future of web search is history. Yahoo says the model for getting information via the browser is outdated. In the future, relevant information will be delivered directly to readers.

"The future of the web is about personalization. Where search was dominant, now the web is about 'me.' It's about weaving the web together in a way that is smart and personalized for the user," said Tapan Bhat, VP, Yahoo!'s Personalised Home Page.

Interestingly, iGoogle is about personalization and has been making a lot of noise to that extent. Suddenly, it has become the core focus at Yahoo. Yahoo has been losing market share to Google in search and has been recasting itself as a company not focused on search. In fact Susan Decker, CFO of Yahoo, has said previously that "our goal is not to be number one in search".

"They've realized they can't compete with Google on search," said Deborah Schultz, a Silicon Valley-based marketing consultant. Search continues to gain wider adoption as an enabler for online commerce, and may soon become the platform for commerce. Billions of dollar are being channeled into search as major marketers and brand advertisers see the efficiency of the medium. This river of money is finding it way mostly to Google. In fact, the company does more in revenue in a single quarter than Yahoo does in a year. The entire Searchnomics conference is focused on the importance of search to web sites and online businesses.

Today, June 12, 2007, Yahoo holds it annual shareholder meeting. Yahoo's Terry Semel was the highest paid CEO in 2006, with total compensation of $71.7 million, according to the AP. That is two times more than the $27 million in total compensation for the New York Yankees' Alex Rodriguez, baseball's highest-paid player, and higher than the typical pay A-list stars like Brad Pitt who earn $20 million+ a movie, plus 20 percent of the gross box office take.

There is even talk that Microsoft (NASDAQ:MSFT) may buy the company. That would give Semel a graceful exit. However, the word on the street is that the company is not attractive enough to any single major buyer to advance their product line, not at that price. Jeff Clavier, a venture capitalist at SoftTech, said: "The problem with Yahoo! is that they're trying to be all things to all people but they don't do any one thing particularly well."

All this is making investors, partners and customers very nervous. Several advertisers and partners are moving to Google; Friendster, a social networking site, moved from Yahoo to Google to better monetize its user base with Google's larger ad platform and deeper inventory. If this trend continues, Yahoo may be history before search is.

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