Yahoo's Existential Crisis

Apr.25.08 | About: Yahoo! Inc. (YHOO)

One really has to wonder where Yahoo (NASDAQ:YHOO), as a company, has been for a while. Sure, it started life out as a search engine, but at some point, it expanded well beyond the realm of search into a social networking site of sorts. Yahoo Groups, Yahoo Finance, Yahoo Answers, e-mail and a wide variety of other smaller nitch marketplaces are just some of their current endeavors. Why, then, has Yahoo seemed to continue to try so hard to compete in an arena it has clearly lost a long time ago to Google (NASDAQ:GOOG)? Wouldn't Yahoo have simply been better off giving up search in favor of its other initiatives?

Its recent publicity and corporate moves seem, finally, to be coming to this realization. Alas, it's a little too late to change course now, what with the big behemoth Microsoft (NASDAQ:MSFT) breathing down Yahoo's throat.

Okay, maybe the money is in search advertising, but that doesn't mean you can't get your advertising dollar in some other meaningful way. I've been a Yahoo Group owner and moderator for a number of years. I must say that the service has been incredibly meaningful and useful to me, and I'm sure to many others, and Yahoo hasn't charged a dime for it. I doubt they would change their minds now, and even if they did, there would, I'm sure, be a mass revolt against it, but it seems to me that Yahoo lost a significant opportunity there somewhere.

One can't very well change the past, though. So, how about the present, or the future? Can Yahoo do anything now to salvage itself as a viable business with future growth potential? Surely, it is trying to do so. Will it succeed? Who knows, but one thing is for certain: a takeover by Microsoft would be far more stifling to future growth opportunities for Yahoo. Anything Microsoft takes it tends to change, and not always for the better of the product.

I'd like to ask a slightly different question here, though: Do shareholders care more about money these days than either quality products (Microsoft seems to take at least three releases on each of their products in order to get something actually worthy of being called something other than "beta software") or truly creative vision (Microsoft being the two ton gorilla doesn't ever really have to worry about being creative because people will buy their products because, well, because they are Microsoft)? If yes, they would probably be well served to vote against this proposed acquisition. If no, then Microsoft will move yet another step closer toward trying to monopolize the internet and the free-flowing exchange of information (for now), and the creative and quality prospects on future internet and software growth will continue look rather gloomy.

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