What is the Next Step for Yahoo?

June 25th, 2007 | Categories: marketing, markets, networks, search, social media, strategy

Yahoo logoRecent executive turmoil has landed Yahoo in the spotlight many times. This isn’t the kind of PR and publicity that any company wishes for. Obviously, changes and transition are in store for this Internet giant over the next year. But where should the focus be placed? How will short term strategy decisions affect long term goals? To be honest, I really have no idea at this point. I think we need to delve further into the strengths and weaknesses of the company to determine where emphasis needs to placed and where losses need to be cut…

Yahoo started out as a directory, then blossomed into a search engine. Today, most people would still consider Yahoo a search engine by all accounts. I do not believe this to be the case, although search obviously does play a big role in the success or demise of the company. In my mind, Yahoo is a services company. Unlike Google, which derives the majority of its revenue from search and advertising, Yahoo provides a vast array of services which diversify its revenue stream. We do know that Yahoo Search Marketing (i.e. the new Overture) does bring in large revenues. Having said that however, we also know that many other services drive huge revenues that Google (among others) fail to acknowledge. Examples of this include:

All of these areas drive revenues that are NOT advertising-based. This presents a significant opportunity, as well as the possibility cross-marketing and promotion. Evidence is apparent by the willingness of Yahoo users to spend money on services they find value in. Once this trust threshold can be reached, the sale of further services is quite possible. I guess what I’m trying to say is:

“Yahoo is NOT a search company. Search simply provides an entry way into Yahoo’s world of services.”

This does bring up an interesting point however. If Yahoo places less emphasis on search and continues to fall behind, then they are failing to provide that initial entry way or door. Yahoo must continue to allocate a reasonable amount of resources toward search to *at least* remain on par with the rest of the second-tier players (i.e. MSN, Ask, AOL). Failure to do so will not only affect the prospect of future users, but also the loyalty of current ones.

Many may argue that Yahoo should push the limits and throw huge amounts of resources into search in an attempt to thwart Google and create the next-generation search engine. My thought for those people is this: Yahoo has already established an image in the minds of consumer. The company has not positioned itself to be the best search engine, providing cutting-edge, relevant results. Their search technology is ‘good enough’ - it is the status quo. The company and brand would have to re-invent themselves to do so, and spend a ridiculous sum of money in the process. Even then, I still don’t think Yahoo could compete at a higher level. Google, on the other hand, is known as the leader is search. The company is globally recognized for its PageRank algorithm and relevant results. Positioning of the brand has already been established. Lastly, further evidence against the re-invention of Yahoo: the recent attempt at re-invention by Ask.

Whether Yahoo continues to focus on search or put more resources into other services is yet to be known. One thing is for certain - a strong action plan is need, and it is needed soon. The fate of the company will be strongly influenced by decisions to be made in the next year. Good luck to whatever management is left.

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  1. GigaOM For Yahoo, momentum, not management, a problem « Says:

    […] has another interesting take on Yahoo’s current state of affairs. Share This | Sphere | Print | Topic: Featured, Web| […]

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