Yahoo The Failure: Myth Versus Reality

As SS Yahoo appears to be
sinking, let me be the contrarian about her future. I admit, I find it as
hard to believe as anyone that Yahoo has much life left in it after all the
executive departures this week, plus the latest news of Delicious founder

Joshua Schacter going. But since Yahoo’s leadership has done a piss-poor
job making people believe there’s hope, I’ll step up and give it a swing.

Buck Up Little Yahoos!

First of all, WTF? Seriously, what the hell is going on? How did Yahoo
become such a loser company in anyone’s mind other than the idiotic
investors who usually don’t seem to know what they’ve bought? Let’s have a
little reality check about that big fat failure Yahoo supposedly is:

• Profitable: Unlike Microsoft, actually makes a profit through
  its online services. Investors bitch the "Panama" paid search system on
  Yahoo doesn’t monetize as well as Google. Hey gang, it’s monetizing a hell
  of a lot better than Microsoft’s system, in that 70 percent of advertisers
  buy through it, versus 50 percent of advertisers using Microsoft,
  according to SEMPO.
   
• The Strong Number Two: Unlike Microsoft, Yahoo has actually
  been a competitor to Google in search, over which most of this turmoil
  revolves.
  Depending on which service you ask, Yahoo has twice the search share
  in the US than Microsoft.

  Remember also that share doesn’t reflect volume. Yahoo has still largely
  maintained a steady amount of raw searches. Google’s share is increasing
  because Google is picking up new search activity seemingly from out of the
  blue, rather than by robbing others. Where these are coming from is
  something I’m still digging into.

  And as part of that digging, guess what?
  Compete: Yahoo
  Traffic Better Than First Reported covers how Yahoo doesn’t look at
  bad as it seemed with one service, when the definitions of what were
  counted as a search were revisited. Want to bet that might happen with
  others?
   

• Kick-Ass Properties: Yahoo has fantastic properties. Time
  magazine
  
  this week awarded Yahoo two of the 10 picks for its "10 Essential
  Sites" special feature. Yahoo Finance and Flickr both got nods. No other
  company got recognized more than once (for the record, the others were
  Wikipedia, Craigslist, ESPN, Yelp, Facebook, Digg, Google, and TMZ. And
  yeah, I know, some of those hardly seem essential. And hey Time, next time
  give me one frakking page listing for everyone. Geez!).

  Let me add to Time’s picks a few more properties that do well for Yahoo.
  Delicious. Yahoo Answers. Yahoo Mail. Yahoo News. Oh, Yahoo Search. All of
  these are either the leaders or strong players in their categories.
   

• Brand Value: Yahoo has a brand. When I talked with Microsoft’s
  Kevin Johnson two weeks ago as part of SMX Advanced, he
  
  commented about how Microsoft is still figuring out how to fix their
  brand — whether that means killing Live or trying to again push it before
  consumers. Yahoo doesn’t need to fix the brand. It’s well known and still
  drawing consumers.

  In fact, important point. Despite all the strum and drang about Yahoo’s
  management and investor woes, there’s been no indication that consumers
  give a toss. Maybe they do, but if so, I haven’t seen a single opinion
  poll on the topic. I haven’t seen that Yahoo’s lost a huge amount of
  traffic. I suspect the typical person going to Yahoo for services is still
  heading over, calls for Jerry’s head or not. The vast majority of Yahoo’s
  users have no clue about the execs and star founders who have departed.

Three Blames

So all this goodness, and Yahoo is a disaster? Give me some of that
disaster! From where I sit, Yahoo has three major problems that have brought
it to this point:

• Google as super success
   
• Microsoft vaporware returns
   
• Bad leadership

Yeah, yeah — let’s drill in.

Google As Super Success

Yahoo sits in a sandwich, with Google the giant top slice of bread
crushing it down into the thin Microsoft slice below. It’s hard to see the
good in Yahoo because it gets smashed up so much by that huge chunk of
Google.

OK, don’t like the metaphor? Here’s perhaps a better one. Google is that
brother or sister that does everything right. Best grades, voted most
popular, gets the best dates. You name it — Google rules! That doesn’t mean
Yahoo sucks. It doesn’t mean Yahoo’s a loser, that Yahoo has been failing —
it’s just being compared to a wonderkid. Yahoo’s also a great kid, but it’s
hard to see that when everyone tends to be so in love with Google.

Microsoft Vaporware Returns

Let’s get this straight. Microsoft’s aggressive pitch to buy Yahoo wasn’t
so they could "accelerate" things, as is the spin now the deal fell through.
It was Microsoft admitting failure. They’ve been at the search game for 10
years, OK? 10 years — just under 1/3 of how old Microsoft is. Go read my
Microsoft’s "Third
Era" Of Search Begins With Departure Of Search Chief Christopher Payne
post if you need a reminder of how long Microsoft has been floundering
around in the search space.

Way back when Microsoft started, people were already getting nervous.
"Look out, Microsoft is jumping into the space — everyone is done for!" And
that was understandable. Microsoft has had a good track record of diligently
succeeding in some areas after years of effort.

Good track record isn’t a guarantee, however. Despite all that Microsoft
has tossed into search, it hasn’t gained ground against Google, much less
really Yahoo. So it threw up the white flag and made an offer to buy the
second place position. Yahoo investors reacted to that as their final
payday, rather than a sign that their "dog" stock actually had life in it.
There was a fair argument that selling out to Microsoft might have been
selling out too cheap.

Remember, if you think Yahoo’s mixed up, Microsoft is even worse. I like
Microsoft. I want them to succeed. But they’ve got a lot of their own
baggage weighing them down. The reality is that Yahoo is the strong number
two in a big market and still far better positioned than Microsoft to
inherit searchers and others seeking alternatives to Google. Yang might not
be insane for thinking his company was worth more than Microsoft was
offering.

Still, Microsoft sits out there. And Yahoo’s own investors ironically may
have helped enable Microsoft to win. Focusing on the short term, yapping
about wanting a sale, they’ve helped weaken Yahoo at the same time Microsoft
is still scrambling around. If Microsoft does succeed (and I do expect they
will to some degree), part of that may be due to disarray caused to Yahoo.
Hell, Microsoft should offer to buy Google next and see what that does.

Bad Leadership

I see everything from a search perspective, OK? So when I start wondering
where Yahoo went wrong, I flip back to when, under Terry Semel, Yahoo really
got into this idea that it needed to own content, have its own "stuff."
Google has no stuff. Google understands that it can leverage everyone else’s
stuff and be quite successful at it. So Yahoo had all these things going on
— today still rolls out new "content" that doesn’t seem necessary.

Hey Yahoo, drop all that crap off your home page now. Like now. Make it
like what you have on your pure search
page, and tell your portal-seeking users to select the "Classic Yahoo"
link if they want all that junk back. You’re fighting a war with Google,
idiots — and Google is Portal 2.0, the stealth portal, where you keep all
that crud off and sneak it up on people after they keep coming back. You
can’t compete with them for search dressed the way you do. Go be a search
engine again.

I can’t pile all the woes on Semel, of course. I mean, there are a lot of
reasons Yahoo has been dysfunctional. It just again, from afar, seemed
to be a direction they went into — be a content site. The big problem now
seems to be Jerry Yang himself. That’s pretty sad to write. I’ve met Jerry a
couple of times, once during an on-stage interview, and he’s always come across
as a straightforward, nice guy. And I liked when he stepped back up to the
helm of Yahoo as perhaps a way for Yahoo to find its roots again.

But

after a year of steering the ship? Disaster. There’s no other way to
describe it. Analysts, press, investors — all seem to feel worse about
Yahoo than ever before. At this point, Yang has become Yahoo’s Lyndon B.
Johnson. He might get cheered on Battleship Yahoo, but not elsewhere. And
like Johnson — who declined to run for the US presidency after growing unpopular after his first term — the best thing Yang could probably do for
Yahoo at this point is to offer not to run again and instead help Yahoo find
the new leader it so desperately needs. [and thanks to a reader below who corrected me on Johnson winning a term on his own initially].

How about some of those
dear departed execs?
Well, let’s throw some blame their way too, OK? That’s tough to do, because
I like and admire many of them — and I know many were frustrated and might
have done much more amazing things elsewhere. But bottom line, however it
happened, they’ve been involved with Yahoo seeming to flounder. And the
stars of Flickr
and

Delicious going? I like them, too. But founders aren’t necessarily the
people you need at the helm to take products forward. In fact, sometimes
they can slow things down. The housecleaning, however it is happening, is
almost universally being reported as a bad thing. And it is from a PR front.
But fresh blood throughout Yahoo might actually be helpful.

Probably the most disappointing thing to me on the leadership front
was Yahoo’s failure
to come away from the Google deal without a big fat multi-billion dollar
revenue guarantee that could be waved in the faces of investors. Here —
Google guarantees us $10 billion over the next 2, 3, 4 years or whatever.
From what I’ve seen, there’s nada guarantee out there. It’s no wonder Fake
Jerry Yang

is talking quite hilariously about Yahoo being Google’s bitch:

Speaking of which, you know what Ballmer said to me the last time we met,
in that airport hangar in San Jose? He said, Well, kid, have fun being
Sergey’s bitch. And I guess Ballmer must have told this to Sergey because
now Sergey never misses a chance to remind me of it in his own subtle ways.
Like he’ll call up and say, Hey, are you getting on this conference call,
bitch? Or in a meeting last week he said, Hey, while you’re up, could you
get me a bottle of water, bitch?

Eric told him to grow up and start acting professional and Sergey just
laughed and said, Why? What’s he going to do? Go make a deal with Microsoft?
If he was gonna do that he wouldn’t even be here.

If you need more of a laugh, Dave Dugdale was inspired by that to do a
short video:

Stepping Up

Who should take over and convince the three people plus the janitor still
at Yahoo that they can win and not sound insane like John Belushi at the end of
Animal House (Who’s with me!)? On the lower-level front, execs are being
reshuffled, various people
report. As for the
top CEO spot, Kara Swisher did a

short-list, but it left me pretty cold. Not that I have better
suggestions!

Me, I’m always going back to search and want a crack team that
understands that from inside out. That means robbing Google. Sadly, Facebook
has already pulled people like Sheryl Sandberg, but you have to wonder if
there’s not someone else in
Google management
that might want to come over. I mean since Google and Yahoo are all now
buddy-buddy again, it’s not even like treason!

Personally, I’d like to see the dynamic duo of Steve Berkowitz and Jim
Lanzone come over to Yahoo. That pair came into Ask.com when it seemed
deader than Yahoo does to many now. And they revived it, kept it in as a
player in a space people assumed would get down to only two companies. It
would be fun to see what they’d do if put in charge of number two Yahoo, rather
than number four Ask.com.

As for the Yahoo brain drain, some are going to Google, some going to
Microsoft, but some will seek fortunes with start-ups. So why not take Yahoo
back to being a start-up? C’mon investment types, can’t Yahoo spin out its
search assets into a separate company? A private one with Yahoo having a
huge share? Then employees can take that gamble again for a big start-up
payoff if the IPO down the line does well.
Autonomy did it
with
Blinkx. Do that and maybe you’d find some frustrated Google talent
flowing back to Yahoo. Hey, maybe someday Google will want a deal for
Yahoo’s ads. Heh.

So there are some thoughts, for what they’re worth. One more thing. I
want Yahoo to drop that damn exclamation point at the end of its name. I’ve!
Always! Hated! It! I never use it, as it interrupts the flow of writing to
have it jumping out. Nor does it feel that appropriate, anymore.