Blog Post

What Should Yahoo Do?

Like a lot of you, I spent some time this past weekend reading Brad Garlinghouse’s “Peanut Butter Manisfesto” to fellow Yahoo executives… also reading all the reactions in and around the blogosphere. Not to make light of a serious situation, but I have to agree with Nick Denton when he dubs Garlinghouse as Silicon Valley’s own “Jerry Maguire”.

While Garlinghouse’s memo was full of common sense and practical suggestions, I didn’t feel that it addressed the root of the problem at Yahoo. In my view, Yahoo’s most significant dilemma is a high-level strategic one… where the question is: Do we need to, and want to, be the king of search? Put another way… is Yahoo in direct competition with Google? The world certainly perceives it as such.

To further analyze this strategic question, let’s zoom out even more. At its core, search is a content aggregation and distribution platform. So to some extent, if your goal is to be the king of search, it is synonymous with wanting to be the king of aggregation and distribution for all the world’s content (hence, Google’s mission statement). But I say “to some extent” because search may not prove to be the optimal platform for all media types. Clearly, search has proven its efficacy with text and documents, but it still has a long way to go when it comes to pictures, videos, and audio.

Given that, one must qualify the desire to be the leading content aggregation and distribution platform with the specific media type/area one wants to dominate. For instance, as video becomes the next wave of media type to conquer, it remains very unclear whether search is the best path to aggregation and distribution. In fact, if YouTube (and most other video-sharing sites) are leading indicators, one can conclude that community is a far more effective filter for precision and recall when it comes to non-text media types. Which would actually prove tremendously beneficial to Yahoo… and therein lies the opportunity (one that doesn’t go head-to-head against Google’s strongest assets).

If you strip away all the layers that make up Yahoo, what you’ll find is the Internet’s largest communications and community company. And being so represents a comparative advantage versus Google… in all the areas where communications and community matter most. The challenge is to turn that comparative advantage into a competitive advantage by developing the vision and strategies that hit Google where they are most vulnerable. Put simply, Yahoo needs to leverage its strengths in communications and community to become the dominant content aggregation and distribution platform for all non-text media.

Ironically, the senior executive in charge of communications and community at Yahoo is none other than Brad Garlinghouse. As such, he is the one who needs to be held accountable for making sure that his operating/business units provide the necessary resources for overall strategic execution. Perhaps that’s what he has been trying to do internally but ended up hitting a wall. Whatever the case may be, it is Garlinghouse’s domain that needs to be opened up and become accessible by all groups/divisions within Yahoo.

And I’m not trying to be a Monday-morning quarterback here… in fact, 14 months ago I wrote a piece about the strategic implications and significance of community, and how companies like Yahoo would increasingly gain their competitive edge from the consumers themselves (now that they are also producers and developers). As such, it’s critical to realize that the priorities of “marketing” have been inversed… whereas the primary function of marketing used to be to broadcast a product’s benefit to consumers, the priority of marketing now should be to be a proxy for consumer control, because it is the consumers who will lead your company to success. Just look at the recent successes of MySpace, YouTube, Facebook, etc. These companies let their users create their competitive advantages… the win did not come from central product planning. That said, I was wrong back then when I stated that Yahoo seems to be doing it right… they failed to execute.

Google injects every initiative it can with its core search DNA. Yahoo must do the same with its communications and community DNA. And on that front, my advice is to first dismantle the ill-conceived Yahoo Media Group and reorganize its interface to traditional media and Hollywood with its core social media assets. They made a very big and expensive mistake by bringing in a traditional broadcast TV executive to run this group… one that AOL seems destined to repeat with their recent executive shuffle. The rules of broadcast media are antithetical to the factors that drive social media, and the thing that I will agree with Brad on is that such insights and visions must be something that is intuitive and native for the leadership at the top.

Photo via Flickr by Football Squares

19 Responses to “What Should Yahoo Do?”

  1. atomic1fire

    buy zoho and make some money out of office 2.0
    like allready said there no work involved with trying to make a yahoo spreadsheets or yahoo writer
    make zoho yahoo productivity suit

  2. The peanut butter memo by Brad Garlinghouse is a classic. Its like when a murderer calls the cops just so he feels he wont be on the suspect list! Some of Yahoo’s biggest missteps have happened in Brad’s camp. By speaking such Harvard-ish crap aloud, he thinks he will be safe. Like any good cop, Yahoo should smell the murder and let him go!

  3. What Should Yahoo Do?

    Initial steps must be centered on improving their corporate culture:
    A. pick a strategy (Are we a Content or Search Tech company?),
    B. choose a direction (more acquisitions or internal r&d),
    C. monetize acquisitions (later when market conditions improve spinoff all hastily made Startup acquisitions),
    D. downsize (cut non-engineer staff by one half),
    E. establish realistic milestones, and
    F. make managers and employees directly accountable for poor performance

    1. Fix monetization of search (as everyone else has commented). Yahoo! needs to stay competitive and increase revenue.

    2. Fix what Yahoo! already has! Brad is so hypocritical – looks at Yahoo! Mail beta – so slow and cluttered with ads everywhere. Same could be said with the latest version of Photos. Calendar is so outdated. Groups is getting an injection of resources finally.

    3. Internally, Yahoo! needs real program management and understand that you either are feature driven or schedule driven – not both at alternating times. Quality Assurance matters. Performance matters. Get everyone at Yahoo! standardized on Outlook or an improved Yahoo! Calendar. Have an automated way of scheduling a conference room (have they fixed that yet – or do you still need to call the lobby of the building to see when a conference room is free?) . Hire, train and develop real managers. Not MBA hotshots who have no idea what they are doing.

  4. Thank you. For identifying a possible peacock, rather than a catalyst.

    Perhaps, we shouldn’t forget that these are ultimately advertising businesses. The seach factor is almost a commodity. Serving relevant ads, with high click-rates, is how Google suceeds. Yahoo! tends to follow the Overture acquisition by serving the highest priced ad first.

    Maybe everyone already knew that. If so, my apologies.

  5. I see people mentioning Google Groups and that it’s better than yahoo’s. More Community sites exist and have even more features. comes to mind. Same basic features as Google Groups with better options and functionality.

    I especially recommend that Peter check it out, as he seems to have use for that type of site.

  6. Garlinghouse should be canned!

    It’s easy to point fingers and say things aren’t working well, but he has no track record of innovation or leadership either. It’s a sign of insubordination, and Semel should make Brad one of the first 15-20% of people to be let go…

  7. “Google injects every initiative it can with its core search DNA”

    So right on the spot with the above post. Yahoo needs to recognize and come to terms with the fact that when it comes to search, it would be hard to bring down Google.

    With that said, Yahoo should focus more on its advantages — the strong and enviable community it has.

    Also, who ever makes decisions related to acquisitions should be replaced. It seems that Yahoo wants a piece of every thing that’s hot — be it Flickr, jumpcut, delicous etc. Well, it seems all these decisions are made 1) without keeping in mind the assets that Yahoo already owns 2) So that Yahoo is not ‘left behind’.

    Well, what was the point of buying Flickr if you havent yet been able to bring out the synergy between Y! photos and Flickr. Jumpcut anyone ??

    Yahoo still has a leading edge over G and Msn when it comes to user community and I think that the sooner they realize this tremendous potential and leverage it, the sooner they’ll be in good shape again..

  8. Monetization is the problem. All that traffic and a fraction of Google’s revenues to show for it?

    That shows two things to me:

    1) Yahoo’s PPC ad technology is not as strong as Google’s
    2) People click on ads more when they’re searching than when they’re blogging/participating in a community/adding photos/etc. etc.

    1 is obvious, and #2 ought to be.

    The implications are that Yahoo! needs to find better ways to monetize communities on the one hand … and yes, on the other hand, continue to improve their search and ad technologies.

  9. I think Yahoo is doing a great job of collecting the community’s feedback… starting with this memo “leak.” Sure… they are going to have to wade through a bunch of useless posts and comments but there is definitely a lot of good input out there.

  10. here are my 3 suggestions for what yahoo should do:
    1) fix monetization (better CPC)
    2) fix monetization (implement CPA)
    3) buy more stuff, & faster

    longer explanation on my blog:

    but seriously, the problem isn’t focus… it’s just monetization. if they fix that, they’ll be fine. if they don’t, they’ll be taken private and/or acquired by someone else (MSFT would be my guess).

  11. I think it’s important to highlight the fact that he probably didn’t want this memo to be leaked, so maybe he is trying to change the strategic direction of the company… I’ve posted this elsewhere: Google buys technology to complement an existing and supported project or concept… Yahoo buys traffic when some random website becomes popular. And perhaps that goes back to the Gates theory, that Yahoo is at its core a content company, not a technology company. Maybe it should just license the Google adwords algorithm and concentrate on it’s only competitive advantage, the #1 internet property.

  12. One of the better thought out pieces on this issue. Whatever the motives for the memo, it is clear that while Yahoo is strong, and might have tricks up its sleeve, to users such as myself it appears jaded and listless. The company has some wonderful assets ( is always the first one that comes to my mind), so it shouldn’t be too hard to re-focus and emerge as the king of community (not something Google is even trying to do).

  13. good to read a post that doesn’t just heap praise upon peanutbuttergate dude for being ‘courageous’ and all sorts of other nonsense.

    the ‘inverse marketing/groups’ stuff seems spot on – i’ve been saying the same. i just started another google group a week ago – b/c it’s decent. yahoo groups are pathetic and are not decent. Groups is among SVP Yellow/Purple’s product responsibilities. It’s a shambles.

    can’t defend that Semel dude. that he hasn’t canned this dude already for incompetence show how lazy Semel is.

  14. WWYD? great post, and insightful, and i more than agree…i also think that yahoo should back off the search space, and instead just do a deal and focus on their ad network…better still, they should prep for sale to microsoft and give their combined user base the most complete and comprehensive suite available, a true something-for-everyone solution all the way up the enterprise ladder…

    also, if ‘consumerization’ is driving the enterprise sw space, you also have to wonder why yahoo is not doing more here to leverage their know-how to build solutions for businesses…it seems like they’re really leaving money on the table in that particular area (their recent reorg show s some attention to this area, but nothing solid)