Yahoo! needs to change its Roots!

There’s an old saying out there: really good management is only necessary if you need to cover up for faulty product. Not like everything takes care of itself by just having a great product, but it certainly makes things a lot easier, doesn’t it?

A Little History

After several underpreforming quarters, the board brought co-founder Yang back in to try to get the company back to its roots. For the most part it worked, Microsoft bid 33 bucks a share for Yahoo!, but Yang and the board got greedy and rejected the offer. Then Silicon Valley veteran Bartz was brought in to shape the ship…that didn’t work so well either and investors acted. How would you like to be fired over the phone?

Bartz’s recent ouster from Yahoo! is no surprise, considering the company has been underperforming the S&P 500 for some time now. I mean, really, you could put any CEO into that position and anyone could flounder, unless their product and strategy were to change drastically. Issue is, they lost track of their core business.

Yahoo!’s Roots Are No Longer Applicable

I go to Yahoo!’s site once in a while, but it’s stale. News items are from Thompson Reuters or from the Associated Press. They also have a Travel site. Have you ever bought a plane ticket from Yahoo!? I bet you haven’t, you probably use Expedia, Priceline, Orbitz or go directly to your favorite airline’s website. By the way, Yahoo!’s site is very handy for testing your Internet connection: just type “ping http://www.yahoo.com”; and the site responds, one of the few to do so.

What’s the first thing we think about when when we think of Yahoo!? We think Internet portal and content, a.k.a. Internet mag, but I bet you don’t think of it as a premier search engine, heck that’s an afterthought as it’s not even their technology anymore. “I’m going to Bing for my favorite Yoga studio through Yahoo!”…no way. I also bet you don’t think of it as an B2B auction site, such as Alibaba, even though Yahoo! has a significant stake in the company.

When Yang started Yahoo! back in the 90′s he set it up to categorize information that was on the Internet so that he could find it better. So at its core, Yahoo! was and still attempts to be a portal that categorizes information so that you can find it. Trouble is the site is so full of content now that it’s more like a news magazine that a site to manage content via categories. Just type http://www.yahoo.com into your favorite web browser and you’ll see what I mean. Then Google came along and we all know how that went. Searching for content by first placing it into categories is cumbersome and no longer applicable!

Yahoo!’s Future

If I were CEO of Yahoo! I would…hide under my desk. Anyone that has to take over the CEO has a huge challenge in front of them. Basically, there would be two choices: sell the company in pieces or shift their strategy. The former would be more appealing to the likes of Proxy-Battle-Guru Icahn, the latter would be more appealing to long term strategic investors. In any case, here are some ideas:

• Start selling applications in the Cloud: they could either penetrate this space via acquisition or could build their own technology by leveraging data centers. Google does it, Microsoft does it, heck all companies are doing it one way or another. They could sell applications specialized in SMB’s, such as something similar to Google Docs.
• Sell infrastructure to provide content on an automated basis: similar to the way Amazon sells its fulfillment services to third parties, Yahoo! could sell content publishing infrastructure to those who need it. I bet they have some significant IP to offer, not a lot of companies offer so much content at an aggregate level.
• Categorize Internet content by rank: SEO companies help position websites organically within Google results, but these are specific strategies to improve the relevancy of a website based on certain key words. However, it would be nice if Yahoo! could leverage all their categories and place “Top 10 Autoparts Websites” using their ranking algorithms.

What else could they do? Next few years shall be very interesting for Yahoo! Time to die a slow death or re invent themselves!