Summary
1) Yahoo has suffered from: a) poor internal processes, b) not understanding and meeting consumer needs in a timely fashion, and c) not exploiting its significant assets.
2) However, as consumers' goals develop and their behavior changes with devices (over the long term) become increasingly connected – Yahoo (and MSN) may find themselves benefiting ahead of Google.
3) Yahoo has some strong assets in Flickr and some of its online services. As access providers look to differentiate and fight commoditisation, there is much value to be realized in owning content. Yahoo’s positioning in this entertainment sphere may yield dividends if it can move quicker. To change the game – one only has to look at image and video search.
4) It will be interesting to see how Panama develops and raises the innovation stakes for Yahoo. Without the cross platform/mobile and image/video search thinking it may be a touch too late though and time for Semal to move on.
Analysis
The original article is too complimentary toward Google and states that “At Yahoo, the marketers rule, and at Google the engineers rule. And for that, Yahoo is finally paying the price”. This is wrong. The fact is that the 'search delivery' of Google meets consumers’ needs in that: a) it is simple to use, b) realizes more accurate results and a greater volume of results, c) well monetizes those results for targeted and relevant advertisers and d) there is no other conflict of interest in providing content or online services via a portal. This last element of not being a portal has allowed Google to grow via partnerships with major ISPs (in that the majority of its revenue is derived from such partnerships). However, as consumers' goals develop and their behavior changes with devices (over the long term) become increasingly connected – Yahoo and MSN may find themselves benefiting from taking a stronger consumer view backed up with significant investment now. and so, they may be leading the market ahead of Google.
The article also highlights differences in valuation as Terry Semel’s valuation of Google at $3bn was somewhat different to what the market afforded it at $147bn – only two years later. Clearly this illustrates the great unknowns in this area – and the strength of belief in Google’s ability to realize future cashflows. According to Market and Investment Analysts Google can do no wrong – with its stranglehold on the growing online search and advertising market. Yahoo! and MSN's investments in search do not seem to be denting Google’s continued grab of share and subsequent growth...yet. However, as devices (mobile, gaming consoles, etc.) proliferate and consumers become more understanding and demanding of their technology service providers – we may see Yahoo! and Microsoft build a stronger presence especially in monetizing mobility and connected devices.
Yahoo has some strong assets in Flickr and some of its online services. As access providers look to differentiate and fight commoditization, there is much value to be realized in owning content. Yahoo’s positioning in this entertainment sphere may yield dividends if it can move quicker. The evidence of integrating/exploiting Inktomi and Overture prove that Yahoo suffers from poor internal structures that will delay bringing suitable products to market. First mover may not always be the advantage made out to be; however you need to move when all around you have and are!
To change the game – one only has to look at image and video search. The current text based search system relying on titles and tags can be bettered and Yahoo! should be stretching the boundaries of what we need and how we will find it. Yahoo has the great benefit that it is a highly trafficked site and has a strong position in online services, however without exploiting these assets and innovating as above they risk losing share of users. This is more so given the new young generation who live in a 'virtual world of communities' and will become tomorrow's consumers.
Clearly, Yahoo has to better exploit its assets. For instance, Flickr remains largely untapped – despite being probably the world’s largest image database. This is an asset that can produce a healthy and growing revenue stream – especially when you look at the market and business needs for images and the way community can enhance their value (a la You Tube).
Back to basics, it will be interesting to see how Panama develops and raises the innovation stakes for Yahoo. Without the cross platform/mobile and image/video search thinking it may be a touch too late though and time for Semal to move on.
