Yahoo: The Sloan of the Digital Age?


Yahoo sells online advertising. That’s what they do for a living, first and foremost. They sell that advertising against content, both aggregated and unaggregated, and against various popular apps, like Yahoo Mail.

They came second in search. Yahoo Mail looks like it may be overtaken by GMail someday. They haven’t created a browser, haven’t created an operating system, never triumphed in video despite being well positioned to do so, and failed to position themselves to win in local and mobile, as their main competitor, Google, moved with lightning speed and ambition on maps, street view, and other audacious plans.

Back in 1999, when we created (The Guide to Portals), Yahoo had the lead or leadership momentum in things like search and mail. They were *the* portal in the minds of digerati (who felt MSN and AOL were lame), when that seemed important. And yes, that may still prove in the light of history to have been Yahoo’s high water mark.

But it’s certainly not all that complicated to describe what Yahoo is, and what it could be, even to this day. Even when their own people (CEO Carol Bartz) appear stumped when asked “what the company is,” or when seemingly treasonous memos from VP’s circulate (the famous “peanut butter manifesto” from Brad Garlinghouse, accusing the company of spreading itself too thin).

Both Bartz and Garlinghouse have taken a constructive outsider’s “tough love” view of how the company became bloated and confused in the process of doing what it does well. Too many years of taking insiders’ claims at face value led to an inflation of titles and the creation of too many meaningless positions.

When Bartz dropped one of her famous f-bombs in a very public interview in May, some people couldn’t believe she’d be allowed to lead a company with such a foul mouth, and one that airs dirty laundry in public to boot:

There were engineers in almost every country, and way too many product people. We had one product management person for every three engineers. We had a lot people telling engineers what to do but nobody f***ing doing anything. Excuse me. I knew that would slip out one of these times.

But wasn’t Bartz right? On one hand, Yahoo needs to be wary of chasing the cult of engineering-driven startup culture. They aren’t a startup, and they aren’t Google. But on the other hand, a lot of engineers are there, and a lot more need to be added. And inexplicable bloat in non-engineering supervisory positions around the world has to be addressed before Yahoo can move forward. Bartz is frustrated because Yahoo is a great company that spends too much time tripping over itself.

(There may also be some oversimplifications in Bartz’s methodology, to be sure. If her marching orders are “classic turnaround” vintage, her regime might potentially make international operations even less efficient by failing to nurture growth in these markets, subjecting country managers to stifling cost controls, just to show short term financial progress to the board.)

That these tough-minded managers can recognize the problem and turn things around should actually be a sign that there is hope. The “everything is great and I bleed purple” stuff is fine for morale, but…  they only work as long as the key management problems with the company are addressed.

When things are turned around, what will Yahoo actually do?

Actually, that’s something of a silly question, in that it is already doing an awful lot — and serving an awful lot of advertising against it. It needs to continue to do that.

Your mileage may vary, but personally I have some relationship with a variety of Yahoo products, services, and content areas. Others, I have largely mothballed. I don’t use Yahoo Mail very much anymore, because GMail became a standard, along with related apps like the Calendar. But I’d consider going back to it, for privacy reasons based on the “single overlord adoption threshold.” I don’t use Yahoo Finance anymore, because I find Google Finance easier to use. I do like Yahoo Sports. I use Flickr less than I used to, but I still use and like it.

I’m sure you have similar stories.

Originally I had considered titling this column Yahoo: The Canada of the Digital Age, for some good reasons. Canada, many of us think, is now looking relatively good as a place to live and work. It’s got no warm beaches, no Hollywood, no Obama, and no 500-year-old buildings. But the country weathered the financial crisis better than most; employment is strong; government is not particularly corrupt; and it three large cities are considered some of the most livable in the world. At a certain point, you realize you were sitting on more than you realized.

But I settled on the idea that Yahoo is like the Sloan of the Internet (yes Sloan is Canadian). In ‘The Rest of My Life,’ Sloan writes:

Am I gonna settle down
Am I gonna be
Someone who has to take
The rest of my life
To settle down?
Then I guess you caught me
Lying to myself
What kind of fool
Doesn’t think about it?

At a certain point, then, you can consider scouring the world for new and better experiences… or you can just go with the relationships you’ve already got.

The job ahead for Yahoo isn’t to convince users that they’re better than Google in every respect, or even in most respects. It’s simply to keep being themselves. Digital content and apps simply aren’t a winner-take-all market. Maybe you don’t want to be second to eBay in auctions or second to Amazon in books, but being the #2 ‘digital nation’ in users’ minds, that alternate place you go to also (other than Google), has a long future ahead of it, if Yahoo plays its cards right.

Here are a few ways that Yahoo can sharpen the edges around its existing identity and corporate culture so that everyone internally is on the same page as to the company’s unique Yahoo-ness:

  • First, do no harm. Yahoo has a unique opportunity to actually out-good the “Don’t Be Evil” leader, Google. It can start by noticing where the leader has crossed the line from bleeding edge to being a major invader of privacy. When Google reached critical mass, offering office software, mail, chat, phone services, desktop search, and much more, they theoretically took control of your whole digital footprint. Yahoo can come back and offer the promise of an alternative. Not one that is perfect; simply one that is less creepy.
  • Get the right people on the bus, by adding clarity to what Yahoo’s definition of ‘talent’ is. A crisper sense of mission is going to be needed to tie into the long term plan to begin attracting top talent again. But if Google is beginning to talk about its next mission statement in terms of being an “innovation company,” Yahoo must decide whether to chase this, or to become a very solid execution company. There is an awful lot of mileage you can get out of analyzing customer feedback and metrics for a company with as large an audience as Yahoo. Innovation can be soft innovation and progress can be towards recognizable goals within the universe of what is already important. Finding the next great thing? That shouldn’t be on the radar and there should be no 20% time, come up with new apps, type of culture at Yahoo… sorry. Big breakthroughs, if they are needed at all, should be achieved mainly through acquisition.
  • Build on legacy. Yahoo’s brand is powerful. Consumers actually trust Yahoo more than both Google and Microsoft, mainly because Yahoo is a fun company that hasn’t tried to take over every aspect of their lives. Yahoo can build on what are essentially benign relationships dating back as long as 15 years.
  • Stick with core products. Losing hope in Yahoo Mail, Flickr, etc. would be a bad move. Consumers are ripe for alternatives to the Borg-like leaders of the world.
  • Bold acquisitions to create lock-in opportunities. At the end of the day, the Portal Wars are about monopolistic media models 2.0. We’ve always said that around here. That’s why Yahoo can’t fully win unless they acquire channels they can exploit. Even if this means acquisitions are actually mergers and they become quite dilutive for existing shareholders. And part of the long-term logic involves giving things away to reap more lock-in advantages. Yes, the combined Yahoo 2.0 giant that I envision may have to raise an awful lot of money with a debt offering to be able to afford this, but the additional attention and loyalty assets they need are locked up in a variety of mid-sized companies that should consider selling out at this time. Deep subsidies or giveaways on products like domain names and handheld devices (read: Yahoo should acquire GoDaddy or Research in Motion) are part of the scenario here. In the future, Yahoo should also be pursuing partnerships with hotels, cities, airports, media companies, malls, and other touchpoints in consumer and business life.
  • Keep selling those ads and don’t hide that part of your culture. Yahoo will have to continue innovating around maximizing ad yield. Advertising is simply a poor business model for 95% of the companies that try to make a go from it. But they have the scale and the technology to do well here. Since that’s covered, plenty of business relationships with agencies and partners will be needed to keep Yahoo on the radar as the type of magnetic, positive publishing company that advertisers and their partners want to do business with.

Yahoo’s culture has always been very different from Google’s. It’s time for them (and us) to reaffirm that this is a good thing, because it gives users and partners an alternative.

A couple of years ago, I walked into the lobby of a mid-sized advertising agency, as they were kind enough to offer a boardroom for a trade association meeting. Lo and behold, in a waiting area, I saw two beautiful, overstuffed Yahoo-branded recliners. Perhaps a gift for doing business with Yahoo, probably in its core area of display ad sales. The total value of the furniture had to be in the neighborhood of $1,600. But it wasn’t just the largesse that struck me, it was the brashness. Google distributes small gifts to its partners and advertisers at holiday time – a beer fridge worth around $95 would be a typical fun, but modest, reward. They wouldn’t be caught dead doing some of the stuff Yahoo has done over the years. It’s just a cultural difference. And the thing about it is, both cultures have a place in the industry.

To quote Sloan, “you’d have to be a fool not to think about it.”

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