Is Yahoo looking for the answers in all the wrong places?

08/09/2011

By: Danny Meadows-Klue

As Yahoo ousts another CEO, it’s clear that problem is with the portal and not the person…

There was a time when portals were the gatekeepers. First Netscape, then AltaVista, then Yahoo, MSN, Freeserve (here in the UK) and many others all had their turns in the sun as the place every internet user started their journey. Before Google’s search solution rose to become the starting point for consumers who have questions, and before Facebook made the play to be everyone’s home page, the portal reigned supreme as the digital gateway. In a world where consumers don’t need a chaperone to the use the net, portals have to work hard to build products and apps that weave themselves back into the consumer’s life again.

Reading back over the last ten years of our Yahoo news stories felt like a case study in missed opportunity and misreading the digital landscape. In the early 2000s, just at the time Yahoo needed to be investing in its product and engineering, the market misread Yahoo’s audience share as sign of a won battle, drawing the conclusion it was a mature media business in a gradually settling digital landscape. Not so. Even today Google and Facebook are relatively young, given the dynamism of changing consumer needs and melting technology barriers.

Bartz may be the casualty - but certainly not the cause – in a familiar cycle She was only brought in two years ago to replace Yahoo’s co-founder Jerry Yang who himself had been resurrected to bring the portal back on course after a previous stormy period. When I interviewed Yang in his first stint at the helm his passion for the platform was electric, engineering and product development shone through. Coming back must have proved a deep frustration as budgets and shareholders curtained the engineering development Yahoo desperately needed. The challenges of the Overture integration, the lack of investment in search technology, and the stagnation of the early messenger and social products left the door open for both Google and Facebook to destroy market share in sectors that Yahoo had a strong claim to.

After the brilliance of Flickr and Delicious, Yahoo sapped the innovation and probably lost the passion of the talent that built those genuinely pioneering products. Great mobile tools and location brokerage out of the San Francisco development team could have beaten Twitter and FourSquare. Instead their funding never scaled and the integration deals with hungry device manufacturers like Nokia and HTC were never put in place.

Firing chief executive Carol Bartz over the phone gives a sense of the climate high in the company. Reading the official statement which describes her removal, ‘effective immediately’ in favour of chief financial officer Timothy Morse suggests the business lacks both direction and succession plan. Yahoo still has brilliant engineers and loyal audiences, particularly in its mail and messenger tools, but Bartz’ email to colleagues makes for demoralising reading: "I am very sad to tell you that I've just been fired over the phone by Yahoo!'s chairman of the board. It has been my pleasure to work with all of you and I wish you only the best going forward."

Over the last few years international fortunes have been mixed. While the Japanese offshoot enjoys staggering audience reach - and logins four times daily from its members - Europe has become much tougher for the portal to maintain ad revenue share, and the awkward saga of China’s Alibaba group (Yahoo holds 40% of the stock).

What Yahoo urgently needs is less investor pressure and more product development. If it is to be a longterm player in the social, portal and mobile space, it will only get there by investing in its engineering, its products and its teams. Brilliance in its product strategy is the only way forwards.

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