Yahoo: Break-up vs. Union

With all the talk of Yahoo and AOL merging in some fashion now that Carol has been fired as CEO of Yahoo, it’s a little hard to imagine that being very successful. While I think she did some things right (notably trying to get rid of businesses that weren’t doing much for the company), I’m not sure she ever got to the essence of the problem at Yahoo.

As a company, Yahoo spent years investing profits from very easy to understand and profitable businesses into things that were risky bets in new areas that could help the company “grow audience” or “deepen engagement” (yes, the MBA types speak like this there). But most of those experiments failed and continued to suck the money away from other more sensible ventures. Many public companies face this problem at some point in the evolution–it’s natural to want to grow.

Worse yet, nobody could seem to articulate what Yahoo really is, especially when they shut down search operations and largely handed the keys to Microsoft, one of the only companies that can afford to try to compete with Google.

Yahoo is a a Web 1.0 attempt to be all things to all people. And it doing so, it seems crippled by its own audience and scale. People are paranoid of changing things for fear of losing a few percent of clicks on their most profitable pages, product evolution be damned! Meanwhile, the Internet has continued to evolve.

There was a point in time when the most sensible thing to do was to take the most successful pieces of Yahoo and spin them off into separate entities that are no longer burdened by needing to follow all the Yahoo rules and having their profits used to prop up other business areas that never really took off.

I’m not sure that’s a viable option anymore, but I suspect it’s worth thinking about. Might Yahoo! News or Yahoo! Finance find that they can really thrive if they suddenly became their own 50-75 person companies? What about Yahoo! Sports and it’s popular fantasy sports leagues? I’m not sure if Shine would make it on its own or not, but why not find out?

Yahoo! Mail is a whole different beast. It’s very capital intensive (not as bad as Search was, but it’s still a beast) and I’m not sure the various redesigns ever helped to raise click through rates the way some spreadsheet jocks thought they would (who really clicks ads in their email client?). Where would it even be today without the AT&T DSL partnership and the various other long-term users picked up out of laziness due to being the default when someone “gets the Internet” in their new house or apartment?

It feels like the more I look at it, the more things haven’t changed a lot in the last 5 or 6 years. Yahoo is a content aggregation and delivery service for the masses. And like the larger publishing and media world, there are a few “verticals” that draw most of the eyeballs and make the bulk of the money. And that really makes you wonder about the costs of having everything else hanging around, needing engineers, and product managers, and designers, and so on.

It’s too bad that Microsoft deal fell through a few years ago. Holding out for $42/share vs. $37 a share (or whatever the real spread was) all seems rather silly and short sighted at this point, doesn’t it?

Can Jerry Yang pull together enough investors to take the company private? Maybe. But can he make the changes that Yahoo really needs to make in order to be a major player 3-5 years down the road? I have no idea.

About Jeremy Zawodny

I'm a software engineer and pilot. I work at craigslist by day, hacking on various bits of back-end software and data systems. As a pilot, I fly Glastar N97BM and high performance gliders in the northern California and Nevada area. I'm also the original author of "High Performance MySQL" published by O'Reilly Media. I still speak at conferences and user groups on occasion.
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7 Responses to Yahoo: Break-up vs. Union

  1. Shankar says:

    “Yahoo is a a Web 1.0 attempt to be all things to all people.”
    They succeeded in that attempt except that Yahoo thought it could sit on that success, for ever.

    Yes, Internet evolved into a system that Yahoo could have never make sense of. It thought the Internet would come around to take cues from Yahoo, but it wasn’t meant to be.

    Hindsight is 20/20, but I believe Yahoo had/still has two problems – Heaviness of being successful in the Web 1.0 era and seeing the world through those eyes and Cultural issues.

    Such an heaviness and resistance to foresee and change, essentially allowed smaller companies grow like mushrooms and to become a giant. They lost too many acquisition opportunities. They lost steam.

    On product managers being rigid to change and only to maintain cash-registeres essentially shut down ‘innovation’. They introduced changes which were essentially copy-cat imitations – that’s not innovation.

    Yahoo’s fate is comparable to Cray or Silicon Graphics or Sun Microsystems. You would vaporize in the Silcon Valley if you don’t innovate – period.

  2. nohoo says:

    i have never understood the logic behind why aol – yahoo should merger …

    well, if yahoo with some excellent services (well, I’m allergic to the term “properties”) and profitable investments in asia cannot return to past glory, how can a merger of two losers make a winning combination?

  3. mrg says:

    merger? Personally, hope that there’s more sell-off a la Delicious; esp. Y! Groups. What an insufferable turd. There’s a lot of communities that have to suffer through that clusterF*ck of a UI every day. And really, it’s not like they can migrate to Google or FB. …

  4. Andrew says:

    Do you think the internet would be better today had the Microsoft-Yahoo deal gone through? Would Yahoo be better off? Obviously Yahoo shareholders would be better off, but would it have done any good other than that?

  5. Anon says:

    So, what do you think of how Yahoo is doing these days under Marissa?

    (And I’m one of those people still clinging to Yahoo Mail. I hope that never goes away…)

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