Yahoo committed seppuku today
calacanis.com
calacanis.com
Yahoo is now a media creation and curation company. Yahoo Sports is number one, Yahoo News is top five (HHS Secretary Sebelius had an exclusive op-ed in YN yesterday), OMG is killing TMZ and others, and so on and so forth. Yahoo's strategy of original content and great curation is all about stickiness. Let's be clear - Yahoo will still sell the very best ads for themselves, and Microsoft gets that sales expertise as well. No one on the face of this earth sells premium online ad space better than Yahoo.
Yahoo has clearly decided that they won't play in search any more, and that's a rational decision - they only played in search for a small period of their history. They were powered by Inktomi before Google, and now will be by Bing for the next ten years, and presumably something other than Bing after that.
Whilst there is no doubt Yahoo is strong in some areas, he's saying Yahoo has thrown-in the towel in the big fat one. He argues that Yahoo had more than one chance of being a player in search and each time they fluffed it. All the current focus-on-core-strengths talk doesn't cover up the fact that they blew the big one. That's his point, and I think it's a very valid one.
It's not in search, as far as Yahoo is concerned. Having gigantic teams dedicated to tweaking search algorithms and running servers was obviously not working out to Yahoo's advantage in the long run... they were losing market share to Bing, and who knows how much they were spending to try to innovate in search? As far as I know, they've been losing money on searching for a long time.
Is Yahoo ever going to be rolling in money again? No, and maybe not ever. However, they have a metric ton of products that can generate revenue: commercial licenses for service APIs, cloud computing resources, etc, and now they'll be focusing more on their advertising (which is REALLY where the money is these days). As far as staying afloat as a company not raking in the big dollars, this was probably the best bet without some major upheaval. They can focus and develop and sell things that actually might have a chance at making some money.
It is like BMW switching to Toyota engines and putting a little sticker on the dashboard that says Powered by Lexus. How long will BMW last when that happens?
Unfortunately, that analogy just doesn't work in the car industry. People will still buy the BMW because it is a BMW.
To back it up, I'll give you a two real world examples, both to do with another car Manufacturer - Porsche.
When Dr Ferdinand Porsche first created his company, his Porsche 64 was created using many parts from the VW Beetle.
From my personal experience, back in 2002, I was helping my brother strip down his 1986 Porsche 944 turbo to be raced in 03.
While pulling the car down, I noticed that many of the parts were manufactured by Audi and VW (which admittedly owns Audi). Even while we were stripping the sound proofing material off the body, I found out that the body of the car was manufactured by Audi, which to me was very surprising (given the body was one of the main selling points of the car at the time, even Mazda ripped off the design for the RX7).
If I had to give a rough breakdown in parts, I would have said that particular model was a 3-way split when it came to who's parts were in the car.
As for Porsche's company performance, they are one of the strongest car brands worldwide and definitely one of the most profitable, in 07 having made 5.8 Billion Euro profit off of 7.3 Billion Euro in revenue.
Currently, the only thing that is causing them headaches is their financial acrobatics, not the fact that their cars are made out of other manufacturer's parts.
So unfortunately, your analogy just doesn't hold up.
The point: same line different production values.
or - Your 130 thousand dollar automobile is made by the same people who make your kids 15 thousand dollar automobile.
It would turn a lot of people off Porsche and boost VW's brand image.
I think many people are aware that major brands OEM parts from all over.
But there isn't a sticker on the dashboard saying one of the most expensive parts is from a specific maker.
My main point is that Yahoo is transferring a lot of brand equity to Bing. If there was no Bing branding on the SERPs then this would be much less of an issue.
And really, some hackers pop the hood and look at engines but really do most people? Do most people even know how to change their own oil or even bother to?
People own these luxury vehicles BECAUSE of the status associated with them, not because of who produces what parts for the car.
So the analogy comparing the Yahoo situation to BMW was a bad one, which was my point - I wasn't trying to say it was a bad move by Yahoo.
Time will tell on that one.
And yes, while luxury brands use many parts not specifically made by them, they do not promote another brand who is a competitor.
Another analogy maybe? If the Apple iPhone had a splash screen that said "Powered by Microsoft" it would harm the brand. Apple knows this and while my mac is powered by Intel, there's never any "Intel Inside" branding.
Oye. Isn't that what AOL was?
They should have just worked it out with AOL last year.
But Bing is clearly a search engine. That's the central focus and that's what people will remember. It might not be "top of mind" for most of us but it's going to be top of mind to a lot of Yahoo users soon enough.
The market's immediate reaction: "Yahoo Shareholders Transfer $2.9 Billion To Microsoft Shareholders" - http://bit.ly/yn2TT
These guys have something else: a strong bargaining position. "Innovation is a fleeting advantage." Cornering a market, setting up barriers to entry—those are time-tested and effective ways to make serious money.
Don't get me wrong, I love American capitalism, and I don't think innovation trumps all other factors (like reliability). The myth of Microsoft innovation is just one of those peculiar cultural myths that, in this case, blocks out the reality for people who don't work in the field.
The facade of innovation works for larger items too. Why create a vehicle that lasts long after the 5 year bodywork warranty when you're just reducing your market. Entice people with the new model, make sure your goods don't last too long - that appears to be the capitalist way.
Gmail
AdSense/AdWords
Google Scholar
Google Maps / Google Earth
Google Books
Google Image Search
Google Apps
Google Code
Google News
Chrome
SketchUp
"Innovation" in the strong sense of something super-radically new is not that important, at least to me. Let's not get distracted by that.
The reason I like Google is that things they make are well done. They don't have jingly-bobs popping up all over the place and lots of new "features" that actually make things worse. Their stuff has generally started simple and good, and gotten better. I don't find myself resenting using Google's stuff, cursing at the stupid bugs all the time. Their products have lots of nice little touches, like the way Google search will evaluate a mathematical expression or look up the time in a given location, and it searches PDF and PPT files and renders them decently in HTML. Google Groups now searches bulletin boards and discussion lists as well as Usenet groups. Google Maps does a really nice job of finding bus routes in San Francisco. It often just does what you want it to, without your having to ask, and without getting in the way.
When using most Microsoft products, I usually have the feeling that some "manager" has decided that there's no money in making things work nicely, but there is money in "shipping it". For example, the auto-numbering bugs that have been in MS-Word more than 10 years now and annoy people every single day.
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When we bought Keyhole, we were able to bring a serious amount of datacenter and network resources to the problem of serving tiles, make the consumer client free for use and offer web interfaces to the same. I think that was non-trivial and quite innovative.
That Michael Jones and the Keyholers were able to take advantage of that expertise speaks to their remarkable ability as well. (I really like when I get the chance to work with MTJ, he's brilliant)
So while the team at keyhole were themselves hugely innovative, the combined work of google + keyhole was amazing, more so than either group could have done on their own.
To say that a Google or a microsoft can only be innovative if you only count those people who are hired specifically and only though one mechanism and at one time if seems unrealistic . It doesn't recognize that a company is the combined knowledge of the past work in the space, the employees experience gained at university and previous employers, and through knowledge and employees gained via acquisitions.
(this is not to say that all acquisitions work out, either)
Say what you will about their software - but there is no argument that they know how to run a business.
Any recommendations for what I should have done instead?
You don't need to respond to every qualm or counterpoint if others do it for you.
If Microsoft is so bad, why is everybody buying it? The "shady business practices" theory is just too easy. And even if that was the only reason: I guess then they innovated in the sector of "shady business practices". They certainly did not become so big through sheer luck.
I don't normally agree with Calacanis (although it's hard to argue with his success) but he's dead on about this I'm afraid.
I liked the aggression + innovation = fighting.
which is better? giving up the areas in which yahoo can't win, getting a good deal in return and concentrating on the areas they are strong in or trying to fight a losing battle, sinking millions of dollars in the process?
His logic seems to be 'search is very important so yahoo shouldn't give up its second place'. It doesn't matter search is uber important, what matters is whether yahoo can keep its place. They certainly feel they can't, so its very sensible to get out before the going gets really bad.
good business is all about deciding which areas to play, and knowing when to leave
When I was at Yahoo during the "dot bomb" crash. Yahoo was scrambling to decrease its reliance on advertising and made a big push into premium/paid subscriptions. Well that fizzled. As did Terry Semel's entertainment strategy and the subsequent attempt to go toe-to-toe with GOOG.
Personally, I like the entertainment/media portal strategy (out of the remaining options available). But at this point it still feels like Yahoo is being pushed into this strategy rather than boldy pushing forward with it. I think that's partially why it feals more like defeat/retreat at this point than anything else. Present-day Yahoo just can't shake that feeling of failure/lost opportunity in the eyes of many observers. That's gonna hound them for a long time until they can garner up a bona fide hit.
Search is now one of the highest-leverage points in the world economy, and it will become more important as time goes on. Microsoft having their claws a little deeper into search means they will use that position not so much to give people everywhere access to information, but mostly to help other Microsoft ventures grab and hold market share against competitors.
I think Yahoo are better off leaving this problem to Microsoft. People don't tend to call Microsoft innovative and search is an established place that they want to be in - this is normal behavior for them. Microsoft are in a good position for doing search by acquiring powerset and other companies (as Jason mentions). Microsoft this more so they can compete with Google directly and Yahoo have better sense. Yahoo is doing stuff that neither Google or Microsoft do well, like Flickr, Del.icio.us, News and other content.
Innovation from the customers point of view would come from improving the interface to search, which Yahoo can do without doing the algorithm themselves.
If look at what they offer with the BOSS and search monkey APIs http://developer.yahoo.com/search/ Yahoo is keen on this direction. At the Yahoo Hackday London in May they were pushing these APIs with talks and handing out documentation etc.
What's everyone else's experience with this? Does anyone here use Yahoo, and if so, why?
And Yahoo mail by the way is massive - I can't remember the actual status but they are a multiple of any of their competitors in size and google is a tiny small fraction. I think people underestimate the importance of this just because email isn't seen as sexy these days - but it's eyeballs, and very sticky ones (sorry for image :-) ), they come back regularly again and again - people with lots of history in their Yahoo mail are pretty much never going to leave.
Wait? So they've only just entered the search market? hmmm.
Ramblings methinks.
Starts singing - - - I'm so excited.....
Dude, Yahoo search was dying anyway, which is a shame because people like Yahoo, it's just that they have not been advertising so much. Like google had the benefit of viral marketing, to counteract it, Yahoo should have aggressively marketed itself to put its name out there. I mean, people in Europe probably hardly know of Yahoo compared to Google, which I do not think is true in the US.
So, in an ideal world I would have liked the Yahoo search brand to be kept, but the brains behind it to be of microsoft. This way, if played right, there could be a serious competitor and who knows we may get a 60 - 40 market share, and in that dream world, the publisher, or the user would hold the power.
As a side note, interesting that although Yahoo stock has gone down around 11%, Microsoft's stock has barely moved, I would have expected it to shoot up.
And where is Apple with "the search for rest of us"? =)
Now this newcomer gets greedy, some money exchanging hands under the table and now Yahoo search is dead.
Carol Bartz? she will be forgotten quickly.