t times I’ve wondered if Yahoo! should consider replacing the exclamation point at the end of their name with a question mark. In light of some of their decisions and actions over the years, it seems that Yahoo? would be more fitting, as in Ya who do they want to be?
Do they aspire to be a media giant? The leading online ad platform? An information destination? All of the above? Depending on which mission statement you come across on Yahoo!’s website, their mission is either to A) Be the most essential global Internet service for consumers and businesses, or B) Connect people to their passions, their communities, and the world’s knowledge.
Where is Yahoo! going? What do they want to dominate in and why? I’m not exactly sure. If you were to ask the same questions about Google, the answer is clear. Google’s stated vision is to “Organize the world’s information” (and make enough money doing it to finance the creation of a new world). Do I agree with that statement? I’m not sure I do as a lot of their actions aren’t congruent with the statement. I find them to be a large media company looking to utilize technology to distribute their advertisers wherever and however they can…but I digress. Agree with it or not, they at least have a vision statement that is clear and concise and their performance to-date backs it up.
How did Yahoo! arrive at its current place playing second fiddle to Google? There was a defining moment in the history of these two companies that has had ripple effects that we can still see today. In a recent article on Wired.com, Fred Vogelstein suggests that Yahoo! blew it during the summer of 2002 when their $3 billion offer to purchase Google was rebuffed and Terry Semel, Yahoo! CEO, balked at the higher $5 billion dollar valuation of Google.
After that failed merger Yahoo! subsequently purchased Overture. While it was a strategic move they needed to make to compete with Google, Yahoo! was already at a competitive disadvantage. Google was able to build their ad platform from scratch and seamlessly integrate it with their search technology. Yahoo!, on the other hand, had the monumental task of consuming Overture, a company I personally characterize as culturally dysfunctional.
I had business dealings with Overture dating back to their pre-Yahoo! days and one of the common criticisms shared by my peers in the industry was how difficult it was to do business with them. Their culture appeared to be dysfunctional from an outsider’s perspective.
If you’re familiar with the story of the Good Samaritan, Overture would have played the role of the other guy – the one that walked past the man in need. They often gave the appearance of a company that would just as soon ignore its partners/traffic providers/customers rather than offer assistance. This isn’t to say that this type of behavior is uncommon for companies that grow to a certain size, but Overture excelled at it.
Now, fast-forward a couple of years to Yahoo!’s hiring of Terry Semel, the Hollywood deal-maker. Yahoo! had its sights set on becoming the next media giant so bringing on a seasoned and accomplished Hollywood insider was the logical choice at the time. In hindsight however, one might question the logic of hiring a CEO with very limited technical knowledge to guide a company that is defined by technology. This lack of technical savvy would be an extremely difficult hurdle for anyone to overcome when leading the merger of two technology-centric companies like Yahoo! and Overture, in addition to the challenge of overcoming the cultural differences.
Here we are almost five years later and Yahoo! has just launched their revamped ad platform named Panama. While Yahoo! touts this as a strategic leap forward, the bottom line is that Panama was a task that needed to get completed just to remain in the game. Early returns have been good for Panama, as evidenced by Merrill Lynch’s positive outlook for Yahoo! stock and their 13% increase in ad-related revenue from one year ago. The response from advertisers has been positive for the most part, however, some smaller companies are finding it difficult to switch platforms and transition their existing accounts. Panama is an important upgrade for Yahoo!, but the battle for dominance in paid search has already been won by Google.
Second place in the paid search industry is certainly not an insignificant position, but the same questions still remain. Do they have the leadership, vision and focus to reassert themselves as a leader, pioneer and dominant force that they once were?
Yahoo! is an amazing company, and a brand that has defined the Internet as we know it, but they have missed the mark recently and lost opportunities to surge ahead. What’s next for Yahoo!? I have my own theories, but they all depend on who is leading the company and if those people can define a clear and concise vision for the future that can take Yahoo! to new heights. I am curious to see what that vision will be and if it will give them the ability to regain the competitive advantage they once held.
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