I love Yahoo! They are the quintessential geek company, a bunch of people I think of as friends (as well as really smart people I admire) work there, and they have made some real contributions to the world of PHP and OSS.
It is sad, therefore, to see them dying a slow and unhappy death as their sales plunge, their stock turns to dust and their leadership runs in any number of different directions, their heads firmly in their hands.
What to do? As they search for a new leader, here are my humble armchair-CEO suggestions:
1. Figure Out Who You Are
Every time I ask a Y! employee what it is that their company does, I get a different answer—usually ranging from “we’re a search engine” (wrong) to “what doesn’t it do?” (right, and bad).
Five years ago, I sat in front of a Y! employee at a restaurant, asked this very same question, and got the standard “we do lots of things” response. I told my host, “Google is going to bury you, because they’ve figured out the one important lesson of business: they do one thing, and they do it well.” He didn’t believe me, I’m sure, and here we are.
The real problem with Y! is that it has no identity. Is it a search engine? Yes, but it is also a media company. It’s an e-commerce provider. It’s a content provider. It washes. It rinses. It makes coffee.
Google’s mission statement—forget the whole “don’t be evil” bullshit—is simple, and immediately effective:
Google’s mission is to organize the world’s information and make it universally accessible and useful.
That’s all there is. Fifteen words—even an idiot working at a Google office on Mars could immediately tell if his or her project fulfills the mission’s objective.
Yahoo’s mission statement (when corporate officer remember that they have one) is befuddling:
Yahoo! powers and delights our communities of users, advertisers, and publishers – all of us united in creating indispensable experiences, and fueled by trust.
Do you see the difference? Yahoo’s statement is laden with superlatives and subjective metrics. What “delights” your communities? What makes your experiences “indispensable”? Most of all, it smacks of incredible arrogance—the way I see it, you do the job to the best of your abilities, and it’s up to your customers to decide whether you’re delighting them and providing indispensable services.
2. Ditch the Search
On the surface, search marketing is a big moneymaker for Yahoo—if you look at their latest quarterly earnings report, you’ll notice that a large percentage of their revenues come from that sector. However, so do a large portion of their expenses. The cost of revenues is an abominable 43%—ridiculous for a company that has no physical manufacturing operations, in my opinion—and the cost of sales is 41% of the gross profit.
The search marketing operations should be treated as a strategic asset and sold as such—they could help assist the operations of a floundering rival (like Microsoft for example) and generate much-needed cash to realign and expand Yahoo’s operations.
Why Microsoft? Because it makes sense. MS wants to solidify its reach into people’s homes, and search is a great way to provide a unifying platform for all its other products—something that Google can’t do. Meanwhile, Yahoo can focus on building the best search technology, thus eroding Google’s perceived technological advantage on a level playing field.
3. Don’t Ditch the Search
This is not to say that Yahoo! should abandon its search technology—far from it. Yahoo’s search technology is, in my opinion, years ahead of Microsoft’s and, in many ways, much better than Google’s. Yahoo should play on this strength by becoming a search technology provider, and supply superior search technologies to companies that need them.
This is where Google’s own mission statement is self-limiting: they gather the data, and decide how to organize it. Yahoo could exploit this weakness by providing clients with a service that organizes data they way they want.
4. Organize Your Technology
Yahoo’s biggest strength is its incredible brain pool. They employ smart people—they just don’t know how to take advantage of their abilities. The first step here is to clearly separate research from development. Have a team dedicate to research—make them go nuts and come up with whatever new ideas they want. But also have a team whose job is to build solid products that are reliable and work well in a thoroughly integrated way (and I don’t mean “they use the same login”).
“Solid” is the keyword here. Google’s products, with the exception of its search engine, are flaky and limited at best. Many of them employ good ideas, but suffer from “permanent beta syndrome,” which is simply a consequence of Google’s modus operandi. You can’t ask developers to experiment and build solid products at the same time.
5. Find a Market
By ditching its media-company image and focusing on becoming a technology provider, Yahoo would find a ready market in a gigantic segment of the world economy: entertainment—a market which is all about data and its organization. Think cable companies, media conglomerates—all interests that have shown time and again that they have no clue whatsoever about how to take advantage of the Internet without shooting themselves in the foot with a ballistic missile.
With just a small number of strategic acquisitions, coupled with the services it already provides, Yahoo could position itself to be the primary technology developer and provider for a very profitable segment of the economy and work in a thoroughly synergistic way with them: they know how make good products and capture their markets, and Yahoo knows how to make sure that the products work well and provide ample opportunity for profit.
I am, of course, but a lowly PHP guy, but it seems to me that Yahoo’s predicament is not impossible to fix. Doing so will require management with a decent set of cojones, and a dramatic reduction in the focus of the company. Of course, I see the latter as a good thing, which will, however, require significant sacrifices and long-term support from the investors.