June 20, 2007 4:00 AM PDT

Five steps to a Yahoo turnaround

After 18 months of floundering, Yahoo finally swallowed a bitter pill Monday and replaced Chief Executive Terry Semel with co-founder Jerry Yang.

But just promoting "Chief Yahoo" Yang and giving Semel a ticket back to his old stomping grounds in Hollywood won't be enough to get the company back on track, Yahoo watchers said in interviews Tuesday. The company has a beast of a competitor in Google and a shaky product lineup. Plus, employee morale is low, and at least one key management position remains unfilled.

"It's clear they have lost mind share and market share to competitors, namely Google, over the last several years," said Derek Brown, an analyst at Cantor Fitzgerald. "Seems to me that they're in a fairly important juncture in their history."

"They need to show some innovation, some new product that is different from Google."
--Ellen Siminoff, CEO, Efficient Frontier

That's not to say it's a lost cause. Yahoo still pulls in gobs of traffic and is one of the best-known brands in the country. And no one knows the company better than Mr. Yahoo himself, Jerry Yang. But the clock is ticking. Analysts, industry watchers and one former Yahoo executive say Yang has to move quickly on five things:

Focus on social media: It seems a bit cliche at this point, but there is no question that social media is hot and Yahoo hasn't done enough to ride that wave. Despite the company's acquisitions of popular photo site Flickr and bookmarking site Delicious and the rapid rise in use of its Answers site, analysts say Yahoo has failed to adequately integrate the services or create a centralized online hub for people to hang out. Yahoo's 360 social network has not been widely adopted, even within the company.

"The social-media space is new growth for the Internet, and Yahoo has properties but none are on par with MySpace, Facebook or even YouTube," said Sandeep Aggarwal, an Internet analyst at Oppenheimer & Co.

Several observers suggested that Yahoo should buy, or at least partner with, Facebook.

Boomerang bosses

Last year, Yahoo ignominiously lost, to Microsoft, a deal to serve ads on Facebook and reportedly has declined to offer as much money as Facebook wants to be acquired. Yahoo has conceded that growth for display advertising, its largest business, is slowing, and analysts say many advertisers are being lured over to popular social-networking sites.

"They haven't done a good job of integrating the social media they have now," said Danny Sullivan, editor of the Search Engine Land blog. "Maybe getting something like Facebook would help them."

Added Greg Sterling, principal of consultancy Sterling Market Intelligence, "They need to build a center to their social-media strategy through the acquisition of a social network or blogging platform."

Get better at video: Another hot area where Yahoo is lagging is video, partly for the same reason as social networking--advertisers follow the eyeballs. Google nabbed the prize when it acquired viral video site YouTube for $1.65 billion in stock last year.

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Yahoo has stated that it plans to target social networking, video and mobile. "They need to definitely be on the lookout for acquisitions that make sense in those areas," said Eric Jackson, chief executive and president of consultancy Jackson Leadership Systems. "I suspect that Jerry is going to be a little faster to move."

Jackson was the shareholder who challenged Semel at last week's shareholder meeting, saying that Semel owed stockholders a public apology for the company's lackluster financial performance.

Streamline internal structure, processes: With nearly 12,000 employees and so many different products and divisions, Yahoo has become a large, complex corporation that some critics say has difficulty responding quickly to competitive threats, such as Google on search and search advertising. The company could start by axing redundant, overlapping and underwhelming products, like it did by shutting Yahoo Auctions and closing Yahoo Photos in favor of Flickr, Jackson said. Consolidating MyWeb and Delicious might be a start, he added.

"Authority and decision making needs to be pushed down within the organization," Jackson said. "There is a culture that has become apparent where too many managers are quashing ideas that come up from below."

Yahoo also should improve the efficiency of its display advertising business so that it doesn't lose out advertising to sites with lower cost-per-impression rates, like MySpace, said David Card, an analyst at Jupiter Research. "They need to make their internal machinery work better," he said.

See more CNET content tagged:
Jerry Yang, social media, Yahoo! Inc., Terry Semel, Facebook

23 comments

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To late
It is probably to late for Yahoo to be really competitive with any other company. The only thing that Yahoo is still ahead is in their groups (and their instant messaging however I am sure that won't last long until Google comes up with their own and beats Yahoo).

All the rest (i.e. email, home start page, news, newsgroups, calendar, online documents, etc.) are done much better by Google. Yahoo is so far behind the curve right now I don't see them ever catching up and lets be realistic here, they have been going downhill for at least 2-3 years and not just the last 18 months).

What kind of "innovation" could Yahoo come up with to save the day? Probably nothing. Yahoo will has become a third rate service much like Lycos and Netscape. The bell has rung and Yahoo is so punch drunk that it doesn't realize that the fight is over.
Posted by saa001 (9 comments )
Reply Link Flag
Not too late
Try a more ambitious idea in the category of "Concept Search Technology" but not just simple pondering on the current notions or theories on "Natural Language Processing", such idea is called "Codonology". Realization of Codonology will lead to a new phage of mechanism for human understanding exchange. It is thinking beyond Googol or Google. Please visit www.Codonology.com for detail.
Posted by Codonology (27 comments )
Reply Link Flag
Time is critical , 4D logic is the answer
There are technologies that Yahoo could adopt that would set them down the right path. Back down a path of a more creative experience for the user and more relevant content in time and space.
Posted by Manhattan2 (329 comments )
Reply Link Flag
1.0 Company in a 2.0 World
The problem with Yahoo is they aren't unique enough, and
they're still following the same tactics before Web 2.0 came to
be. First off, they don't need to name everything they acquire
"Yahoo". When they first acquire Launch, they left it Launch for a
while but soon renamed it "Yahoo Music." Then came "Yahoo
Music Unlimited" which was their answer to iTunes, and doesn't
roll of the tongue as nice as say "Launch Unlimited". As of now
they have left Flickr, Flickr, but that's probably only because they
already had a "Yahoo Photos", but oh they didn't fail to put "a
Yahoo Company" on the Flickr homepage or require Flickr users
to have a Yahoo account!

Then comes Yahoo's failure to embrace Web 2.0. Look at any of
their pages, what do you see? Ugly, flashy, tacky,
advertisements which are absent on Google and (some) of MSN.
How are you supposed to take a company who sells text ads
serious when their own websites don't utilize the technology to
its full potential?! It will be a cold day in Mountain View before
you see a "Pinch J-Lo's ass, Win an iPod!" ad on Google. Yahoo
is ultimately becoming Lycos, which is fine with me as I am a
Google user anyway.
Posted by gsmiller88 (624 comments )
Reply Link Flag
Actually they DO need to brand everything
Every part of the Yahoo! universe needs to be branded as such, and needs to be more tightly integrated. A huge problem for them right now is that a lot of the properties are branded inconsistently, whether it be name, look and feel, or how tightly woven they are into the base Yahoo! experience. 360 is a perfect example. Yahoo has almost three times the audience of MySpace but are doing nothing to take the lead in social networking.

Buying Facebook - or even Bebo (as has been rumored)- isn't the answer. Why introduce yet another incompatible platform into an ecosystem that's already a jumble of incompatible mush? The focus should be on pulling the properties together, branding consistently and ensuring that the "experience" (look, feel and functionality) are the same from page to page to page.

They are running out of time though.
Posted by chrisrindone (3 comments )
Link Flag
ads don't help
Before Google's beautiful white screen appeared, I was a Yahoo user. Ads, which are often obnoxious and at the very least irritating, don't inspire me to visit Yahoo. Yahoo's website looks messy and unattractive partly due to the ads.

When you can build your own entry screen on an empty palette (Google), why would you choose a website that needs cleaning up first?
Posted by Leslie619 (3 comments )
Link Flag
get back to basics
Yahoo can come back and be competitive, but to do so they
need to return to their roots: search and information
management.

The overtures to becoming a media company with original
content (whatever that means) wasn?t necessarily wrong headed,
but those efforts should never have eclipsed Yahoo?s identity as
a tool ?to organize information and make it universally
accessible and useful,? to borrow a page from Google. That is
the latter?s articulated mission and some variant of it should be
Yahoo?s as well.

Yahoo needs to focus on helping people find and manage
information in all its forms: internet search, maps, books, video,
audio, art, physical sciences, life sciences, across the range of
academic disciplines, etc.

Google got its start by imitating Yahoo. Now, they are beating
them at their own game even as Yahoo has drifting away from its
core mission.

Time for Yahoo to get back to basics.
Posted by baygbm (4 comments )
Reply Link Flag
Give people what they want
I grew up with yahoo in the mid 1990s and now I find myself using google more and more.

1. Yahoo search was great for its time but soon they started showing less relevant and paid search at the first window and I found myself searching through pages. Big mistake on yahoos part for falling behind in search when they started to milk it in late 90s and early 2000s and ignored what people really wanted- fast relevant searches without the headaches.

2. User loyalty:
Email: As with everything, Yahoo would always force their $10 plan for extra storage. 2mb which was later upgraded to 4mg was a far cry for people who used email for sending images, documents, etc more and more. The interface was even worse because after login, I would go to main window, then Mail, then inbox. That was more revenue for yahoo because I went through 3-4 links and banner ads to see my emails.
Google revolutionized email with gmail and quickly became the leader when yahoo and MS hotmail followed and still way behind the technology.
News: Yahoo news is something that I still go back to once in a while. It was really one of the best features that kept yahoo as my Home browser page. They did well with content but Google came and did it better in terms of thousands of news sites rather than just Reuters, ap, etc. Yahoo is still a good alternative to google news.
Maps: Yahoo was barely in the game after mapquest but they lacked innovation with user friendly interface and style.
Social networking: Scattered between their personal paid service to their yahoo groups. No one single identity that really defined yahoo network.
Audio/Video: Companies with 100k budget are doing better than Yahoo with its 39billion market cap. Lets leave it at that.

They can get back to work and create a web experience far better than google if they wanted.
Posted by lavacentral (61 comments )
Reply Link Flag
get your own house in order first
Isn't it amazing that the folks at CNET has the audacity to criticze Yahoo management (and Yang in particular) when their own company has done absolutely miserably for the investors over the last several years? What credentials does CNET have to knock the other companies, much less, give advice on a turnaround, with such abysmal record of their own? It's absolutely sickening to read such garbage from totally incompetant source.
Posted by oxtail01 (308 comments )
Reply Link Flag
♥ bill gates sweating 4 days, mega-ultra rare & collectable
This is still for sale, maybe it would be of interest to advancing knowledge of what Yahoo is working with on the MS Platform..... and this is still ongoing and relevant to Vista with pending cases in the states and abroad.......

<a class="jive-link-external" href="http://savannah.craigslist.org/emd/346578623.html" target="_newWindow">http://savannah.craigslist.org/emd/346578623.html</a>

Thank you
Posted by trueview (29 comments )
Reply Link Flag
start by doing current things RIGHT
Simple - increase reliability and effectiveness of current yahoo products.

Example:
recently had 2-3day outage from a yahoo hosted domain.

yahoo groups sometimes slow to send out messages, and long outages. yahoo mail often marks yahoo group email as SPAM!

come on, fix the old stuff first.
Posted by m9800 (3 comments )
Reply Link Flag
The problem is...
The problem is that Google is so darn good.

I use their search, docs, email, analytics, etc.

I can do almost everything I need to do with Google and it is easy and seamless.

Yahoo now needs to offer better integration and ease of use than Google and even if they did, I probably still wouldn't switch because it would be too hard to do so.
Posted by t8 (3716 comments )
Reply Link Flag
Yahoo & CNET
Yahoo should buy CNET. They're a perfect team. You combine an internet portal like Yahoo, which draws the most traffic, with a media content generator like CNET and it's a win-win for both.

CNET owns Gamespot (video games), TV.com (television), mp3.com (music), GameFAQs (user-generated gaming advice), FilmSpot, download.com , and more.

This is what Yahoo has been looking for, they get to expand their media empire with video games, TV, music, films, downloads, and more.

This combination is staring Yahoo right in the eye. Don't drop the ball again, Yahoo. If Yahoo doesn't acquire CNET, then some other media company will eventually. The new CEO Jerry Yang has to really be blind to miss this once in a lifetime opportunity.
Posted by Millerboy (104 comments )
Reply Link Flag
Bigger Not Always Better
It's too easy to sucumb to the "Bigger is better" mentality to get companies out of a jamb. Yahoo just needs to do one or two things really well. Doing a lot of things in a mediocre fashion is not success. Google basically does one and only one thing really well -- search. The other stuff -- Google Earth, Gmail, etc. is just icing. Ebay does one and only one thing well. Amazon does one and only one thing well.
Posted by Stating (869 comments )
Link Flag
Yahooooooo!......................
I like Yahoo!. For years MyYahoo.com has been my browser startup page; I pay to use Yahoo enhanced email; I have over 2000 photos on Flickr ; I find Yahoo Finance to be almost as good as Bloomberg but without the $1800 a month price tag; I have even been using Yahoo's search recently and find it so greatly improved that I don't need Google anymore. I have registered websites using Yahoo.
Posted by niravabhavsar (74 comments )
Reply Link Flag
yahoo enhanced e-mail
I loved BETA webmail, I stopped using Thunderbird because of it, and then they added ADS! Back to thunderbird and I cancled my DSL account and switched to cable because of it.

STUPID MOVE YAHOO!
Posted by wiseowl411 (3 comments )
Link Flag
Don't piss off paying customers. . .
In an industry where everything is free, try not to **** off paying customers with ads that slow down a 3 Mps DSL connection.

Or adding JAVA script to TV listings so you can't search and it take 10 minutes to search DirectTV lineup. And then don't ignore 1,000's of complaints on your "suggestion" forums for 6 months or longer.

After 5 years with Ameritech, SBC, and AT&#38;T DSL I canceled my DSL, dish and phone line and switched to Cable because YAHOO.COM pissed me off enough.
Posted by wiseowl411 (3 comments )
Reply Link Flag
You're Right, But...Much Work is Needed
It is not too late for Yahoo, but the mental models in use (web 1.0 in web 2.0 world, etc) is the restrictor plate that precludes meaningful and relevant innovation for Yahoo. Business and individual consumers don't buy technology, they buy relevance, value and experience. I am not so sure Yahoo has done a good job to keep up with these factors, which tends to influence why and how people do what they do and make decisions. But, it's not too late to be sure.
Posted by lfhowell (2 comments )
Reply Link Flag
Start By Fixing Email
I realize that Terry Smell didn't even know what email was -- he used sticks and clay tablets to communicate, but the new-old Yahoo management needs to do something about the volume of stupid email spam. If Yahoo hasn't figured out by now that email with subjects like Pen1s is spam God help them. I've had to define over 30 filters of my own to cut down the volume of this crap. That is ridiculous. Yahoo Mail needs these features:

1) Ability for customer to block all email coming from top level country domains such as CN and RU

2) Ability to block email with subjects that are variations of themes such as Mortgage, Loan, You Are Approved, Rolex, Pills, Pharmacy, etc.

3) Rejection of all emails with sent dates &lt; 3 days or &gt; 2 days

4) Ability to tune Yahoo Messenger so that only pre-approved sender emails trigger a "new mail" notification pop-up


These are NOT hard things to do. If Terry Smell actually used email he would have figured this out long ago. But I guess if you are paid $75 million a year then you can just have an Admin do your email for you.
Posted by Stating (869 comments )
Reply Link Flag
Add one more ,,,
Do you ever have your email messages dropped by Yahoo email ? I have this experience from time to time. My outgoing messages never get to the recipients and vice versa. It is very frustrating when you are on some thing of importance.
Posted by petermpham2003 (20 comments )
Link Flag
Technology, Restructuring and Innovation NOT
Yahoo would not be successful as part of Microsoft. The company (Yahoo) would be obliterated if integrated within Google. There would be outright brand confusion and which services would "win" and be this two-headed beast if part of AOL; so much for the large portals as an exit.

Big media: Viacom, Newscorp, Bertlesman would all experience initial nirvana with such a large group of new eyeballs, but the confusion would be too much to digest and the relationships with Google and MSN, et al.

So, you've got this big company with incredible brand recognition, lots of paying customers, eyeballs and a global presence. The consultants come in from McKinsey or BCG and ask Yahoo executives: What would you do if you acquired yourselves to accelerate revenue growth and global relevance in the year 2010?

Well, what's interesting is that Yahoo is closer than many would believe. My opinion. Here's an illustration. I run a niche social networking site that focuses on marketing product, services and innovations developed by people from developing countries and/or from organizations that support these deserving women and men.

I do this alone, and the focus of the membership was and continues to be international. The people that join are mature, well meaning, and innovative, have money and want to have relevant conversation that makes a difference. Moreover, global enterprises are working hard to achieve new growth in emerging markets. Let's face it, if Cisco's gear is in ALL developed countries, where do they find NEW value, new customers?

If the lives of people in developing countries improve dramatically, which comprise 4 billion people, there's your market opportunity. So, how can Yahoo become relevant and take full advantage of this opportunity? My thoughts are not the panacea to be sure; however, they should really examine this strategy and see how one person (without restrictions) is pushing the envelope to a new era, Web 3.0 at www.spangy.com. And to be clear, Web 3.0 is NOT about technology although pundits who read this will argue the point; it is about being relevant, creating value and offering a great experience. So, finding a vacation for the kids for under $3,000 that has swimming, golf, etc is an often used example to explain the thought behind Web 3.0. I am working on this at my home right now, but the application is much more relevant and valuable for a company like Yahoo.

This is, potentially the value creation opportunity to rethink Yahoo. Let's call it Mindset 3.0. Join us at our new community at www.spangy.com. So, instead of trying to touch the same, weary eyeballs, it's time to find fresh, new eyes and minds for Yahoo. Then get these people involved in the process and there you have it, the new Yahoo 3.0. Expect my invoice in two weeks? Or, you can get BCG to validate this strategy for $2 million or so, but whatever Yahoo chooses, it must be as cool looking as the Safari web browser interface with a touch of ?can?t tell you that, because I would give away my secrets. Best wishes Yahoo!
Posted by lfhowell (2 comments )
Reply Link Flag
Saving Yahoo
Simple, if cannot beat them join them, what do google, good search with out adverts you can easily ignore and simple search box in the center. Remove all the other crap from their font page, replace it with a simple box. Then allow users add all other functions as options.

Setup Yahooface, or if they worried about being sued Yahoo world. Social site which integrates everything in it, s imple interface in which the user can log into. This where they maintain their own profile from, upload their videos, set up their website, their own blogs, everything can be access from this one page, they build their own world from this profile, with this one sign up, they receive all of yahoo services have extra options.
Posted by knowles2 (1653 comments )
Reply Link Flag
 

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