July 17, 2007 5:45 PM PDT

Still no cure for what ails Yahoo

At Yahoo, there is plenty of talk but no real plan.

As expected, Yahoo posted disappointing second-quarter financial results on Tuesday and lowered its guidance for the remainder of the year. The company cited continuing slowed growth in display advertising and bigger-than-expected declines in search affiliate sales.

As Google pulls further and further ahead in the ad market war, Yahoo executives keep promising big things. But so far, it appears, they're just promises, and vague ones at that.

"I'm a little frustrated by the direction of Yahoo," said Jordan Rohan of RBC Capital Markets. "Investor patience is wearing thin."

Yahoo executives do seem like they're feeling the heat, but they haven't adequately spelled out exactly what they plan to do to change course.

On a conference call with analysts after the earnings report, Chief Executive Jerry Yang said he would "spend the next 100 days or so mapping out a strategic plan" and conduct a "top to bottom review of our business."

"I have a great sense of urgency to move fast and in a focused way," Yang said.

He promised there would be "no sacred cows" and talked about three key topics: insight, openness and partnering. Specifically, the company will de-emphasize underperforming products and "set a new bar for the Yahoo culture" by "prioritizing teamwork, leadership and a desire to win."

President and former CFO Sue Decker added that the company needs to "accelerate the transformation of Yahoo." She was named president in the management change last month that swept co-founder Yang to the CEO spot and former CEO Terry Semel off to the sidelines as a nonexecutive chairman of the board.

Yahoo is a "sinking ship"
While that might sound like the company is serious about making changes, the move has some observers scratching their heads.

"There was a broad stroke strategy articulated but not a detailed plan," said Steve Weinstein of Pacific Crest Securities.

For the troubled company, it doesn't seem like there's an immediate fix to its problems. Even a surprise acquisition of a hit Internet property like Facebook won't fix what ails Yahoo.

No one is saying Yahoo is going to buy Facebook, which analysts say is gaining display ad dollars at Yahoo's expense. But even if it wanted to, Facebook has chosen Microsoft to serve ads on its popular social-networking site. And there is no indication that Yahoo shareholders could stomach another big acquisition, particularly with the $1 billion to $6 billion price tag pegged to the young company.

"It's been a sinking ship for a year and a half," Piper Jaffray analyst Gene Munster said of Yahoo. "Yahoo is slow to do anything, and now it seems they are acknowledging that and want to make changes more rapidly and cut the businesses that aren't performing. That's new."

So, how does Yahoo catch Google? The honest answer: it doesn't.

Google not only continues to increase its search market share (about 50 percent, double that of Yahoo's), it also is able to get a much larger percentage of the ad dollars spent on search marketing--75 percent compared with Yahoo's 18 percent, according to a recent study from SearchIgnite and RBC Capital Markets.

Google's U.S. ad revenue is expected to rise by 45 percent this year while Yahoo's will fall by 18 percent from a year ago, according to an eMarketer study.

The contrast will be stark when Google reports its second-quarter financial results on Thursday. Analysts expect Google's revenue growth to be higher than 60 percent, while Yahoo's was 11 percent.

"It's the 'haves' and the 'have nots,'" Munster said. "Google's results on Thursday are going to emphasize the reason why Yahoo has got to make a real change."

See more CNET content tagged:
Yahoo! Inc., Jerry Yang, RBC Capital Markets, Facebook, Google Inc.

23 comments

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Focus on what you do best
Yahoo needs to figure out whether it can compete with Google or not. If it determines it can't, it needs to learn to play 2nd fiddle. What Yahoo needs to do, is figure out what it does best. It shouldn't give up on competing with Google, but must reinvent itself and discover it's niche. Look at Google. They figured out what they can do best, and are doing a pretty good job at it.
Posted by cyberspittle (165 comments )
Reply Link Flag
Like what?
Yahoo doesn't do anything well.
Posted by nicmart (1829 comments )
Link Flag
Time to reinvent
Yahoo's an insanely lousy company. Semel's only talent was cashing checks. Yang likes Chinese dictators, George Bush, and seems to honestly believe he was more than a lucky college student in the right place at the right time (he wasn't). Decker is a classic mealy-mouth, clueless, useless, expensive MBA.

It's time for Yahoo's Board to clean up this house before it topples over. Demand brilliant, ethical people build a better mouse-trap. Raise the standards: stop helping Chinese thugs and Yahoo Group-based pediophiles. Make it clear what is a natural search result from a paid listing. Dump the counter-productive "fee" on adding one's site into the Yahoo directory (is the benefit of a crappier directory really worth the small fees for those who will pay?).

In other words, it's time for Yahoo to either a) die (preferably sooner, rather than later -- with it's parts being sold off to anybody else), or b) grow up; become a mensch, and realize that inertia will only carry you so far.

Me, I'd like to see Yahoo's I/M and Flicr purchased by Google while maybe some other well-financed but pathetic site (ask.com maybe?) can purchase the search. But if Yahoo's Board -- and this one's gonna' have to come from the Boardroom; management is dug-in too deep to see clearly -- wants any hope it's pink-slip time for senior management.
Posted by michaelo1966 (159 comments )
Reply Link Flag
It would help if Yahoo stuff worked.
I work for an online school (Forgive any spelling mistakes and such. I am profoundly dyslexic/lexdisic. They only let me play with the technology, not teach).

We have had a very hard time getting our email to students who use Yahoo. I don't know how much money we have lost because Yahoo flushed email we sent to potential students.

When a technology company can't get their email to work, it is time for them to find a new business.
Posted by ralfthedog (1589 comments )
Reply Link Flag
PS.
We do not send uninsulated email, and the students did not find our email in the spam folder.
Posted by ralfthedog (1589 comments )
Link Flag
A Brand In Search Of A Product
Under the disastrous leadership of Semel (the Gil Amelio of Yahoo!)
this company squandered its immense resources by not actually
creating a product to go along with one of the most recognizable
names in high tech. It probably did not help that they also
colloborated with the Chinese Communist government to hand over
email contents either.

The best thing they can do now is just sell the brand name and
shut down their worthless organization.
Posted by aaydogan (123 comments )
Reply Link Flag
Yahoo's biggest problem was...
Yahoo's biggest problem was they were too scared of Microsoft, so everything they did was done in a way to not step on their toes. A quote from Yang I think it was, after MS trashed Netscape went something like this "never ever compete with Microsoft".

Google didn't give a toss about Microsoft and competed anyway. They just flew under the radar and then when the Redmond Beast turned around to kill them, it was too late. They were too big.

The future belongs to those who aim high. In the heart of Yahoo was fear. They had no faith.

Google even has the coloured balls to come up with Docs and Spreadsheets and then give it to the public for free.

You gotta love Google. The coloured balls actually have a meaning.
Posted by t8 (3716 comments )
Reply Link Flag
yup you are rite...but
But remember back then even netscape was worth something like google is valued today..So microsoft still can turn table...but still its difficult to beat them down..but i am sure microsoft should be doing something...
Posted by jaspal.m (52 comments )
Link Flag
Yahoo cannot never compete with Ms
Yahoo, unlikely Google, is not run by businessman,
not "engineering/software phds"

How do u expect it to step into Ms game and compete.

When it comes to technological direction, yahoo will be at a loss.
Posted by rslc (93 comments )
Link Flag
yahoo services work great for me
I love yahoo's services, especially the new yahoo mail. i rarely if ever have spam in my inbox, my yahoo photos is pretty cool, and i love their other sites. I still don't like the gmail interface but the other google services aren't too bad. picasa is nice. all in all i think yahoo is just as good, if not better in some areas than google. but that's just my .02
Posted by ITrogue (23 comments )
Reply Link Flag
New Yahoo Push Email for iPhone
Yahoo is the only provider to support the new iPhone with Push Email. It has some problems but is pretty nice. I think they have an opportunity NOW to provide over the air SYNC of Mail, Contacts and Calendar. Based on what I see here they will drop the ball and let Google or MS take the lead. Web Based Applications is the future and access from your phone is required. This is the direction I think they are a natural for. Will see.
Posted by d21mike (10 comments )
Link Flag
The trouble with Yahoo
I have been with Yahoo since the beginning, listed as Piligrande. I have made the statement to many that I didn't want anything else as Yahoo had everything I wanted or needed.
With a revised team recently hired that thinks they are great technicians, there is common talk on the net about "everything they fix something, they screw something up". I find that is the truth. The thing that worries me most is their continuing 'cut-off' or close down of IM service when the IM is inactive for a certain period of time. It drives me crazy when I am expecting a contact (friend) to come on-line, or go off-line, and I never get the voice notice I set up, simply because one of the super-smart techies thinks I'm not active and has cut me off. This has cost me money!!!!!
Posted by sargento (4 comments )
Reply Link Flag
Yes, but...
What about the new way websites will be rated? Yahoo will come upover Google then, because more people stay on Yahoo all day than stay on Google. Will be interesting to watch.
Posted by taffypaffy (3 comments )
Reply Link Flag
Yahooooooo!
The problem with Yahoo is that it is run by a bunch of yahooooss.....6 or 7 years ago, I was a big yahoo fan....I subscribed to several of their paid services as well as email, etc...I cancelled a service and they kept charging my credit card. I spent the better part of 3 days calling their corporate offices to try to find someone.... anyone that remotely cared about why I was calling. I got really frustrated and once I got somone on the phone, I cancelled everything. I was somewhat surprised when the lady was so cavalier about it all with a "who needs you attitude"....a couple of years later I met a VP of advertising sales at a seminar and spoke to him about how isolated his sales people were and that I had tried a number of times to get to someone about advertising...phone calls, voice mails and emails....all went unanswered. He was a nice enough guy, but was way too busy telling me just how great his company was especially his ad sales department and how high their average ad revenue per sales rep was making his department one of the most successful ad sales company ever...When I got home from Denver, I sold my yahoo stock at a nice profit and would never have anything to do with them again. Like so many rapidly successful tech companies, they became arrogant, cavalier and worst of all, believe everything they said about themselves as to how great they were...Michael Dell is another good example. When you get to the point you are more important than your customers, you are doomed to learn the hard lessons often way to late....need for a culture change as Yang said, is an understatement. They need a gian leaf blower to clean house and start over realizing how extremely valuable each and every customer and potential customer is. Arrogance has got to be up there with foolish pride as a deadly sine in business.
Posted by Gerry S (18 comments )
Reply Link Flag
Yahoo works for me too
I primarily use Yahoo email, and it's been reliable for me, compared to hotmail.

Although, I must say GMail interface seem a lot "snappier".

Yahoo needs better integration between it's components ie. consistent look and feel. I think Google does this better.

I'd like to see an email "whitelist" feature as a little bit of spam still manages to get through the current spam filter.

Just my 2c.
Posted by flemingho (23 comments )
Reply Link Flag
Yahoo is cool, Google Works
The issue with one of their more popular products, Yahoo Chat, is that it has been overrun by spambots. Logging in to a chatroom can take many, many attempts as queues fill with bot logins. In spite of the ease with which this could be solved, chat seems to be the poor stepchild at Yahoo.

Do a side by side search on yahoo and google and the relevance and timeliness of the results stands out.

I wish i had bought Yahoo stock when it was 23 cents a share, maybe ill have the opportunity again.
Posted by disco-legend-zeke (448 comments )
Reply Link Flag
I don't
use Yahoo it's a weak flawed program. Tried it once and left.....
Posted by krazyken44 (13 comments )
Reply Link Flag
 

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