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The Truth From Inside Yahoo!
Brad Garlinghouse's memo is worth reading if you do business with Yahoo!, work for them, own their stock, or care about competition at the top of the Internet pyramid.
Having sold a few companies to Yahoo! and watched another sell out before we could invest, I found this part of the memo to be particularly true.
We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company.
• YME vs. Musicmatch
• Flickr vs. Photos
• YMG video vs. Search video
• Deli.cio.us vs. myweb
• Messenger and plug-ins vs. Sidebar and widgets
• Social media vs. 360 and Groups
• Front page vs. YMG
• Global strategy from BU'vs. Global strategy from Int'l
When Delicious was sold to Yahoo! I hoped and expected that they would merge delicious and myweb, at least the backends, and ideally the entire services into a single social bookmarking system they could propogate across their entire network, particularly search. It never happened and I think they missed a huge opportunity, in fact the opportunity that Delicious presented them.
It appears that Yahoo! likes to hedge its bets. But that means they don't have confidence that they can make the right ones.
Brad argues that Yahoo! must make the tough calls:
Kill the redundancies. Align a set of new BU's so that they are not competing against each other. Search focuses on search. Social media aligns with community and communications. No competing owners for Video, Photos, etc. And Front Page becomes Switzerland. This will be a delicate exercise -- decentralization can create inefficiencies, but I believe we can find the right balance.
It's good advice and I hope they listen to Brad.
Comments (9) | Posted November 18, 2006 in Venture Capital and Technology
Comments
It seems like Yahoo is taking a strategy like what Cisco took during the late 90s and early 2000 for acquisitions. Cisco made several acquisitions and offered several competing products, for instance they had two different caching products from two different acquisitions. It took Cisco over 2 years to integrate them. Yahoo would need to integrate it's offerings since it confuses the consumer and does not send a clear message. Google seems to be merging all their acquisitions into their core strategy (for instance writely was merged with google spreadsheet).
Posted by: Techjobber | Nov 19, 2006 12:09:06 AM
Looks like yahoo might prefer to take a bit of IAC approach, of owning seperate successul web brands, than immediately squeeze them into the Y! brand and stay holistic.
Perhaps the strength of Flickr and del.ici.us brands (btw, flickr results are shown on yahoo image search)which derives from their individual/underground/indie spirit is too precious to lose at this stage?
Tough question - and as Brad says, it's kinda a bet.
Another option is that Yahoo didn't buy Flickr/delicious in order to turn their users into Yahoo users - and therefore they still want to keep those redundancies.
Posted by: Uri L. | Nov 19, 2006 7:22:06 AM
I agree wth Uri.
I think that working on identity of internet user cannot be done under a single brand because it's too scary for the user.
It's kind of Evil.
But again maybe I am wrong.
Posted by: leafar | Nov 19, 2006 8:28:00 AM
I am an ex Y!, I left at the very peak of the last bubble (at the end of 1999).
I think the BIGGEST problem they have is ownership. There was a time if you wanted to do something with Y! Sports, you get to Tonya Antonucci, and you convince her, and it was a done deal. Finance, it was Mike Reilly. Travel it was Susan Briggs. Communities, it was Doug Hirsch. My Y! it was Henry Sohn (and later Scott Gatz). Commerce, it was John Briggs. Entertainment and Games, it was me.
There was a core group (the SRP group) whose members had real ownership for each of the properties.
About the time I left they added several layers of infrastructure, There were GM's and a "pod" structure. All of a sudden people were worried about how big there groups were and "use it or lose it headcount". The buck no longer stopped with one person.
When I started at Y! the boast was how few resources it took build and run a product. When I left the boast was how big your group headcount was.
Posted by: Erik Schwartz | Nov 19, 2006 9:09:42 AM
I like IAC approach and think Y! is on the good way; would you prefer del.icio.us and Flickr end up like GeoCities. They keep these brands separate from Y! so that they can protect their soul and energy. At the same time, Y! adopts the goods of their acquisitions into their core products. And market their overlapping services to different audiences.
I think, Yahoo's problem is different.
Posted by: Emre Sokullu | Nov 19, 2006 9:13:50 AM
Many questions...
Many ideas...
Many suggestions...
Many recommendations...
Much head scratching and teeth gnashing...
One real answer...a new, better, “target their actual traits and characteristics instead of the words they type into little search boxes” PPC ad platform...that Google; thanks to pending patent 11/250,908; can’t get its hands on...
One real answer...
Target people. Not words.
Think Keytraits. Not Keywords.
Think paid match. Not paid search.
Posted by: Steve M. | Nov 19, 2006 10:35:19 AM
This memo suggests that much more clarity is needed from Yahoo's CEO. It appears to be time for Terry Semel to retire and I would suggest that Susan Decker take over.
Jerry Yang and David Filo are critical at this crossroads for Yahoo!:
http://breakoutperformance.blogspot.com/2006/11/open-letter-to-jerry-yang-and-david.html
Cheers,
Eric
Posted by: Eric Jackson | Nov 19, 2006 1:32:55 PM
I had a different reaction to the memo. Mine was "Brad doesn't like peanut butter? How can you not like peanut butter!?" Granted if your allergic, but he doesn't claim to be allergic, he just claims to hate it. He might like that new Almond Butter they make. Man, that stuff is out of this world. It's pricey though. I'm starting to sound like a few minutes with Andy Rooney....that can't be a good sign.
Posted by: Dick Costolo | Nov 19, 2006 1:54:44 PM
A note on Yahoo: if you want a look into how the industry as a whole is doing, look at Yahoo, their revenues line up perfectly with the market and if you look at their P/E changes it can show a solid insight into overall market beliefs...
Anywhoo on top, IAC is great but they are fundamentally a commerce company, yahoo is a media company. Media company makes money on page views, linking it together would build agreggate page views and advertising.
There are 2 types of acquisitions these days: a) Get Eyeballs or b) add features...Yahoo has made smart acquisitions that could hit both categories, but alas they have not done so but that was never in the game plan at Yahoo much anyway...if you want to look at integration look at MSN, if you want to look at innovation look at ASK, if you want to look at simplicity look at GOOG, if you want to look at floundering look at AOL...if you want to look at media it is YHOO
Posted by: Rich Hecker | Nov 19, 2006 7:44:58 PM
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