The De-Portalization of the Internet (aka What I Would Do If I Were Running Yahoo!)

Back in the first Internet era, it was all about amassing as large an audience as you could on your website. That's when Yahoo! was built and still to this day, Yahoo! is a "portal" where you can get almost anything you might want; email, chat, stock charts, news, instant messenger, shopping, jobs, etc, etc. Some of these services were bought instead of built, and after being bought they were integrated into Yahoo! adopting its look and feel and its URL structure. Today, according to comScore, Yahoo! has the largest Internet audience in the US, with 130 million people in the US visiting Yahoo! at least once a month.

But the first Internet era was at time when consumers weren't that comfortable with vastness of the web and they wanted a safe clean place where they could experience the web easily and comfortably. If AOL was the web on training wheels (it wasn't really the web at all), then Yahoo! was the web you graduated to when you were ready to shed your training wheels.

Google and others changed all of that. Today most consumers are comfortable with the web and all of its complexity. They simple type a search query into Google, Yahoo!, or some other search engine and off they go. In October, according to comScore, there were 6.8bn searches done in the US alone.

I don't have the data to prove it, but my guess is if you looked at the percent of all pageviews that are generated each month, a much smaller portion exist on the top 10 properties today than in 2000, at the height of the first Internet era.

Today, we shop directly with the Internet merchants we like or we use a shopping search engine to find what we want. We can look for jobs on Indeed, meet people on MySpace or Facebook, find roomates on Craigslist, and use Meebo for instant messaging. It's rarely true that the best of breed service exists on a "portal". The portals continue to buy best of breed services like Flickr,  but now they let the service continue to exist on the web with its own look and feel and URL structure.

The other thing that Google did to foster this de-portalization was introduce a monetization system that existed off its own network. Dave Winer says that "web 2.0" is really nothing more than "an aftermarket for Google". While I don't agree with that assessment at all, it does point out how critical an effective monetization system Adsense has been and how important that money has been to building a de-portalized web. What Adsense does is provide a revenue stream early on in the life of a new web service, long before the founders can focus on building their own monetization system. And that has led to a proliferation of high quality web services that do not ever need to end up on a portal.

So if you buy that the web has been de-portalized, what do you do if you run the largest portal in the world? I think its pretty simple actually. Yahoo! needs to offer its users and customers (advertisers) the ability to get the same experience they get on Yahoo! all over the web. They need to stop thinking about keeping their audience on Yahoo.com and start thinking about serving their audience wherever they are on the web. They need to stop thinking about selling ads on Yahoo.com and start thinking about selling ads all over the web.

I know that they are doing all of this, but I do not believe they have made a strategic decision to "de-portalize" their business model. For one, it will cost them in the short run. There are partnerships, deals, and relationships that produce millions of dollars in revenues that would go up in smoke if they really de-portalized with a vengeance. AOL faced the same issue, but much worse, with their ISP revenue and finally realized they had to give up on an unsustainable revenue stream in order to be a player on the web long term. I believe that Yahoo! needs to make that same kind of strategic decision. And I think their stock will react positively if they articulate it correctly.

So what are some concrete things they need to do? Well first, they need to improve their search service. On a de-portalized web, it all starts with search. I never hear of companies that have 80 percent of their traffic coming from Yahoo! I hear of companies all the time that have 80 percent of their traffic coming from Google. Yahoo! may have 28% of all Internet searches, but for some reason that I am not sure I completely understand, Yahoo! does not generate 28% of Internet traffic.

When most people talk about the fact that Yahoo! needs to improve its search system, they focus on the monetization piece (ie Panama). That's clearly critical as Google monetizes search something like 10x better than Yahoo! But I think Yahoo's search itself is inferior to Google's. I have tried to use Yahoo!'s search as much or more than Google's over the past year as I want to support Yahoo! as much as possible. But I do not get the results I want from Yahoo!, particularly on advanced searches or complex search queries. Yahoo! needs to make it's search product as good as Google's (ideally better) and they are not at that level today.

Yahoo! also needs to start building properties that exist outside the Yahoo.com orbit, like the new Mixd service they launched last week (but Mixd still has a yahoo.com URL).

And Yahoo! needs to get its YPN (Yahoo! Publisher Network) service in gear. They need to offer advertisers the ability to reach people when they are not on Yahoo! They've done some things recently, like the eBay partnership, that suggest they are headed in that direction. But I would urge them to move faster in this direction than they are moving now. It might mean buying some ad networks instead of just investing in them.

I believe AOL's purchase of Ad.com was the single best thing that AOL has done since launching AIM ten years ago. Yahoo! should look at that move closely. I think there's a lot to learn about what has happened to Ad.com inside of AOL.

These are some examples of the moves that Yahoo! needs to make in order to leverage their considerable assets onto a de-portalized web. They are not the only things they need to do, but this is not a McKinsey strategic plan. It's a blog post. And it's gotten too long already.

As always, I'd encourage you all to weigh in on this topic in the comments. I heard the other day from a reader who likes this blog because of the quality of the comments. That's all of you he likes. And I like you too! So let us all know what you think about this topic.

Comments

[Erik Schwartz]

I may have said enough on this already (being that both TechCrunch and ValleyWag are quoting me) but...

They need to focus on solving the problems of the users. Where they do that they kick Google's butt, where they don't they're getting killed. You need to step back and ask "what problem am I trying to solve"? The current TV Listings fiasco is the perfect example.

Why do most people use a TV listings site?

To find out what's on TV right now.

How do you know if you're successful?

The average time on the site is as SHORT as possible. If people are spending too much time on the site, then solving their true problem is taking too long.

If the primary feature of TV.yahoo.com is anything other than a grid that reads your zip code cookie and puts up your local default listings (or customized ones if you've done that) then you're focused on the wrong thing.

I'm using the TV Listings example because it's making a lot of noise right now, but Y! is screwing this up all over the place.

Does this require de-portalization? Perhaps, not necessarily though. It mostly requires a laserlike focus on the user's problems. This needs to be solved from the bottom up (the users) not the top down.

[carl rahn griffith]

a great read, thanks ... re: de-portalization - an interesting semantic; a current business plan of mine still (deliberately) uses the portal terminology simply for terms of familiarity - sure it also cites rss/web2.0, et al, but our industry is all too eager to abandon a terminology just as the understanding of it seeps into the lexicon of target consumers. it's an obsessive habit we all suffer from in this industry.

so, i have stuck with the portal term, for now. in the context of yahoo and their myriad of problems, i don't think this is where their problems reside. my yahoo is still my primary homepage - it does all i need, is real-time enough, neat and tidy and customisable enough for me. my yahoo email address is '[email protected]' - i was a very early adopter of yahoo (wish i'd been an early adopter of their stock back then, lol). it still "does what it says on the tin." to me, yahoo is still the 'good cop' of the www but, boy, has it lost its way in so many areas lately - i use their blogging service (360) but i have lost count regarding how long that's been in beta and how erratic it is.

they're suffering from the problems all such innovators get when they become a monolith; ISVs are not the best in the world at managed (human scale) growth, are they? i agree entirely with you that they need to make the yahoo brand a standard look/feel/quality of service and this can be as modular (de-portalized) as one wishes.

but, my yahoo home page portal is still relevant. for me and my business plan.

for now ;-)

[Mike]

For full disclosure, I work at Yahoo.

I agree with several posters here that we have not done a good enough job syndicating our massive ad network - what several people referred to as YPN. Keep in mind this is a priority that runs across business units here at the company - not just the folks selling graphical ads. For example, we have been very active in mobile monetization, an area in which I believe we are leading the field. The newspaper deal that we just announced will also serve to push out our listings business to non-Yahoo properties. But we could do more, I agree.

But I wanted to comment on Fred's observation about the dawn of de-portalization. Whether you agree with the premise that this is a trend that is here to stay, it's clear to me - and affirmed in my daily business - that the idea of a "homepage" where one can start off his web media consumption is not going away anytime soon. Going to 1 place where you can check mail, get weather, market information, get a quick laugh or amusement, and... search for something makes a lot of sense. And 140 million people - on top of the other homepages operated by our competitors - seem to agree. Even those users who set G or Y's simplified search homepage as their default homepage will still gravitate to a page or pages on the web - be it their local newspaper, MySpace page, etc. - to come back to after they are finished surfing for that specific thing they were looking for.

So while I tend to agree we could do more and better on monetization, I don't reach the same conclusion that this is a problem arising from a focus on the portal. You're never going to gain the kind of massive scale that Yahoo has without offering a "something for everyone" kind of experiece, at least as a core product offering. In fact, having amassed the largest audience online, if all we did was to enhance and create new monetization engines - which starts with Panama - you can see how increasing CPMs and RPSs by even a few basis points will result in material P&L impacts that go straight to the bottom line.

[Jimbo Wales]

Say it aint so, Fred!!! I thought you were a down to earth VC and you are a real estate magnate. What happened to your trips to the shake shack? Is this persona you present real?

$37.5 M. Village Townhouse
Blogger-Adventurer Fred Wilson Parts With 55-Foot-Wide House, But for How Much?
By Max Abelson


Kate Leonova/propertyshark.com
11 West 10th Street.
It’s been a hyperbolic year for tip-top Manhattan real estate. Such dread! Such anxious nostalgia for the freewheeling days of old!

But there has also been a load of record-breaking sales, and now the bubbly giddiness has spread downtown.

According to the real-estate database ROLEX, a compilation of listings shared by city brokerages, a 55-foot-wide townhouse at 11 West 10th has gone to contract. (Fifty-five feet is about a third of the width of an N.F.L. football field.)

The blogging venture capitalist Fred Wilson owns the 15,000-square-foot townhouse, which he listed in July with Debbie Korb at Sotheby’s International Realty. The asking price was $37.5 million.

If it closed near there, this 1847 mansion would be the most expensive single-family residence downtown.

“There’s nothing that compares,” said Prudential Douglas Elliman’s Jan Hashey. In 1996, Ms. Hashey co-brokered the $3.9 million deal between the Ladies Christian Union (which had owned the mansion since 1919) and the N.Y.U. School of Law. N.Y.U. sold it to Fred Wilson and his wife four years later, though sales figures aren’t available.

The mansion was built as a Greek Revival row house in the mid-19th century. Afterward, it became the Milbank Memorial Home, and then the Milbanks donated the place to the lady Christians.

“It was an amazing place,” Ms. Hashey said, “with young women from out of state in, you know, 10-by-eight-foot rooms. Thirty of them! Thirty bedrooms!”

But its look has changed. Ms. Hashey, who last saw the house two months ago, said that the celebrity architect David Piscuskas “redid every inch of the house” for the Wilsons. The place now has an elevator to navigate among the five floors, plus a playroom that’s “like a basketball court.”

There have been other famous architects around. In 1888, Beaux-Arts master Ernest Flagg designed the mansion’s east-side library, whose books were later donated by Irving Berlin.

Now it has a New World elegance, Ms. Hashey said. “Charm isn’t exactly the word. It’s not an old Village townhouse anymore.”

Besides owning one of downtown’s New World masterpieces, Mr. Wilson has a big Internet hobby. He runs an endearing blog called A VC—as in “a venture capitalist”—and he just recently ended a 15-month series of podcasts called “Positively 10th Street”—as in 11 West 10th Street.

In his blog bio, Mr. Wilson said that he works 70 hours per week at his firm, Union Square Ventures. Maybe he can scale that back if his deal closes near the asking price? He didn’t return calls to his office.

And when a reporter went to his home to ask about profiling the 159-year-old mansion, a woman who answered the door said: “Never. Absolutely not.”

[Todd]

The article didn't give any data to pack up the long-tailification of web usage, so I checked out Comscore to see just how usage is changing among the portals.

In August 2005 (farthest back I can get data), the 4 portals (Y!, MSN, AOL, Google) accounted for 36.4% of time spent on the web, compared to 34.1% in October 2006. Yahoo! and Google both gained time spent share in the period:

Yahoo! Sites 12.7% -> 14.5%
Time Warner Network 14.4% -> 11.0%
Microsoft Sites 8.3% -> 6.8%
Google Sites 1.0% -> 1.8%

The top 10 sites in terms of reach accounted for 41.4% of time spent in August 2005 and 41.4% now.

Wasn't there an equivalent prediction about portals losing influence once people got "found the sites they really wanted to use" back in 1998 or something? Then there was this study in 2001 that showed the opposite actually happened:
http://www.ecommercetimes.com/story/10222.html

[John K]

I don't think de-portalization matters.

Yahoo knows what they should do - and they are *trying* to do it: Create the biggest display ad / behavioural / demographically targeted ad network in the world.

I spell it out in a post on the re-org:

http://gotads.blogspot.com/2006/12/yahoo-reorg.html

The REAL problem with Yahoo is not that it's a portal, it's Yahoo's corporate culture and an inability to push stuff out the door fast enough.

Yahoo is a matrix managed mess, and Semel is not about to change it to move fast enough.

Yahoo's engineering strives for pristine platforms, but they TAKE TOO LONG to do anything.

Basically Yahoo is moving too ponderously to become the ad company they could become.

[Tom F]

I think Yahoo! need to be all about community (social). That would be their differentiator from Gogle and it can be easily articulated. You can't explain that we're the "de-portal" company.

So, everything they do must be about connecting people to a community. Delicious (and myweb) should be snapped into search as you suggest. Most Y! visitors would use it without knowing what delicious even is. And every Y! service should make it easy to find and interact with other people in that context or leverage a community in some way. We know that a community can make everything you do on Y! more relevant, easier and valuable. Y! Answers is a fine example.

Yahoo!...the community company. That, however, is not something Semel's DNA is wired to do. He's a we-own-content company guy.

Last thought. That's why buying Facebook could make sense, as long as they bet the farm on community.

[Colin Henderson]

Dave Winer wrote a few months ago about Googles core strength is "send them away and they will come back". His point was that people have enough confidence with Google that they are quite happy to click off their search or other Google properties, but that same confidence brings them back next time they want to do something.

I would add demographic shifts mean GenX & GenY will not be satisfied to live inside the constraints of a Yahoo/AOL/MSN only - they want to see what else is out there.

[Jonathan R]

Simply be definition, everyone who is commenting here are 'expert' web users. The majority of web users are not so, as demonstrated from user studies i've read, as well as search query logs. The vast proportion of search queries are woefully underspecified

One prior comment pointed out that 140 million people still use a homepage, and Steve Balmers superb quote "as Ballmer said the other day, "how crazy is it that the more words you type into a search engine the worse the results get?"

In my humble opinion, the question is how/if Y! matures as the Web on a whole matures (already, multi term queries are growing in popularity, a coarse metric of this for sure), and whether Y (or G!) addresses Ballmer's observation.

[Dustin]

A complete overhaul could not happen though. What about all those novice users out there who still are scared by the entire process of the Internet? Yahoo! as it stands not is there for them.

[Search Engines WEB]

Would these same (Yahoo) suggestions also apply to MSN?