Monday, February 26, 2007

Next Steps for Yahoo!: Right-Sizing for a Trimmer Market Role

In some ways it seems preposterous to be laying low the number one global destination Web site but that hasn't stopped Seeking Alpha's Eric Jackson from delivering a scathing review of Yahoo's financial performance in light of Yahoo's stock price sinking 7% for the past 2 years, compared to Google’s 151% increase. Jackson trashes just about every major Yahoo media initiative and lost deal-making opportunity in recent memory - not to mention CEO Terry Semel's half-billion=plus U.S. dollar compensation package over the past four years. Notably Jackson calls not just for the ouster of Semel but as well for the exit of six others from Yahoo's boardroom and steeper investments in R&D.

In other words Yahoo has become just another top-heavy media company trying to focus on old world dealmaking and brand advertising plays while Google creates infinite reserves of user-tailored page inventory from its search results pages and embedded ads on any Web page that wants to host them. It's not an entirely fair characterization of Yahoo, given some of its good moves as of late into social media, but it's fair enough as a reflection of how many traditional media companies have failed to put their money where the growth is. Put simply, acquiring and generating traditional content is not generating the needed page views to justify the investments that Yahoo has made in recent years leading to an overall decline in site traffic. It's going to be hard for Yahoo to make the kind of radical moves that Jackson suggests, but shareholders will be pushing them in that direction soon enough.

The hardest part of this shakeup will be that Yahoo's outlook on online media has been a major force in propping up many other media companies' hopes for being able to build traditional models for brand ad-supported content online - and in the process provide those with skills attached to those traditional methods and channels a comfortable career migration path. Ousting Semel and complicit board members is as much a slap in the face of the broader hopes of traditional media companies as much as it is for anyone at Yahoo in particular. Yahoo's significant traffic and membership assets are not going to disappear overnight, but the fundamental failure of Yahoo to fund growth in directions that build valuable user-defined contexts does not augur much for other media-centric portal plays. Here's hoping that the changes come in time to save many of Yahoo's best assets from becoming under-invested properties in a too-little-too-late belt-tightening exercise.
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