So, everyone seems to be chapping Yahoo's hide these days, including even Yahoo itself -- or at least one very audible Jerry Maguire over there. i guess i'm no exception; last week at at the Web 2.0 conference i was also giving them some grief -- but mainly i was just questioning their ridiculously slow moves on acquisition strategy (Bix and other previous 2-digit MM deals aside, Yahoo hasn't really pulled the trigger on anything large in quite some time. The lack of a large social media property / blogging platform glares rather obviously, given Google's Blogger, Microsoft's MSN Spaces, and Fox's MySpace. But i digress... we'll cover the plodding acquisition efforts later).
Even though i think they need to get off the crapper & buy something -- either Facebook or SixApart, possibly both -- i certainly don't agree with all the folks piling on that Yahoo is dead. Far from it. There's really just one major thing that Yahoo needs to fix: MONETIZATION.
As Fred Wilson points out in his recent graphs, Yahoo is still #1 in both users & page views. But unlike Fred, i agree with Mark Pincus and Randy Befumo that they're really not in as bad a shape as it seems. They just need to fix the monetization issue -- either with Panama in the short-term, or with CPA-based costing for advertising in the long-term. Altho they may lose some share to Google / others over the next few years, they're still in good shape with the eyeballs & page views.
HOWEVER, the monetization issue is killing them -- both in terms of their ability to make good cash flow from their own traffic, and even more importantly it's killing them in terms of their ability to negotiate partnerships and acquisitions. as long as Google can monetize better than Yahoo, they can always pay more for acquisition or partnership deals -- or else, they can choose to jack up the price on any deal they think Yahoo might want. this is probably why the Facebook deal has been taking forever, and why it hasn't happened yet. FB doesn't have to be in a hurry, and as long as Yahoo's monetization sucketh compared to the GOOG, they'll keep making Y! have to think twice about paying big $$$ to beat them out in any deal.
so what's the solution? well, i don't know the entire secret to solving the issues over there, but somehow i don't think Brad's memo is the real answer. maybe he's right on a few points, but "FOCUS" isn't necessarily the problem -- if the monetization were working better, they could buy any content property they want under the sun, and make the deal work. in fact, i'd say their diversity of content is actually a strength -- they're not dependent on any one income stream, and they can offer a variety of content properties to users to keep them coming back. (and btw, if a diverse content portal is such a crappy strategy, then tell me why Google is trying to copy it so damn fast, eh? altho they ain't doing so hot on that front either).
so now that i've wasted as much time writing as Brad did, what's my solution?
reposting from Fred's comments, here are the 3 things i'd suggest Yahoo do to get back on track:
- short-term: fix CPC-based monetization using Panama... make the most of what you got.
- long-term: implement CPA-based monetization, using pricing & point-of-txn data from Y! Stores, eBay, & PayPal (nice deal there, btw)
- now & in the future: STEP ON THE F***ING GAS ON THE DEALS, GUYS! do small acquisitions (<$50M) once or twice a month, do a large deal ($100-500M) every quarter, and bet big once a year ($1-2B+). buy LOTS of stuff, and do it FASTER -- then distribute it to your worldwide audience & monetize it using your own advertising engines. so far, Yahoo has only done a good job on the small stuff. they've whiffed on most other big deals since Overture.
this last point should be obvious -- not just to Yahoo, but also to Google, Microsoft, eBay, Amazon, AOL, FIM/NewsCorp, IAC, Apple, and every other public internet/media company worth >$10B. if you haven't figured it out by now, i'll give you the playbook -- you have millions users, you have billions in cash, and for the most part you've got functioning businesses & positive cashflow.
what don't you have? innovation. maybe Google is doing a decent job at it, and Apple can pull an iPod out of its ass once every ten years, but the rest of you? you're huge, inefficient bureaucracies that suck the life out of any entrepreneur worth his/her salt. we wouldn't stay there for more than a year if it weren't for rising stock prices, earnout deals, or incentive clauses.
that's right, surprise surprise -- in order to get innovation at large public companies, most times you have to pay for it. and guess what? if you DO pay for it, you can get a LOT OF IT. thank god for capitalism, entrepreneurship, and lots of geeks who can make cool shit. these days Silicon Valley and plenty of other places are churning out great little companies & products (ok, sometimes just features) at a mile-a-minute. why? because it doesn't cost that much to build stuff these days, and if they get some traction on either users or revenue, there are at least 10 companies out there that might buy it.
... and one of them could just be Yahoo.