

A 4 point plan to save Yahoo - jdavid

Since moving to the valley I have begun to appreciate what Yahoo! is to the web.  When I was young I might have seen yahoo as a search engine or a competitor to AOL, and even today Yahoo holds some of the coolest companies like Delicious, and Flickr.  Yahoo, unlike Microsoft and Google has a simple brand, a brand that people like and a brand that people know.  Their brand is like internet gold, almost a Disney of sorts for internet content, and that is their problem.  Disney is a world wide brand but today, they find themselves competing head to head with other animation studios, like Yahoo! tries to compete with Google, if only Yahoo! would stop trying to compete with Google on PageRank, they might actually do well.  Yahoo needs to work with what they have, 1 billion users, a friendly and trustworthy brand, and access to some of the webs most innovative startups.  Microsoft knows this and arguably wanted to buy Yahoo!s eyeballs and brand, so we know that is Yahoo’s value, but maybe Yahoo has more?<p>So to help Yahoo capitalize on what it has I have a few things I would try.<p>1.	Re monetize Flickr.<p>There are several photo sites that earn more revenue per user than Flickr, sites like SmugMug.  SmugMug and Flickr differ in that SmugMug enables an ecosystem of photographers to earn a living, where Flickr is more of a sharing site.  Flickr has more in common with Wikipedia, and to follow the comparison, SmugMug would be like Wikia.  The point is that SmugMug capitalizes better on their users with accounts that range between $40-$150 a year in cost.  Flickr also misses out on the photobucket revenue play, and the stock photo play that iStockPhoto, GettyImages and other stock photo sites play off of.  A perfect Flickr would compete at scale with all of these markets.  With 6+ million photos uploaded every day, Flickr could surely monetize better.<p>2.	Own the Living Room<p>There are a number of ways that yahoo could signal they are a growth company, and one such way would be to buy a nearly recession proof company like Netflix that makes a habit of friendly interfaces, great customer services, and improving video selection and access.  Sure Hulu launched and a number of other internet video sites, but Netflix has paying customers, is involved in revenue positive independent films and could draw the attention of what Mark Cuban is doing with content.  Buying Netflix gives Yahoo access to software running on XBOX 360, the PS3 and their own box.<p>3.	Partner with IBM<p>60-70% of IBMs revenue is based on services and in a recession services take a hit.  IBM is a cash strong company with a ton of expertise in making stuff work.  IBM also lacks in content distribution channels.  IBM loves the idea of SecondLife, virtual world, virtual goods, and how that relates to the enterprise.  Yahoo and IBM could make a great team and buffer Yahoo from being bought by Google or Microsoft; it would create a trinary web market.  IBMs hardware expertise would also play well with the Netflix set top box.  Yahoo and IBM also have similar brand reputations, with Yahoo being more consumer, and IBM being more enterprise.<p>4.	buy Opera, partner with Nintendo<p>Microsoft has IE, Google has FF, and Chrome, Yahoo should buy Opera just to square the field.  I believe IBM would support this too.  Opera is also the largest mobile web browser, and is on the Nintendo Wii.  Next, Yahoo should sign an exclusive distribution play with Nintendo to deliver Social Flash games via the Wii.  Yahoo has Y!OS and 1 billion users to promote the Wii’s social and casual gaming status, and Yahoo has the ability to manage a safe relationship with cool Flash games into the living room via the Wii.  Buying Opera would allow Yahoo to offer Flash via Javascript full access to the Wiimote’s functionality, and Opera has a history of pushing the browser experience.  I think Opera would enjoy the chance at the living room.<p>So that is my 4 point plan to save Yahoo.  Pulling all of these off ASAP would be idea, but pulling 1 or two off would still create billions of dollars in revenue a year for Yahoo!, and they are plays that are not in direct competition with Google.  They are also good sources of revenue in a recession, games and entertainment typically do well and no one has won the living room like Apple has won music, this is Yahoo!’s chance.
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markessien
This is silly. You have a company that is flawed by being a bit unfocused, and
your suggestion involves them expanding even more, and spreading themselves
even thinner. That would be classic fail.

Yahoo is fine and it does not need to do anything about money. Yahoo makes
money and that's all that is needed. Yahoo should continue to develop it's
strategy of acquiring more users, particularly in the developing world. If
yahoo can control a billion users, it does not need to do much.

Yahoo is a massive force on the internet, and a score of different cutthroat
capitalists are trying to force it to its knees by fearmongering, after which
they will take over the company and control those users. Yahoo is right to
resist.

So long Yahoo is running in profit, it does not need to do anything much apart
from cut costs and cut any dead projects. There is nothing to save here, it's
still number 1 on the internet.

~~~
jdavid
i am just asking Yahoo to draw revenue from what they are GOOD at. They are a
content distributor with a Great brand. They are not a search engine, and they
do not have a fantastic Ad business. This would allow them to generate revenue
off of the things that they can Win at without much competition.

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jbyers
Here's a different four point plan for Yahoo!

1\. Cut costs to the bone. Ruthlessly reduce headcount, non-core services, and
the executive roster. Go until Wall Street thinks you're insane, then cut a
bit more for good measure. I'm talking 30% layoffs in one shot, with strong
incentives for the remaining top talent to stick around. Forget about playing
to the interests of Silicon Valley startups and idealogues. Sell or shutter
the acquisitions that don't have a path to material revenue contribution. Fire
the consultants. Put a small team of passionate executives in the driver's
seat, top up their options, and fire the rest. Make it clear that bureaucracy,
infighting, and complacency are over.

2\. Replace Jerry Yang with a leader who is aggressive, fearless, and given a
long leash by the board to steer Yahoo! to a new corporate identity. I
actually think Jerry is a good leader, I just believe he's in an impossible
situation and needs to be freed from Yahoo! for his and the company's benefit.
Ideally promote from within someone who has the passion and vision to lead,
maybe paired with an outsider who the axe-man.

3\. Explore any deal that boosts monetization of Yahoo's massive traffic.
Swallow pride, and get solidly in the black. The levers are well within reach,
the Yahoo! brand is still a tremendous force on the Internet, and the company
sits atop a formidable set of services. Sidle up to your enemies if they'll
help you achieve profitability.

4\. Rediscover Yahoo's soul. While it would be nice to do this ahead of the
unpleasant cuts described above, I don't think it's possible. This will be
possible when the company is unencumbered by historical baggage, unburdened by
a tremendously depressed stock price, and full of people excited to figure out
together what the next chapter is for the company. The new soul of Yahoo! will
not be found in a consultant's report, executive talking points, a set of
loosely-joined web 2.0 startups.

Disclaimer: I am a Yahoo! shareholder.

~~~
jdavid
Way to be someone that contributes to the 80s like recession, in a bullish
economy these tactics will work, but in a down economy firing people will not
boost the stock price. It will not improve Yahoo's brand, and it will hardly
help them. You do not want to fire people in a bear economy unless you have
to. Look at the 80s and stock prices correlated with layoffs and you will see
that it hardly effects the stock price.

I firmly disagree with your position, and I don't want Yahoo to fire away who
it is, to create some short term value that can easily be bought by some
company that wants to spam Yahoo! traffic. That is not a good fit, and you are
not going to get Jerry Yang to do it, nor the board. Yahoo provides critical
leadership in the internet game, and having them absorbed by another internet
company like MS or Google is not good for the ecosystem.

IBM does not have a strong internet play, and since they restructured in the
90s, they know how to do it. They also know that you generally need to
radically shift a companies culture and IBM is involved in building community.
IBM would be a GREAT partner to lead Yahoo through this, and maybe a great
buyer of Yahoo Stock.

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mattmaroon
I don't think Flickr is big enough to make much impact on their bottom line.
Even if they doubled revenues, it'd still be a drop in the bucket.

Netflix has its own troubles, but might be a good buy for them. Way outside of
their core competency, but moving toward it at least. They're probably still
wary of trying to become a media company since that's what drove them to where
they are now. They bought one V.O.D. company, and the only people who
benefited from that were Mark Cuban and Todd Wagner.

Not sure what exactly you want them to do with IBM. Any suggestions as to how
they could partner? I don't see much synergy there.

Why would Nintendo let someone else deliver flash games on their platform?
Nintendo most certainly doesn't need anyone's help there. If they decide to go
that route, they'll run it themselves. I expect them to do some Xbox Live
Arcade type stuff at some point.

Yahoo's current strategy of opening up might actually be good and is much more
in line with their core competencies. Branching off into goofy tangential
media stuff (as a result of hiring a Hollywood CEO) is what got them into this
pickle.

~~~
jdavid
unfortunately Yahoo has yet to learn that 'Caja' sucks. I just talked to some
people at myspace yesterday and they are pulling Caja, just as Google Gadgets
did and anyone else who has played with the technology. It really makes app
development a pain, and non conforming to the other networks, so you don't
have write once tweek everywhere, but you have rewrite from line 1, and oh,
don't use prototype, jquery, dojo, or any other javascript productivity tool.

right now Yahoo!s brand identity is clashing with them being able to come out
of the gate strong on the social platform, and developers will not be able to
take their apps and just have them run on yahoo, they will have the choice to
either edge and grow revenue on myspace, hi5, and orkut, or to stop and
rewrite for yahoo. I suspect that devs will choose to grow first on the other
networks and then take their time porting to yahoo.

Nintendo put a browser with flash in the Wii for a reason, now its time to
give them a profit motive. Yahoo! can do the content distrobution, and no,
Nintendo can not do that as well as Yahoo!.

IBM/Yahoo, just look at the 80s/90s with IBM and how they transformed, that is
the key to my point and i have responded in other posts.

~~~
mattmaroon
Nintendo cannot distribute games as well as Yahoo? That's just crazy talk.

Why would Wii customers prefer an in-browser flash game over a non-browser
game? How many Wii owners even bought the browser?

They'd be infinitely better off just selling all games through the Nintendo
Store, which they do now. Maybe allowing people to develop for Flash there
would be a great idea. But making them go through the browser and offering
part of the profits to Yahoo is not.

I don't know what Caja is, but Flickr just doesn't have the revenue to be a
big deal for Yahoo. It was a sound acquisition, but it's still a small % of
their overall profits. Even if you doubled it without increasing costs at all,
it's a long way from mattering.

I'm still missing how they have any synergy at all with IBM. IBM doesn't even
sell PCs anymore. You want them to integrate Yahoo on voting machines and ATMs
or something?

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pedalpete
Though I like your Opera angle, particularly with Opera's strength in mobile.
Not that i disagree with the rest of your ideas, but they just don't seem to
really shout 'strategy', and I gotta say I don't really understand your
'Partner with IBM' plan.

I suspect Flickr's strength is specifically that it isn't monetized like
SmugMug. They don't need to copy another service, they need to innovate and
continue the growth of that platform. Though that may mean stronger
monetization of the business, I hope it would not mean simply copying another
service.

With respect to 'Owning the Living Room', I suspect that this is so far from
there strengths as to be unrealistic with the economics currently the way they
are. Sure you could argue the same about Google, but they've got the cash to
go out and make a mobile OS and give it a go. Yahoo! arguably can't take that
risk on a market which is not as large as mobile.

Just my thoughts, but I think the Opera angle is a pretty good one.

~~~
jwilliams
> I gotta say I don't really understand your 'Partner with IBM' plan.

Yeah. That one sticks out at me too - the problem is that it might be
beneficial in some respects to Yahoo, but IBM don't really have anything to
gain out of it - If IBM partners with someone it needs to be a
synergy/feedback loop with their hardware/software revenue streams.

~~~
jdavid
IBM reinvented itself in the 80s and 90s and came back strong with a
drastically different culture. It is probably one of the coolest comeback
stories second to Apple. The paring is that IBM does not have a content or
distribution play opportunity. I also think 'social' is going to go enterprise
and b2b in the next 5 years. So an IBM-Yahoo deal would give IBM a consumer
delivery leg, and Yahoo could serve as social and internet ecosystem experts
for intranet, and b2b social systems engineering. If you really think about
it, IBM and Yahoo have a lot to offer each other, that Google and MS don't.

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trapper
I respectfully disagree. For what it's worth:

The entire yahoo should focus on building a better advertising system than
google. I believe they have the tools to do it. Google pushes ads to you by
crawling your site and determining what ads should be displayed. What I want,
and I believe others would too, is a method of pulling ads to your site
completely programmatically. To do this, we would need to be able to classify
links, and this is where the power of tagging comes in. My four steps:

1\. Programmatic "pull" advertising retrieval with complete control. 2\.
Dynamic ads for single-page applications. 3\. Integrate delicious into yahoo
itself (e.g. have "tag this" buttons for each search result, and show tag
clouds/related tags in search). Make these tags easily obtainable in real time
for any website that wants it, which would be required for the "pull" model to
work. 4\. Integrate flickr into yahoo for the same reasons.

Advertisers will switch, because even as lower rates are on yahoo currently,
you will have greater contextual ads and greater results with site visitors.
You know your site better than google!

Advertisers want to be working on a mixed model. Google provides a push
advertising model. Yahoo could provide a mixed model, providing push + pull at
the sites discretion. I believe if they do this they could take back the lead.
And, they have a unique advantage at the moment: delicious and flickr.

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ojbyrne
As a big flickr fan, I'd hate to see it "monetized." At least, not beyond
raising the price of a Pro membership. I'd have no problem paying something in
the range of $40-80 (though I think the lower part of that range would
probably make more sense in terms of the market).

~~~
jdavid
right now yahoo has no store front feature which is why sumgMug charges $150.
Adding a store front and allowing custom skins for your flickr page would
offer more value to photographers and not require raising rates on pro
accounts. I would also raise the price on the pro account from $20-$25, people
would still pay it, and its still the best price on the web.

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swombat
A better option, which seems to be what Yahoo is already doing with their open
apis and such, would be to aim to become a de-facto platform for people to
build new start-ups - to expand the market of "creating an online business"
and be right in the middle of that market.

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Tichy
Why does Google have FF, just because Google search is the default on the
search box? I always change mine to Yahoo.

~~~
jdavid
the Mozilla foundation made $250million from the Google search bar and spread
FF campaign.

~~~
Tichy
But that still doesn't imply that Google owns Mozilla, or does it? In fact,
does Google own all the websites that make money off Google Adwords? I hope
not.

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pclark
you seem to think all these companies will welcome Yahoo with welcome arms.
You're dreaming.

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rms
Does anyone think that Yahoo's stock is undervalued?

~~~
markessien
Yahoos stock has bottomed out, and I'm right now going to buy a few hundred
worth. Thanks for reminding me.

~~~
comatose_kid
Why do you think Yahoo's stock has bottomed out? Forward P/E is still pretty
stratospheric in this market, and you're buying after the Dow has gone up by
almost 900 points in a single day.

~~~
markessien
Because Yahoo is a huge company owning the most popular websites on the
planet, and the current price is at it's current level because of a slew of
bad news and negative press. Everyone is looking at Yahoo stock and waiting
for the right moment to start buying. When it starts, it will be a gold rush
all the way back to 20, when it will stabilize and hang on for a bit.

In any case, Yahoo is going to get a few more takeover bids or hostile
takeovers or so on, and those will drive the price back up.

Yahoo is at it's price because of negative news. Not because of a fundamental
difference in the company. And the old price was not inflated because of good
news either. So it's fair to say that the price will recover at some point. It
may take a while, but it's a pretty safe investment.

I mean, you think the company growing at the largest rate in the developing
world is going to have a permanently depressed stock price for the next 2
years?

~~~
comatose_kid
How do you figure it is growing at the largest rate? And what do you mean by
growing? User base, revenues, profits?

