Yahoo!: Yesterdays News?

    October 12, 2006

Google’s prowess continues to rise at a feverish pace among Internet consumers as well as in the realm of advertising. Meanwhile, Yahoo’s future in search and social networking remains in question.

Try to remember the last time you saw Yahoo mentioned in any kind of significant e-business headline.

Go ahead, I’ll wait.

Relevant news concerning the search industry and ensuing advertising partnerships all seem to point toward Google these days. Consequently, Yahoo continues to slip out of the public consciousness at a breakneck pace.

Consider, if you will, the very recent and much publicized Google acquisition of YouTube. According to the New York Times, Yahoo was close to finalizing that deal weeks ago until negotiations came to a screeching halt due to concerns over the handling of copyrighted material.

The Times goes on to document other lucrative opportunities Google has snatched from underneath Yahoo’s unsuspecting nose. Not the least of which was a $900 million advertising deal the company inked with MySpace in August, giving the search giant an enormous presence in the social networking market.

But this next tidbit has to be the icing on the cake.

At the time of this report, a bug in the Yahoo! Search Marketing interface has left many of the company’s advertising partners without any kind of functionality for nearly three whole days! According to Search Engine Roundtable, Yahoo’s technical support still has no estimated date or time frame for resolving the problem.

Does this sound like a company headed in the right direction?

Of course, the company is not completely without positives. Information Week reports in a recent article that J.D. Power and Associates ranked Yahoo! Messenger at the top of the list of instant messaging providers.

This marks the second year in a row that Yahoo’s IM client has been named number one in the J.D. Power rankings.

However, Google doesn’t plan to take a back seat in the Instant Messaging market for much longer.

The company’s recent acquisition for former AOL Instant Messenger lead developer Justin Uberti has many industry insiders speculating on whether AIM and Google Talk have future plans for joint development of a new instant messaging service.

The two companies are already working on a project to integrate communication between the two instant messaging clients.

With all that being said, a simpler comparison may lie in the sheer volume of monetary assets between the two companies.

Google boasts a resume of $11 billion in cash and a total value of $131 billion.

“In poker terms, Google is the dominating chip stack,” comments RBC Capital Markets analyst Jordan Rohan in the New York Times.

Conversely, Yahoo holds $4 billion in cash and carries a total value of $34 billion, which would appear to position the company as the short stack at the table.

So what does Yahoo have to do in order to separate itself and step out of Google’s ever-growing shadow?

Technology news this week is laden with spicy rumors about Yahoo’s prospective acquisition of Facebook, potentially in response to Google’s deal with YouTube.

But is that really the answer to all of the questions surrounding the company’s current direction?

New York Times columnist Saul Hansell offers an interesting viewpoint on Yahoo’s corporate focus. He points out that, “Yahoo may well be slipping because of the sheer scope of its ambitions.”

He goes to elaborate, “It competes in news with CNN, in sports with ESPN, in e-mail with Microsoft, in instant messaging with AOL, in social networking with MySpace, and of course in searching with Google. And it does so in dozens of countries.”

With the company’s external focus already somewhat diluted, the internal structure seems to be suffering as well.

Hansell echoes the struggle by noting, “Current and former Yahoo employees say the company has been bogged down by bureaucracy and internal squabbling.”

Citing a specific example, Hansell goes on to add, “For example, the media group, which handles video programming, and the search group, which has a system to find videos on the Web, both wanted to offer a service for users to upload their own video clips. The search group won, but the delay allowed YouTube, a start-up, to dominate the market.”

The laundry list of troubles continues on as Hansell reports, “Companies that try to do deals with Yahoo also say they find it to be slow, demanding and inconsistent in negotiations.”

How can Yahoo expect to survive in today’s highly competitive markets if the company can’t even manage to properly negotiate partnership agreements?

Perhaps it’s time for Yahoo to stop hiding behind their trademark “smiley face” logo, and quit pretending that Google isn’t making a mockery of them at every turn. It’s clear to most everyone that the company has fundamental flaws in executing its business strategy, due perhaps in no small part to conflicts within the company’s internal infrastructure.

So the question remains: Can Yahoo rebound and become a big-time player in the online realm again?

Only time will tell, but the answer is uncertain at best.

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Joe is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.