The headlines blare an age-old story, where the designated grown-up brought in to grow the high-flying young company has been sacked, replaced by the original founder. Can Jerry Yang restore Yahoo! to its glory days? It worked for Apple, but will Yahoo! be equally fortunate?
I think that question is flawed.
Yahoo! is actually a highly successful company that has one big problem—it’s not Google. I once thought that this was a problem only in the financial markets. I thought that Yahoo!’s management knew that it could be highly successful without beating Google at its own game. But when the CEO is forced out, that shows you that this is more than an image problem—it’s affecting the company’s strategy.
Now I am not smart enough to know whether Terry Semel was doing a good job or a bad job. But I do know that Yahoo! is a winning company with tremendous assets. And they’ve beaten Google in several important areas, with FlickR and Yahoo! Answers. And while they are a distant #2 in search, they have maintained that position when companies like Microsoft have seen their share eroded significantly. Yahoo! looks like an underachiever only when compared to Google.
Now that doesn’t mean that Yahoo! can’t make more of its assets than it does. I have always wondered why Yahoo! wasn’t the first to a deeper personalized search, but Microsoft beat it there in paid search and Google is quickly outstripping Yahoo! in organic search, as both competitors create search results that are customized based on what is known about the searcher. Because Yahoo! has a much deeper relationship with many of its searchers than its competitors do (because of its lead in mail and other Internet content properties), you’d think that it would have more personal information at its disposal and could do a better job in personalization.
And perhaps it will. Yahoo! is a strong company right now but it suffers from having even greater potential. Unfortunately, I am reminded of baseball manager Casey Stengel, who once remarked that “Potential means you ain’t done nothing yet.” Yahoo! has done a lot, but it suffers in comparison to Google. To me, we’d be better off evaluating Yahoo! on its own merits rather than as Google’s kid brother. There’s plenty of room to succeed on the Internet without being Google, and Google hasn’t shown a strong ability to move beyond search yet. No one should underestimate Google, but I think we are in a period where we are underestimating the value of what Yahoo! does well.
So often we cover these companies as though business is winner-take-all. It’s not. Certainly, anyone would rather be #1 than #2, but if the next CEO of Yahoo! accepts being #2 to Google in search (while still investing and improving there), while taking advantage of Yahoo!’s other competencies, we might all start to see that Yahoo! has a pretty nice business going. Maybe this is the perfect time for someone new to take the reigns because expectations have now been dampened. The conventional wisdom is that Yahoo! has failed because it’s not Google. Maybe now it can be the best Yahoo! it can be.
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