pyehouse
12Sep/110

AOL Yahoo Merger, Doing It Wrong Online

According to a Guardian post, an AOL Yahoo merger is being considered. Yahoo is worth $17 billion. AOL is valued at $1.68 billion. You can imagine, then, the chutzpah it takes to say they're doing it wrong online. But they are. I co-own a Houston based computer support company which you've probably never heard of. It isn't valued nearly as highly. So why call these two out? Simply, they deserve it.

Yahoo seems to be going through Kubler-Ross' stage 3, bargaining, staving off the end just a little bit longer. AOL has been in decline for what seems like forever. It's like an ant's view of watching a human tumble to the ground. It must seem like eternity. In any event, now the rumor mill has it that the two Internet giants are considering merging. It seems a feeble gesture somehow. The problem isn't that either of them needs what the other has. The problem is that neither is doing the right thing with what they've got.

Both companies provide a multitude of services to their viewers. Yahoo provides myriad social and information services including their mail service. AOL provides content from many sources which they have either developed or acquired over time, in addition to their mail service. In AOL's case, they don't need additional services to beckon readers into their content-laden maw. They need to improve their content by shooting for more quality and less quantity. I don't know that anyone drops by AOL because they have the hottest stories, best blogging or most ground breaking journalism. They go there because of inertia. And Yahoo doesn't need AOL either. Instead they need to take the multitude of services they provide now and streamline them, turning them into a single cohesive experience.

No, these two companies are strange bedfellows. They have overlap in areas where merging won't help and their differences aren't complementary areas. What we're seeing is one more stage of dying. Let's hope it's relatively painless.

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7Sep/110

What Went Wrong At Yahoo?

Yahoo is hurting. It's been hurting for some time now. It's growth has been stunted, in fact seeing ad revenue shrink, particularly in the face of fierce competition from Google and subsequently Facebook. According to the Wall Street Journal, an insider source reports the company is willing to consider selling to the right bidder. Taken with the rest of the financial news about the company's woes, it signals a pretty sharp descent from what were once lofty heights. What went wrong?

It is easy to say "Google and Facebook" and leave it at that, but that leaves a lot unsaid. Google, for instance, nominally offered precisely what Yahoo was offering. As has been stated repeatedly of late, the real client of Google (as well as Yahoo) is advertisers. Their real product for sale is the attention of the users of their various services. But in order to create that product, they still have to provide something attractive for those visitors. In other words, a better experience. That is where Yahoo failed against Google. Whether Google has strayed from it's "Don't Be Evil" mantra, it started by focusing on providing quality search results for those using their search engine. The algorithm has been tinkered with and improved over time, but even from the start, users were treated to a very simple and very effective interface. One text field, one button. This was in contradiction to Yahoo's interface which enticed you to drill down through their heirarchy of categories. Of course Yahoo also had a search field, but on top of the relative clutter of their home page, they had yet to really provide a similarly effective search experience. As a result, the core reason people visited either site was better served by going to Google rather than to Yahoo. Yahoo began providing peripheral services to their users before Google did, like Yahoo Mail, still one of the most widely used web-based email services. But monetizing those services was still problematic.

So what of Facebook? Where Google stepped in and did Yahoo's services but better, Facebook offered a completely different service but one that ultimately competed for the same advertisers. Yahoo has had social services and had them in place well before Facebook. But again, they weren't capitalized on and thus lost ground. Moreover, services like Yahoo Groups, Yahoo Personals and Yahoo 360 were all too disparate and never provided a single cohesive experience for the end user. Facebook provided all of the social aspects in one location and has continued to add to them. More importantly, Facebook provided third party developers the opportunity to tap into their ecosystem and make money. This not only increased direct revenue to Facebook, it also allowed additional compelling content to come into Facebook for visitors without Facebook having to lift a finger to create it. Yahoo, in contrast, focused primarily on user created content and again didn't seem to effectively make what services they did have into revenue centers.

What Yahoo lacked was a focused vision of not only where to go but how to get there. It seems like any time a new feature was to be added, it would be bolted on rather than integrated. And with the revolving door policy that is developing in their top spot and now the leadership-by-committee approach that also looks to be developing, Yahoo doesn't look to be breaking out of their slump anytime soon. Still, they are big. They do get traffic. They may not be top dog, but they aren't to be ignored. If the right person is brought in with the right mandate, a lot could be done to turn the company's fortunes around.

I'm just not holding my breath.