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Yahoo is the Online Version of the Paper Box Manufacturer

I have to say I'm intrigued by what seems to be Yahoo's new business plan: identify core services and then ditch or outsource everything else. First went search, now say goodbye to comparison shopping.

It's an interesting strategy for the company. They lost the search wars. Their brand doesn't mean anything in the marketplace. But they have gobs of traffic. Users that continually come back to the site for a handful of core services.

So rather than spending money maintaining a bunch of services users don't primarily use Yahoo for, they outsource/ EOL them. Search? An ancillary service, not what draws users to the site - and very expensive to maintain. Outsource it to Microsoft. Cloud services? Some potential there, but it doesn't drive page views. Cut it. Shopping? Same. etc., etc.

Email, news and finance are what drive the page views, so those they keep. (Although for news and finance those are already pretty much outsourced to the AP, Reuters, AFP and the other syndicated content providers. Note to AP: given this direction it would be a good time to cut a new deal with Yahoo.)

From an innovation standpoint, this means Yahoo is done. Sure, they might make some incremental changes to the products they hold onto - but the days of Yahoo being a tech product leader are over. They are the online equivalent of a paper box manufacturer - they have an established product in an established industry and their job is to monetize it with the largest margins possible. Meet your numbers, don't take chances.

On one hand, given their rich history as tech leaders, its kind of sad to see. However, on the other hand, it takes some incredible self awareness for a product focus tech company to recognize their failures and focus on their strengths. If you would have told me 5 years ago, that by 2010 Yahoo would be a pure sales and marketing shop that sits on top of an IT group, I wouldn't have believed you. But that's where we are. Let's see if it works.


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Comments (2)

brad greenspan:

Actually, Carol is doing a shrewd job here. She's basically positioning Yahoo for a sale.

By cutting out the non-core services, she's also reducing expenses and boosting profit margins. The tight P&L focus gussy up Yahoo and makes it a n easier pitch for M&A target.

Of course this are all pretty short-term and one-off stuff. You can't grow a business without growing revenues.

So, if Yahoo doesn't get sold within the next 4 quarters, it's time to bail.

Because, so far, Carol hasn't articulate a plan for Yahoo except slashing cost.

Even Internet companies need to focus on revenue-generating activities and sales and marketing. You really thought this went out the window on the Web?

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