Yahoo! still looking for answers

Yahoo! has been a staple of the Internet sphere for years, becoming extremely popular even before a lot of people had access to the Internet. The search function was used by many, and their other services such as Mail, Calendar, News, and Fantasy sports were used by even more. The variety of services they provide is astounding (just take a look).

But Yahoo! has fallen on tough times relative to past years. Newly hired CEO Scott Thompson looks to revamp Yahoo's revenues in ways that former CEO Carol Bartz failed. This article documents the fact that Yahoo! has slipped tremendously to sites like Google and Facebook in selling advertisements on their sites and search engines. Thompson plans to focus on the fees and commissions (e-commerce and the like) side of Yahoo's business, not nearly as profitable as online ads. With 78% of Yahoo's revenue coming from online ads, it will take a long time for Yahoo to adjust themselves.

This approach makes sense considering Thompson worked at eBay and PayPal previous to his appointment at Yahoo in January of this year. Both of those companies rely on e-commerce and commissions on sales to drive their profits and business. Thompson is looking more long-term. He won't be able to turn around Yahoo! overnight, and I'm sure he knows that.

We talked about business model in class and how replaceable companies can be. When I think about how long it will take for someone to fill Yahoo's void if they were to disappear, I instantly think that Google has replaced it and does it much better. Of course Yahoo! is a player in that market, but the impact they make can be replaced fairly easily. Also, who will miss Yahoo? Personally, I wouldn't (let me know in the comments if you would). To me, Yahoo's services are uninspiring and slow. They offer nothing that I can't find elsewhere. The answers to these questions are the basis of my concerns for Yahoo! and its future.

In my mind, Yahoo! has reached its potential. Their service offerings are great...if we were in 2007. As we've seen, the Internet moves extremely fast, and Yahoo! was at the top for some time. But other sites (mainly Google) has upped the ante for free online services. The marketplace is as competitive as ever; Yahoo! might not have been ready for it. It seems as though Yahoo! has fallen in the trap of following the leader since Google and Yahoo! have a very similar revenue and service model. And when they are up against someone like Google, they will lose that battle every time.

Furthermore, Yahoo's chairman AND co-founder resigned from the board last week. That fact alone makes me extremely weary of the way this company is going.

I know that this post has bashed Yahoo!, but this is not to say it's a bad company. Their industry is extremely tough and they still stay profitable and have a rather large customer base (who hasn't used it?). Yahoo! expects more though, and I can't wait to see how Yahoo! looks in five or ten years.

Sources: WSJ