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Yahoo Using Google: I Am Not Sure This is A Good Idea

By - September 15, 2007

Those of you who’ve stuck with Searchblog through the thin years (er, that’d be now) and in the thicker ones (03-05), may recall my repeated suggestions to Yahoo and Microsoft that they gang up on Google by combining their search and search advertising assets. Others have suggested Yahoo simply cede the game to Google and go back to how things used to be: In other words, let Google serve search and contextual advertising results. Eric over at Barrons reports on the latest of these, an analyst at Bernstein. From Eric’s post:

Bernstein Research analyst Jeffrey Lindsay has some aggressive advice for Yahoo (YHOO) CEO Jerry Yang. He thinks the company’s current slow and incremental approach to fixing the business is actually a risky strategy; he says Yahoo’s large customer base “has been flat for some time and is starting to fray at the edges.” The danger is that moving slowly will allow Yahoo’s subscriber metrics to deteriorate, damaging the value of the business.

Lindsay’s advice: outsource search to Google, and cut staff by as much as 25%. He thinks the company could boost 2008 operating income by $565 million, and EPS by 24 cents, by outsourcing search; cutting a quarter of the staff could add another $658 million in operating income, and another 28 cents in EPS, he figures. He also contends Yahoo needs to restructure its display advertising business to boost growth to the industry average; if they can do that, he writes, the company can add another $376 million in revenue and 15 cents in EPS.

I’m not sure this is a good idea. AOL has not managed to build much on top of that strategy, at least in terms of growing profitability (it did for a while, but the trend is now not good). And Yahoo has a ton of sunk resource into its current strategy.

Instead of the typical Wall St. prescription above – cut costs, cede markets where you are a distant second – I’d say do the opposite: Declare war, rally the troops, and spend like hell to win. At least you’d go out fighting, and there’s a good chance you’d win.

I still think that kind of a war could be fought by combining the armies of Microsoft and Yahoo.


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10 thoughts on “Yahoo Using Google: I Am Not Sure This is A Good Idea

  1. Bob Calder says:

    If you were Yahell, wouldn’t joining forces with Microsoft be like France joining Russia? Putin would draft all your kids as an opening gambit after generously making you a Russian citizen.

  2. TomLee says:

    Laugh, you may, at the Microsoft/Yahoo merger prospects but, the arrangement has been underway for some time now. Yahoo has been placing many former Microsoft managers inot simliar positions within Yahoo for the past year.

    This will go a lon way towards easing the pschological shock and chaos within the inner ranks once the deal is finally announced.

    It’ll come shortly after Yang’s “100 days” expires. Yang realizes that Yahoo can’t be transitioned into something that is more exciting and hip. The damage is done.

    Yang (and Filo?) have lots of great ideas about new web business and will ride their huge golden parachutes held afloat from the Microsoft millions from the buyout, to greener pastures and start something anew.

    TomLee

  3. sighman says:

    yeah, as a current yahoo employee i do agree with tomlee -the peanut butter is too much well toasted on the fat cake baby, everyone with a pretty belle spirit inside is just in hope that msft/yahoo merging will raise the fucking stock up up up and goodbye all you black birds with excel sheets stuffed all over the day.

  4. Kamal Jain says:

    Doing an all out war on Google and win, I think, is actually possible.

  5. Yahoo investor says:

    One idea for Yahoo …

    Put the following feedback link on your search results page:

    “Don’t see what you were looking for? Help us improve – click here.”

    Dedicate all 10,000+ Yahoo employees to reviewing and acting on the customer input that comes from this and continously improve the search algorithm to provide better results than Google.

    Make a huge PR splash about Yahoo’s dedication to the best search results in the world. Maybe the needle will move …

  6. BS says:

    TomLee,
    I am sure you have no idea what you are talking about. The number one way I can tell, your grammar; it reads like you are one of those finance message board posters that tries to pump or sink a stock with BS.

    Ideas, insight or comments are interesting but you’re just making up junk.

  7. nmw says:

    whoa! Well, John: I’m thinking of a different tack.

    You know publishing, right? Why not use your publishing noodle on this? For example, look at http://www.magazine.org/Editorial/Top_40_Covers/16996.cfm and tell me why those are the top 40. Granted: those are COVERS, not TITLES.

    Get your titles (hot and fresh) at http://E-Z.Name !!!

    ;D nmw

  8. mediatech guy says:

    See my post on this blog about this topic. It pits Bear Stearns against Sanford Bernstein.
    http://mediatechanalyst.blogspot.com/

  9. stone says:

    I think this much is clear: Yahoo only outsources search to Google if they’re bought by a financial or private equity firm. I’m not sure what happens with MSN. My bet is that they’ll spend the next 1-2 years trying to figure out how to leverage aQuantive.

  10. peacecindia says:

    Yahoo used to be cool & hip in 1995. I remember being amazed by typing something in their search box and finding a website.

    Of course back then, there were very few websites to find.
    Any website was cool. Yahoo was cool because it existed.
    Yahoo had a feature called ‘Cool’ and it featured new websites. Monster.com was a ‘Cool’ website of the day on Yahoo.

    WebCrawler was a big search engine in 1995 and so was Magellen. Then came Excite, Alta Vista and Infospace.
    AOL was a paid space and charged by the hour.

    When Google went online, I realized that they delivered
    information fast and getting your website listed on Google was free. Google became the most useful tool for finding info on the internet.

    Yahoo was charging (taxing) websites to be listed on their so called portal. The prices to be listed rose each year and then they started charging by the year. I used to think that Yahoo was really full of themselves. All portals are it seems to me.

    But now, Yahoo is crippled by the ‘portal’ and a search result seems to reach into that portal and bring out portal info which is really Yahoo’s paid customers websites.

    Yahoo needs to open their doors and let fresh air & sunshine come inside.

    They keep acquiring demographic companies and it really sucks that they continue their portal mentality.
    Even AOL started offering free AOL mail. Their portal business survives because of brand recognition. Google is slow and weak in the email area. Yahoo has a strong brand.

    I think Yahoo & Google should merge because each has what the other needs.