Having received considerable flack from a demanding reader for refusing to fall into the abyss of commentary on yesterday's Yahoo announcement, I’ve been pressured to write something, anything about the company…
In light of the pending Microsoft deal, here are some brief, random and gratuitous thoughts:
- Yahoo managed to established a strong social graph framework through its user base:
- Yahoo’s communication utilities were early to the game and the consumer switch cost (abandoning for competitor) is still relatively high.
- Yahoo pioneered some of today’s trends and arguably has close to best in class services:
- music, customization of home pages and rich messaging (not voice, I’m talking about the IMvironments, games and nifty tools)
- Yahoo’s focus on acquiring market share and creating an ad-supported model since its birth helped slow the industry’s ability to monetize consumer services online:
- The “everything free” mentality was born out of the need to compete with subscription based ISP providers in the mid nineties. Yahoo was wooing CompuServe users (and the like) into their fluffy ad supported environments. This has backfired on themselves and the industry as a whole. They were not alone. Other competing brands were employing the same strategies. I single out Yahoo only because of their brand's power and visibility.
Tencent, a Chinese based instant messaging service and largest IM based social network has 250 million accounts (some people have multiple accounts) and generates between $400 and $500 million US per year by selling avatars and background music. The company has a $12 million US market cap.While I understand that there are cultural differences influencing North America's ad supported media, the mature online advertising industry (12 years later) knows that this is not a reliable business model.
Today, we're much better equipped to handle micro-payments and technology has matured to a level where consumers are seeing true value for services. The virtual economy on Second Life (while it's future is hazy), indicates that users are willing to pay for digital assets that enhance their "personas" online.
Don’t get me wrong. I am after all, a consumer and a loyal fan of the cool products that the company has afforded me through its strategy. But I feel that it missed a few opportunities along the way that could have changed the game.
Google's entire success (to date) has been directly driven through its understanding that utility is king and transactions have value. While they've managed to swing payment towards the advertisers, every service it provides is touched with this understanding.
- Yahoo fails at integration
- Yahoo has proven repeatedly, its inability to integrate with anything see: Broadcast.com, HotJobs, Overture (we're still waiting for the ability to target Canada properly using Yahoo search!!) and Kelkoo.