Yahoo Open: Why the Odds Don’t Favor Yahoo
September 16, 2008
When we started The Point (Top 5% of the Internet) in 1993, our challenge was Yahoo. I recall my partner Chris Kitze telling me that the Yahoo vision was to provide a directory for the Internet. Yahoo did that. We sold The Point to Lycos and moved on. So did Yahoo. Yahoo become the first ad-supported version of America Online. The company also embarked on a series of acquisitions that permitted each unit to exist as a tiny fiefdom within the larger “directory” and emerging “ad-supported” AOL business. In the rush to portals and advertising, Yahoo ignored search and thus began its method of buying (Inktomi), licensing (InQuira), or getting with a buy out (Flickr) different search engines. Google was inspired by the Overture ad engine. Yahoo surveyed its heterogeneous collection of services, technologies, and systems and ended up the company it is today–an organization looking to throw a Hail Mary pass for the game winning touchdown. That strategy won’t work. Yahoo has to move beyond its Yahooligan approach to management, technology, and development.
The ArnoldIT.com and Beyond Search teams have had many conversations about Yahoo in the last year. Let me summarize the points that keep a lid on our enthusiasm for Yahoo and its present trajectory:
- Code fiddling. Yahoo squandered an opportunity to make the Delicious bookmarking service the dominant player in this segment because Yahoo’s engineers insisted on rewriting Delicious. Why fiddle? Our analysis suggests that Yahoo’s engineers don’t know how to take a hot property, scale it, and go for the jugular in the market. The approach is akin to recopying an accounting worksheet by hand because it is just better when the worksheet is perfect. Wrong.
- Street peddler pushcart. Yahoo never set up a method to integrate tightly each acquisition the company made. I recall a comment from a person involved in GeoCities years ago. The comment was, “Yahoo just let us do out own thing.” Again this is not a recipe for cost efficiency. Here’s why: The Overture system when acquired ran on Solaris with some home grown Linux security. Yahoo bought other properties that were anchored in MySQL. Then Yahoo engineers cooked up their own methods for tests like Mindset. When a problem arose, experts were in submarines and could not really help with other issues. Without a homogeneous engineering vision, staff were not interchangeable and costs remain tough to control. The situation is the same when my mother bought a gizmo from the street peddler in Campinas, Brazil. She got a deal, but the peddler did not have a clue about what the gizmo did, how it worked, or how to fix it. That’s Yahoo’s challenge today.
- Cube warfare. Here’s the situation that, according to my research, forced Terry Semel to set up a sandwich management system. One piece of bread was the set of technical professionals at Yahoo. The other piece of bread was Yahoo top management. Top management did not understand what the technical professionals said, and when technical professionals groused about other silos at Yahoo, Mr. Semel put a layer of MBAs between engineers and top management to sort out the messages. It did not work, and Yahoo continues to suffer from spats across, within, and among the technical units of the company. It took Yahoo years to resolve owning both Flickr and Yahoo Photos. I still can’t figure out which email system is which. I can’t find some Yahoo services. Shopping search is broken for me. An engineer here bought a Yahoo Music subscription service for his MP3 player. Didn’t work from day one, and not a single person from Yahoo lifted a finger, not even the one tracked down via IRC. I created some bookmarks and now have zero idea what the service was or where the marks are located. It took me a year to cancel the billing for a Yahoo music service a client paid me to test. (I think it was Yahoo Launch. Or Yahoo Radio. Or Yahoo Broadcast. Hard to keep ’em straight.) Why? No one cooperates. Google and Microsoft aren’t perfect. But compared to Yahoo, both outfits get passing grades. Yahoo gets to repeat a semester.
When I read the cheerleading for Google in CNet here or on the LA Times’s Web log here, I ask, “What’s the problem with nailing Yahoo on its deeper challenges?” I think it’s time for Yahoo to skip the cosmetics and grand standing. With the stock depressed, Yahoo could face a Waterloo if its Google deal goes south. Microsoft seems at this time to be indifferent to the plight of the Yahooligans. Google is cruising along with no significant challenge except a roadblock built of attorneys stacked like cord wood.
Yahoo is a consumer service. The quicker its thinks in terms of consumerizing its technology to get its costs in line with a consumer operation the better. I’m not sure 300 developers can do much for the corrosive effects of bad management and a questionable technical strategy. Maybe I’m wrong? Maybe not? We sold The Point in 1995 and moved on with our lives. Yahoo, in my opinion, still smacks of the Internet circa 1995, not 2008 and beyond.
Stephen Arnold, September 16, 2008
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