Yahoo: Costs Come Home to Roost
October 22, 2008
By now, you have read the news about the layoffs at Yahoo. If you missed the story, the write up I found insightful was the Guardian’s write up here. The Guardian story quoted Jerry Yang as saying:
We enter this slowing market with competitive advantages as the destination of choice for consumers and a leader in providing online advertisers with the broadest set of advertising management tools and products in the industry. We plan to continue building on those strengths.
This is high quality word smithing. When I read this, several thoughts went through my mind. Before I lose them, here they are:
- Historically Yahoo has operated with its acquisitions operating in silos. Silos mean duplication. Duplication means costs. Fixing silos is not easy, so controlling certain technical costs will be difficult, even for Bainies.
- Microsoft and Yahoo are companies that have groups working without much cooperation. I cannot share my source, but the lack of cooperation has spilled over into the tech group. There are sharp divides by silo, technology, and even programming languages. Divisiveness makes it difficult to get the information needed to know where to make changes. Even Bainies will be flying blind when trying to unwrap Yahoo’s technology.
- Yahoo has tapped some vendors to provide certain services. Some of these vendors are dug in deep. Getting these folks to change their agreements or slash their fees may be hard to do. Bainies will be maxed trying to get these costs to behave. I’m thinking of the Yahoo project I heard about regarding data transformation for advertisers. I wonder if an advertiser can get information about demographics of users across Yahoo’s services.
- Buying AOL will boost costs. No comment needed.
- Losing Google will affect revenue and ultimately increase costs as Yahoo tries to revivify online advertising.
In short, I ask myself, “Is it too late for Yahoo?” One part of me says, “No, Yahoo can fix the problems.” The other part of me says, “She’s a gone goose.” What’s your take?
Stephen Arnold, October 23, 2008
Boom Is Lowered Gently on Yahoo
October 20, 2008
Kara Swisher lowers the boom on Yahoo gently in “What Yahoo’s Looming Costs Cuts Actually Mean (Not as Many Layoffs as You Think), which appeared on October 17, 2008. The hook for the write up is Yahoo’s firing people. I won’t cite a number because whatever that number is it won’t mean as many as I think. With regards to Yahoo, I don’t think much about layoffs. These are inevitable, and regardless of what the company will do in the next three or four months, Yahoo’s sitting on a cost time bomb. Nuking employees won’t do much. If you are a believer in Yahoo, you will enjoy the new announcements cogently summarized by ReadWriteWeb here.
Here’s what my research has turned up.
Yahoo has numerous search systems, search licenses, search initiatives, and search technologies. Today it is desirable to have a less heterogeneous technical sandbox. Not at Yahoo. Overture has a primitive search system, which I could no longer find on the redesigned Yahoo site. No problem because traffic for Yahoo advertising seems to be stable or gently undulating like long slow waves in the moonlight. There are two “flavors” of email and search delivered from the Stata Labs acquisition. No problem. Since the acquisition of Stata Labs, I can find email in the Yahoo system. There’s the Web search. Again no problem it is neither better or worse than Google’s Web search but Google has carried the day for now. There’s Flickr search. There’s other search systems kicking around. One reader reminded me that Yahoo’s real shopping search is Kelkoo. More information here. You could fiddle with the InQuira powered help search system until recently. I like using it to locate “cancel service”. Give Help a whirl here. For a laugh look at this attempt to “improve” Yahoo help.
If I am happy with these different search systems in general, why do I think collectively these very same systems are Yahoo’s cost time bomb. Three reasons:
- It costs money to maintain different systems. Staff, consultants, hardware. The more an organization has, the more it must spend for information technology.
- Heterogeneous systems means staff are not easily interchangeable. This means that Yahoo has to either hire more consultants or live with hacks that may operate like small roadside improvised explosive devices. Yahoo doesn’t know when a fix is going to create a problem elsewhere. These are unbudgeted fixes until one goes pop. CFOs don’t like this type of pop.
- Adding a new feature or function means that Yahoo either has to pick a horse to ride, thus keeping other systems in a position of imposed obsolescence or find a wizard who can produce a fix that works across heterogeneous systems. If this path is followed, see item 2 above.
Yahoo is busy creating new, new things. The hard fact for Yahoo is that much of the underpinnings are old, old things. You don’t fix these problems by firing people. You fix these problems by facing the reality of the infrastructure and making even more difficult decisions about technology, actions, and services. Firing people is expedient, and it will grease the skids for whatever Yahoo’s current pet consultant company recommends. But these steps, like Ms. Swisher’s analysis, lowers the boom gently on a ship that is struggling with flawed engineering. The ship, gently reader, she is not sea worthy.
Stephen Arnold, October 21, 2008
Yahoo Imposes Unilateral Profile Changes
October 19, 2008
I have a Yahoo email premium account. I have written before about killing Yahoo for fee services. Since I analyzed Yahoo’s email search system for a paying customer, I just left the account sitting in cyberspace. As part of the test, I created a custom news profile, slapped some sources on the page, and fiddled with the point and click color and layout functions. I check the site periodically to see what’s new. In the last year, the layout changed so an email link is sometimes hard to find. Eh, so what? Then there were new themes. None of which seemed particularly useful to my 64 year old eyes. Eh, so what? Then there was the sharp deterioration in the shopping search. Eh, so what? I did not pay much attention because Yahoo was morphing into a less and less relevant service for my needs.
Imagine my surprise when I found out that Slashdot posted another Yahoo change. You can read the original Slashdot snippet here, dated October 19, 2008. Yahoo explains what it did and why here. As far as I am concerned a free service can change any time it wants. For me, Yahoo’s fiddling around with open source, its Web log asking for help to improve its help, or this shift in profiles are irrelevant. This addled goose is not going to flap his wings or make a sound.
However, it seems that some users are annoyed with the blank profile delivered to them. I logged on and took a gander. Here’s what the new blank profile looks like:
Amazing. This blank layout is easier for me to read. I can even spot the tiny links to email at the top left hand corner of the display. I don’t care too much for the weird handling of USA Today content, but I skip that drivel regardless of color. The nice red of the stock market declines leaps out at me. Although not shown in the list of financial results is Yahoo’s share price at closing on October 17, 2008, at $12.90, down about $20 from Microsoft’s offer earlier this year. That delta of $20 speaks volumes about Yahoo.
The company is adrift. Grand stand plays like making everything open source won’t work. Even the helpful Yahooligan who reminded me that the real Yahoo shopping service is Kelkoo.com, not the big shopping search link on the splash page’s search box. You could have fooled me. I thought that when the main page’s search box’s shopping label was clicked, Yahoo would deliver the goods so the speak. Nope, that’s not the “real” service. I also pine for Mindset, a Yahoo experimental search service that was somewhat more helpful for me than the “real” search service. Mindset disappeared without warning in the last 12 months or so.
Microhoo: It’s Back in Time for Halloween
October 19, 2008
The run down: Google is explaining that its deal with Yahoo is not such a big deal and certainly not a tie up to worry advertisers, Web searchers, or monopolist alarmists. Yahoo has launched a new ad campaign to boost traffic to its search engine about the same time its shares fell to $12 or $13. Microsoft announces that Google Apps are not polished and steps up its pay for search ploy to shore up its sagging share of the Web search market. I am certain I have forgotten some other developments, but the real news appeared in the Washington Post here. The story, tagged as a Reuters creation, caught my attention with this headline: “Microsoft May Pursue Yahoo Search Partnership”. Additional information appears in Business Week here. This on again, off again deal pumped some juice into Yahoo’s sagging shares. For me, the most important statement in the story was: “The company may pursue a search partnership with Yahoo.” My thought when I read this item was, “So what?” Microsoft’s share of the Web search market continues to disappoint me, and I don’t have a stake in Microsoft. Microsoft’s executives must feel worse than this addled goose. I also considered the dust up in Norway. Norwegian authorities made an early bird visit to seize information, allegedly as part of an investigation into Fast Search & Transfer’s finances prior to the $1.2 billion buy out of the company by Microsoft. To top it off, Google just reported strong third quarter earnings garnered in the run up to the spectacular financial meltdown in September. Google shares jumped into the $350 range. Microsoft shares were at the market close in the $24.50 cent range.
Why my indifference? Three reasons:
- Few people seem to think much of my analyses that point out the hidden costs of a Microsoft Yahoo tie up. Microsoft is confident in its ability to normalize disparate platforms using its Monsoon and other hush hush technology. I don’t buy it, but everyone else seems to think that Microsoft has the technology to tame Yahoo’s years of technological promiscuity.
- The gulf between Google and everyone else in Web search cannot be bridged by hooking together old technologies. The difference boils down to Google’s building plumbing for a decade, refining its ad engine, and hooking users with relevant results. Time is running out so Microsoft has to leap frog Google. A deal with Yahoo is not a leap frog. Microsoft will be chasing Google carrying Yahoo. Google will just maintain or extend its leadership because it has not had significant competition for seven or eight years.
- Google is busy becoming the Internet. Again few attend to the technologies revealed in its technical publications and patent documents. Google can tame the wild Internet stallion, and no other company is in a position to do this. Search results and services delivered from Google without Google’s having to pass the request anywhere other than to itself will deliver performance and the clean and shiny Internet some people want. If Google is the Internet and the Semantic Web, the gulf may become too big so a leap frog play is essentially impossible.
I will monitor this Microsoft Yahoo tie up. If it happens, okay. If it doesn’t, okay too. As I said before, time is running out in this consumer information access sector. Agree? Disagree? Bring you facts and educate me.
Stephen Arnold, October 18, 2008
Yahoo: Tightens Belt
October 17, 2008
Valleywag, one of my favorite Web logs, reports that Yahoo is going to fire 3,500 Yahooligans. You can read “Yahoo to Cut 3,500 Jobs–Party On” here. The article includes some interesting quotes. My favorite is the Yahooligan who, upon bailing out, described Yahoo as “an idea”. Wow. I thought a publicly traded company was a vehicle to enhance shareholder value. I suppose that hippy dippy view of a commercial enterprise has contributed to Yahoo’s sterling technical approach to multiple search systems, its brilliant Panama ad system, and its keen management acumen. No wonder I am an addled goose residing in the hills and hollows of Harrod’s Creek, Kentucky.
Stephen Arnold, October 17, 2008 from London, UK
Yahoo: Pragmatic Advice
October 16, 2008
Silicon Alley Insider does a good job of identifying Yahoo’s weaknesses and pointing out some obvious remedies. The consultants racing around Yahoo will have to lay out options for Yahoo, prioritize them, and dress the painful ones in a Project Runway gown. Yahoo has big problems, and you can get up to speed by reading “Yahoo Cracks $12 , Valuation Now Officially Ridiculous” by Henry Blodgett here. I wanted to add one point to Mr. Blodgett’s analysis. Yahoo’s heterogeneous approach to platforms and software adds another, more troublesome problem to the mix. Some fixes can’t be made because the time, cost, and complexity mean the job is just too big. Other fixes work for one service, but the features can’t be made available seamless to other services. For an example, just navigate to Yahoo and run a shopping query. Now navigate to Google’s shopping service and run the same query. I am running these test queries from the UK, so you may have to rekey the search phrase I used, “quad core motherboard”.
Which set of results makes more sense to you? Yahoo has some bright people, but the platform is looking more like a major liability Yahoo or its eventual owner must address.
Stephen Arnold, October 16, 2008
Google Yahoo: Boo Hoo for GooHoo
October 16, 2008
I don’t pay much attention to online advertising or the search engine optimization games. Ads are part of the furniture of living in the Wild West of capitalism. SEO is little more than people without the ability to create compelling content working hard to outsmart indexing robots. Dull, uninteresting, and crass work from my point of view. The headline in The AM Law Daily here “Five Firms Push for Google Yahoo Antitrust Settlement” by Nate Raymond caught my attention. For me the key point was not the litigation that Google faces. I noted the legal eagles enlisted by GooHoo to make the objections go away: Cleary Gottlieb Steen & Hamilton, Wilson Sonsini Goodrich & Rosati, Skadden, Arps, Slate, Meagher & Flom, and Hunton & Williams. The price tag for the eDiscovery related to this matter is going to be a blockbuster just like the legal fees. No BS regarding the costs of this adventure. We have an aleph of eagles circling this GooHoo matter. Google and Yahoo do seem to be care about ads and SEO-related activities for traffic. In my opinion utilities are natural monopolies and will form one way or another. What’s your view?
Stephen Arnold, October 16, 2008
Yahoo Search: More Needed than an Ad Campaign
October 16, 2008
On October 14, 2008, Yahoo revealed new search features. You can read the story here. You can read ReadWriteWeb’s discussion here. The publicity suggests real change. I just see an ad campaign, including radio spots. With its share price below $14, Yahoo needs to deliver muscle, not window dressing. The economic downturn will exact a toll on Google, Microsoft, and Yahoo. Of the three, Yahoo will be least able to turn the dip into a scoop of ice cream.
That Microsoft buy out offer looks better than a new ad campaign for Yahoo search. I think it still looks good to some Yahoo shareholders. For Yahoo fans, this announcement may be a big deal. For this addled goose, it’s one more example of a company that went from leader to AOL clone in more ways than one.
Stephen Arnold, October 16, 2008
PopGist: A BOSS Powered Search Service
October 13, 2008
One of my two or three readers called PopGist to my attention. You can click here to visit the site. The system takes a query, runs it against the Yahoo index via BOSS (build your own search system), receives the results and performs some useful post processing. I ran one of my favorite test queries–Arnoldit–and received a list of results with discussions grouped under each result. I found the service useful. Take a moment and check it out. I have included a screen shot so you can see how the results appear.To see another search service using BOSS, click here.
Will these services yield the cash Yahoo needs to pay for its heterogeneous computing platform’s operation? Catch up with Google in ads? Break into new markets? No. Yahoo is an aging company. For too long the company has been working of home run projects that usually get a runner to first or second and then leave the runner stranded. Yahoo’s original directory business has morphed into an America Online variant. The model no longer works for AOL, and it no longer works for Yahoo. Is BOSS the super hero search service to save the day? No, but it does yield some useful value adding services like PopGist. Yahoo needs more: more guidance, more astute technology programs, a more pragmatic approach to business. Unless the company gets back on track, I can hear the sounds “ya-whoooo” but when I read the letters, they spell “ya who?”
Stephen Arnold, October 13, 2008
Yahoo BOSS: Not with Much Authority
October 11, 2008
I have been identifying technical challenges for Yahoo for a number of years. The core of my concern is that Yahoo has collected search systems the way my mother hoarded figurines. To recap: Yahoo had a primitive search system for its directory (now long gone) then Yahoo bought Inktomi then Yahoo bought Overture and got Overture’s home grown search system and AltaVista.com then Yahoo bought AllTheWeb.com from Fast Search & Transfer then Yahoo licensed InQuira for customer support then Yahoo bought Stata Labs then Yahoo cut a deal with X1 for desktop search then Yahoo divorced X1 and married IBM OmniFind (Lucene) then Yahoo bought Flickr and got its search system then Yahoo bought Delicious.com recoded it and its search system (a two year project) and … now I’m tired. I don’t think I have these in chronological order. I skipped Yahoo Mindset and the semantic search system and probably two or three other systems.
Why is this a big deal? Cost. If an engineer knows something about Stata Labs and the Overture team needs some help, the skills are not transferable across heterogeneous systems.
The article about Yahoo BOSS that triggers my creating a variant of Homer’s list of ships in the Iliad is an article by Stephen Shankland, which is quite good. His story “Academics Sink Teeth into Yahoo Search Service” here. Mr. Shankland reviews the purpose of BOSS, a play by Yahoo to get more traction for the company’s Web search service. With some clever people building on the Yahoo index, Yahoo hopes to pump up its ad revenues. The twist in the lariat, however, is that Google has a Web search market share of 65 percent, maybe higher depending on which research firms’ data one choose to consult. Also, Yahoo has fumbled a deal with Microsoft. With its shares below $15, Yahoo doesn’t command much authority in Web search, with investors, or with me. Mr. Shankland notes that academics are liking the Yahoo BOSS service.
For me, the most interesting comment was this one:
“We’re not a market leader,” said Prabhakar Raghavan, chief strategist for Yahoo Search. “From a strategic standpoint, it does make sense to let other people innovate on top of us. If the pie grows, our share of the pie grows at the expense of somebody else.”
Baloney. By the time the pie grows, Google will have eaten more. Google is growing at Yahoo’s, Microsoft’s, and Ask.com’s expense. Even with the crash this week, the GOOG continues to chomp away at other vendors’ market share.
Let me capture my thoughts about the choral singing of Kumbaya by Yahoo and wizards-in-training from a number of prestigious academic institutions:
- Costs. Yahoo is going to have to find a way to create a more homogeneous approach to search. If one of these wizards-in-training hits a home run, Yahoo is going to need a way to scale which means money. With heterogeneous search systems, something’s got to give. That “something” will be cost control.
- Time. Time is running out. Yahoo has made minimal progress in its Web traffic race with Google. Instead of focusing, Yahoo has fiddled as its market share has burned. Yahoo has its own Nero, and I’m not sure how much longer the head Yahoo is going to be left in power.
- Google. Cutting a deal with Google seemed like a great way to get out of the Microsoft deal. Now the Google deal is not a reality, and if it is or it isn’t, Yahoo is too far gone to be a threat. The company will become a GM to Google’s Toyota. If the last six months suggest Yahoo’s strategic strength, Yahoo is going to be Studebaker.
In short, Yahoo has got to do more than BOSS (a name that suggests control and superiority) to convince me that it has much of a future. In fact, when I hear boss I think of deboss, a word that denotes stamping a hole into a surface.
Stephen Arnold, October 11, 2008
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