Why Yahoo is F**ked

When the second largest search engine in the United States passed up a multi, multi, multi billon dollar offer made by the largest computer software maker in the world, they all but laid seeds for their own destruction. It didn’t help that they signed a deal with their main competitor only days later.

Yahoo can’t seem to stay out of the news these days and most of the stories seem to be bad. Even when Yahoo thinks it’s good. Activist investor Carl Icahn has been rasing hell about the management at Yahoo and is doing everything he can to remove Jerry Yang, a co-founder and now CEO of Yahoo. And if Icahn, or anyone else, wants to save this sinking ship, it looks like Yang has to go.

After passing up the deal with Microsoft and signing a deal with Google, huge numbers of top executives left Yahoo because they were unhappy with the leadership of Susan Decker the President and Jerry Yang, CEO. Bill Gates issued a statement saying that a major factor in Microsoft’s desire to buy Yahoo was because of the executives and their creativity. (Microsoft has been putting ads out in Silicon Valley for executive positions now hoping to get some ex-Yahoo employees.) Now with many of them already gone or thinking about leaving, Yahoo’s value is quickly decreasing. This posses a problem for Icahn who wants to sell Yahoo to Microsoft if he is elected to the board. Microsoft may not even want it by then and if they do, you can bet the offer will be significantly smaller.

Then to top it all off, Yahoo signed a deal with Google to start showing Google ads with Yahoo searches. This means both companies are going to make more money, but now Google, which accounts for about 64% of all web searches in the U.S., has it’s foot in the door to eventually take over Yahoo which has another 23% of all web searches. That may seem extreme, but not out of the question. Yahoo is a big company and has spread itself to thin and got a little to carried away with acting like a big time dot com instead of building their company properly, like Google did. Yahoo’s board of directors include (or included as of recently) people who had nothing to do with running a web business. This is a MAJOR problem. Not all business is created equally and knowing how to run an airline, doesn’t mean you know how to run a website. Because of this, Yahoo’s services were numerous, but not very good.

So what should Yahoo have done? Take the first offer from Microsoft. Combine the powers of MSN search (#3 behind Google and Yahoo), build the strength of all of Yahoo’s services, revamp their board and THEN take Google head on. Instead they have headed just the opposite direction. So what to do now?

If I was to save Yahoo, here is my plan. Fire Yang and Decker for one. It’s just time to go. You can’t lead a company with people that don’t have the respect of their employees. Then spin off parts of Yahoo such as the website hosting service into a new and separate company. It is a great thing to have, but at this point may to much to handle for a company trying to beat the Godzilla of search engines. Then, now here’s the kicker, break the contract with Google. It may cost money now and seem like a bad idea, but it shows that Yahoo can and wants to stand alone. It also pushes back any ideas Google might have of taking over more of Yahoo. Then focus on strengthen Yahoo’s paid search service. It’s good now and has some features that Google’s Adwords doesn’t have, such as tracking exactly how much money people spend on your site on each conversion. Along with that, I would ad a free keyword search service like they used to have. Google’s keyword search is great and if Yahoo had one like that it would help bring in more small business customers. Now there are many more things to be done that can save this company, but I don’t have time go into all of them. But I think you get the idea.

Personally I work with a site hosted by Yahoo and work with their paid search service so I have to keep a close eye on this stuff. But again, this is the internet we’re talking about you never know what will happen next.