Yahoo, Think Different!

Yahoo’s Q3 performance comes in at less than satisfactory. As usual, they’re chasing Google’s tail, trying to acquire Facebook, following Google’s example of the YouTube acquisition.

Yahoo did something yesterday, however, that I like a lot. They took a 20% stake in RightMedia, an Ad auction marketplace.

I would make another move, as follows: acquire a cutting edge interactive advertising agency, that knows how to work with large brands and advertisers. My bet in this category would be AKQA.

A bit of history: AKQA was formed via a roll-up of a number of interactive agencies, and financed by private equity firm Francisco Partners. They are at about $75 Million in revenue, and specializes in creative user experience designs for brands like XBOX, Coca Cola, etc.

Considered as a top notch interactive agency, AKQA would bring to Yahoo a level of customer (advertiser) perspective that they currently lack, and I believe, will not be able to build up internally. This would be the equivalent of a professional services organization for an enterprise software company.

Remember, fast growth companies like Siebel Systems were built on the shoulders of system integrators like Accenture and KPMG. We just haven’t seen the equivalent of that model in the online advertising business, and hence, a chasm remains between the more UI oriented expertise of the AKQA’s of the world, and the more algorithms and back-end functionality oriented capabilities that reside within Yahoo and Google.

It is my observation, that, this gap cannot be bridged without some concerted effort in bringing the two camps together under one umbrella. The immense possibilities of Algorithms-driven-advertising, Algorithms-driven-entertainment, Advergaming, etc. will be left unrealized, without a much closer collaboration between these two worlds.