The Yahoo! Turnaround Formula

Red Herring included the possibility of a buy-out of Yahoo! this year among its top predictions. ‘Business Week’ rated Terry Semel recently as one of the highest paid chief executives with one of the worst returns to shareholders.

And yet, I have said it for a long time, that Yahoo! is a superbly underleveraged asset that if played properly, could return gold.

Today, TechCrunch reports on one of Yahoo’s big (and rare) wins versus Google: Yahoo! Answers. It is indicative of an area in which Yahoo! remains strong: Content and Community, versus Google’s stronghold: Search.

So, the first order of business for Yahoo! is to understand that brand advertising – CPM-based banner ads – is also big business, and concede the broad CPC-based Search business to Google.

Then, focus on the 3Cs : Content, Community, and Commerce.

And, they need to be segmented 3Cs. Not the haphazard, all-over-the-place 3C that Yahoo has today, which makes it impossible for a sales rep/account manager to have a structured conversation with an advertising customer. If I am a Nike brand manager and I want to market to three segments, College Kids, Teenagers, and Pre-Teens, Yahoo’s properties are not organized in a way that allows me to understand how to distribute my money among these properties. And Yahoo’s sales reps cannot explain; they don’t know themselves.

For all its morale-boosting effect, the Yahoo! Answers property is yet another horribly understood and explained ad vehicle which does not clarify how I am to reach my desired segment using it. This puts it in the category of junk CPM, in the order of 50 cents. But it doesn’t have to be this way, and Yahoo! Answers could just as easily fetch $30 CPMs.

This brings us to the fourth C: Context. In what Context am I asking the questions? Is the Community that is relevant to that Context, around me, so that I can actually tap into their knowledge?

Yahoo! hardly needs to do anything drastic; it just needs to reorganize its entire portfolio into Segments and Lifestyles, and align the 4Cs of each segment so that the people interested in advertising to a particular segment can reach the community in a focused way, in Context. If they want to sell groceries to people reading recipes, they should be able to reach them right there. Or, if they have gadget geeks researching cell phones, they should be able to access that eyeball, in Context.

And this would be the point to bring back Search. Constrained-domain Search. Vertical Search. In-context Search. And, Search with a customized UI specific to that segment. Example: I am a petite woman, looking for designer jackets by Armani, Yves St. Laurent, or Gucci. Give me a search engine interface that allows me to put in sizes, colors and brands, not just free-form keywords. I am interested in precision. I am interested in personalization.

Yahoo: You can give me Context. You can give me Personalization. You can give me Content, Community, Commerce, and Vertical Search.

But you don’t. You keep disappointing me. You keep chasing Google’s tail, investing where they are strong, rather than where you are strong.

What a waste. What a colossal waste.

I am shaking my head.

Related Reading:

* Connecting With Your Intimate Bot
* Web 3.0 = (4C + P + VS)
* Yahoo Please Put Up A Fight
* Google’s Achilles Heel
* Yahoo & Web 3.0
* Yahoo Must Acquire Shutterfly