Based on the outward appearance of last week’s Yahoo’s reorg, the online giant seems to be on the verge of getting its act together. The sprawling mass will now be slimmed down to three sleek business units: a user-focused unit; an advertiser and publisher division; and a technology wing that ties it all together. But even with all the change, I think the company still might be inherently flawed. That’s because Yahoo’s a business based on total dominance of the Internet (“Our mission is to be the most essential global Internet service for consumers and businesses,” reads the opening line of Yahoo’s core values statement). And the goal of Internet dominance may be a mission that just isn’t relevant any more.
Let’s start with the roots of the company. With a founding date of January ’94 and an IPO in 1996, Yahoo was born of the earliest days of the Internet. Back then, if you’ll recall, the Internet was a fairly straightforward thing: it was an amalgam of web pages, all strung together. It worked through a single interface of the computer. The big excitement around it was the idea of hyperlinks, and the questions of the future were largely ones of how many pages the Web would eventually serve, and how many people would come to use it. The idea that the Web would eventually grow to multiple interfaces (like the mobile Web) and would eventually contain a slew of vastly different channels (social media; publisher; virtual realities, etc.) never really came up outside the ivory towers of geekdom.
In this environment, the idea of becoming the dominant Internet player made a good deal of sense. That’s because dominating the web meant one very specific thing: becoming the player who controlled the largest number of people over the largest number of websites—and who made the largest amount of money off of it. Given the Web’s key media predecessor–television–such a view of the coming Internet growth made a good deal of sense. After all, TV remained essentially the same thing—a video screen that provided a passive viewing experience, and that lived in users’ living rooms—for at least 50 years into its existence. And the fact that the television didn’t change for 50 years is what allowed its early players—like NBC, CBS, and ABC—to steal the lead in that medium by controlling it from the start. There was little reason to assume that the Internet would work differently.
But what ended up happening, of course, is that the Internet did end up in a very different way than its beginnings hinted at. In this second decade of the Internet, we’re seeing multiple channels and multiple interfaces, which means that keeping the lead over the entire Web means a lot more than being able to be in control of the most people over the highest number of web pages (which Yahoo in fact does). It means being able to leverage all the different types of channels and interfaces that the web offers—which, to keep pace with its goals, Yahoo is forced to do, from social media to mobile—at the cost of spreading itself thin like peanut butter on toast.
In this light, last week’s complaints from Madison Avenue that the reorg didn’t go far enough nicely highlight Yahoo’s particular predicament. Many of the complaints can be nicely summed up by Jeff Marhall, SVP and GM of Starcom IP. Yahoo, Marshall claims, “has a tendency to focus more on filling the boxes than on creating ad opportunities around new areas like social networking and video.” It’s tempting to say that expanding into more areas is exactly what Yahoo shouldn’t be doing just now—because Yahoo needs to streamline, not spread itself thinner. But if Yahoo wants to fulfill its manifest destiny of Internet dominance, it needs to follow the Web wherever it goes, and even lead the online evolution into new phases. But in a company that’s now famous for being spread thin “like peanut butter on toast,” running in still more directions may not be the smartest move.
Which is why Yahoo’s only way out is to re-think what it is that they actually are. So far, the re-org has simply focused on shifting the company “from a product focus to a customer focus,” to paraphrase CEO Terry Semel. But there are an awful lot of ways to service customers—and Yahoo would be wise to figure out what kind of services they’ll focus on, and what kinds they won’t. Otherwise, Yahoo might become the next AOL—another online giant that couldn’t shift fast enough from an overly-holistic view of what being a Web service means.
