Can Yahoo learn from its mistakes?

9th May 2012

With all the problems it currently seems mired in and has been in the past, the outing of CEO Scott Thompson's exaggeration of his academic qualifications just adds a certain putrification to an already stinky situation.   Former PayPal president Thompson – only picked up by Yahoo in January this year – is the company's fourth CEO in five years.The Wall Street jury's literally still out on how much longer he will remain at the helm.  Dan Loeb, boss at Yahoo shareholder and hedge fund Third Point Capital, who exposed Thompson's CV hole, is currently seeking legal access to Yahoo's records of the process behind his recruitment. AllThingsD also broke the news that the board member responsible for hiring Thompson has since been forced to resign. 

Of course Yahoo's problems go beyond a questionable ability to hold onto its leadership. Its main issue is that of a giant who once straddled all the revenue generating sectors of the web and, having failed to adapt, is now floundering amid intense competition in a market that has changed and continues to at breakneck speed.

How'd you like me now?

By comparison, Amazon that other mid-90s web alumni that began with single-mindedness in the business of bookselling – and is now the worlds' largest online retailer and e-book producer – demonstrated its own nimbleness this week with its move into selling high-end fashion.

Yahoo's beginnings were classic Silicon Valley: founded in 1994 by Stanford students Jerry Wang and David Filo, it went from being essentially a web directory and pioneer of online advertising to providing all of the offerings that came to be known as ‘web services' – email, instant messaging, online calendars, auctions, and news aggregation. As the ‘go to' web portal, Yahoo was there first – a whole four years before that other Stanford-born star Google entered the scene.  The classic market disruptor of its day, by the turn of the millennium Yahoo was valued at more than $100 billion.

Mistakes? You've made a few…

Yahoo has made a more than a few mistakes in its 18-year history, and it's worth highlighting a few here:

1:

A Lapse in Innovation: In 2000, instead of developing its own algorithms for its search offering, Yahoo licensed Google's in a four-year deal. Newbie Google learned everything it needed to about the art and science of online search, Yahoo lost an awful lot of  ‘stickiness' and an exodus of Yahoo users began accordingly.  There have been several other innovations shortfalls since then that have let Google et al run ahead, such as not developing a paid search model and not converting the web portal for social media capability. 

2:

Cooperating with the Chinese on censorship: in 2004 Yahoo broke an internet cardinal rule (of the time) by supplying email and IP address details of a Chinese journalist to the authorities in Beijing. Following the journalist's arrest, Reporters Without Borders labelled the company a "Chinese police informant". Yahoo was also pilloried both at home by U.S Congress and by its international user base.  

3:

Missed M& A opportunities: one of the many criticisms levelled at Yahoo is that it is too diversified for these times and doesn't lead the way in any particular sector.  There were two ways in the web giant's recent past in which it could have rectified that: either by merging with eBay when the opportunity presented itself  in 2006 and 2007 or – after that particular ship sailed – selling out to Microsoft in 2008, which co-founder and CEO Jerry Yang heavily opposed.

Even more galling for Yahoo investors would be the fact that six years earlier, under the leadership of Hollywood veteran Terry Semel, it had the opportunity to neutralise what has in recent times proved to be its most brutal nemesis – by buying Google

Getting ‘sticky' again

In looking back briefly at Yahoo's past for inspiration to sustain its future, one of the most prominent shortcomings has been a steady decline in its ability to innovate from within since the dotcom bust in 2000, opting instead to build up its content offering.   

So here's an old idea for a new age: the suggestion box.  At a time when shareholders are flexing their muscles at the C-suite, and the fallibility of the CEO cult is being thrown into sharp relief more than ever, perhaps investors could be a source of solutions as well as a highlighter of problems.  And they could do that by harnessing the networked intelligence distribution method du jour – crowdsourcing.

All in it together

Within a closed community of producers and investors, it should be easy enough in theory to devise a system though which the best ideas for company growth, innovation (and in Yahoo's case, ultimate survival) can be channelled to the board.  With an engendered sense of a common purpose, and a healthy sense of the need to innovate or die from the ground up,  the rewards would speak for themselves.

 

More on Mindful Money

Warren Buffett thinks Facebook and Apple are 'too risky'

Mobile technology: What the west can learn from the rest

Why online piracy could be the film industry's biggest opportunity

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