Posted September 10, 2007 4:21 pm by with 6 comments

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Earlier this year, Yahoo’s corporate leadership saw a major restructuring, presumably in an effort to turn the tide of their fortunes. A month later, with Yahoo’s disappointing Q2 report, Jerry Yang said that there would be “no sacred cows” for Yahoo, especially over the next 100 days, which he hoped would be a critical period in turning the company around. The Wall Street Journal writes today about Yahoo’s grim progress thus far.

The WSJ reports that at least one sacred cow was considered:

the Web-search-advertising business it built up at great expense in recent years. Under the scenario discussed by top executives, Yahoo would have outsourced that search-advertising activity — which places small text ads next to Web search results — to either Google or Microsoft Corp., the people say. One of these people says Yahoo raised the idea with Google. . . .

But one of the people familiar with the matter says Mr. Yang concluded that Yahoo needed to be the “marketing operating system,” providing advertisers with a full menu of online-ad options. Yahoo would have a hard time doing so if it outsourced search advertising, which represents roughly 40% of the U.S. online-ad market, one person says. Any discussion of outsourcing search ads has now cooled, the people familiar with the situation say.

In some ways, it’s a chicken-or-the-egg argument. Yahoo needs a bigger audience to command higher CPC and revenues from search advertising, and they need more revenue (presumably from search advertising) to grow like Google did. But outsourcing their paid search to Google doesn’t seem like a great way to beat or even catch up to the search giant.

The WSJ expects no major announcements from Yahoo before those 100 days are up next month, although they do mention less probably scenarios, such as closing down portions of Yahoo’s music to get rid of some of their 300 employees in that business.

Another possibility is leveraging Yahoo Mail, still one of the top free Web-based email programs, as a social networking platform of some sort. Susan Decker, President of Yahoo, said in July that the service was “one of the Web’s largest dormant social networks and one that we are aggressively pursuing ways to activate.”

At present, some shareholders are plenty disgruntled as the stock price continues to fall The WSJ reports that it’s dropped off 15% over the last year. It seems that some, however, hold out hope for a comeback.


  • They will probably have more disappointment to come as the gap between Google and Yahoo increases. If i was a shareholder i would probably be selling by now. Yahoo needs to diversify a little bit unless they want to go down in a few years time.

  • I’d really like to see Yahoo do well, but it’s hard to see happening. Take Yahoo mail. My Yahoo email address was the first I ever had, but over time I use it less and less, mostly because it doesn’t work that well. It’s slow, slower, and slowest and the Ajax interface hasn’t improved since I first adopted it a year ago.

    I think leveraging their social properties is the right course for Yahoo, but they still need to make the basics work better.

  • I think the only chance Yahoo or MSN have is if they merge. Then they could ba a force against Google.

  • JamesTiburionKirk

    Wake-up Jerry and remember that Yahoo is first and foremost a search engine. Dump the old Yahoo Directory editors who have now over-editoralized and screwed up Yahoo Search. Everyone seems to be aware of this except you and the officers at Yahoo.

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