Yahoo

Yahoo’s best strategy for success, but does it know?

Yahoo may be staring its path to success in the face, but may or may not recognize it. The Yahoo Zimbra paid email system is outstripping Google (including Gmail and Google Apps) and most other webmail systems, too.

What’s likely most significant about Zimbra’s success is that it’s due in no small part to a deal struck with Comcast. We’ve said for some time that Yahoo’s best chance for success lies in partnerships with the network operators, who are eager to exploit over-the-top (OTT) innovation but seemingly paralyzed in their own initiatives in that direction.

Yahoo could step in and create partnerships that would not only generate new opportunities for Yahoo, but pioneer the integration of OTT and operator features into common service sets. Listening, Ms. Bartz?

Online developments at AOL and Yahoo

Big news in the online game: AOL is creating a new division and Yahoo has finally found a new CEO. The AOL move creates MediaGlow, which is formed of two groups—Platform A for advertising and People Networks focused on social media. Yahoo has selected Carol Bartz, formerly of Autodesk, in a move that has some analysts concerned about lack of online and search experience and that has apparently prompted Susan Decker to depart Yahoo.

Both companies had little choice but to do something, and the outcome is far from certain in both cases. AOL’s People Networks may be its best hope, and Bartz will have to quickly come to terms with the Microsoft search sell-off opportunity, which Balmer has indicated won’t be on the table forever. We think Yahoo may be thinking of a more software-intensive position in the future.

Google, meanwhile, may be in for a surprisingly strong Q4 according to one research firm, who says its ads rose 58% in the quarter.

Yahoo still looking at deals

Yahoo’s board may be looking inside itself for the next CEO, hoping to get someone who can manage the company effectively without a learning curve, as well as someone who can deal with Yang, who is expected to be a difficult partner to any new CEO.

Yahoo is also still considering an AOL deal, apparently quibbling over how much of Yahoo Time-Warner would get for the deal. All the time this goes on is time lost for Yahoo, which is clearly rudderless in the period of transition and at risk in a market where display ads are becoming less relevant. That, in our view, is partly because Yahoo is becoming less relevant. Icahn, it is reported, opposes the partial sale of Yahoo (presumably to Microsoft) in favor of something he hopes would be more lucrative.

Yahoo’s Yang steps down

Yahoo’s Jerry Yang, an icon in the search business and a focus of shareholder angst after refusing the Microsoft deal earlier this year, is stepping down as CEO. The move is not a surprise, given that it now appears that there is no way shareholders could hope to recover what they lost when Microsoft was turned away.

Since the decision, which resulted in a board change led by Icahn, Yang has failed to offer any constructive steps to building value as an independent company. The board is likely to at least consider Susan Decker, the president, as successor. We believe this would be a mistake; she might well prove simply a proxy for Yang’s views.

What are Yahoo’s options?

November 17 2008 regarding Yahoo.
The Economist has said in print what most people probably have been thinking: Jerry Yang must go. Their criticism is very much our own. Yang and Decker have not developed any meaningful strategy to replace the Microsoft deal they opposed. In fact, you could argue that their approach was to say that if the deal were not done, things would simply go on as before. If true, that type of progress would be unacceptable to shareholders. If not true, then what will be done?

We believe that many Silicon Valley firms believe they are still the “owners” of their own companies, when in fact they’ve done an IPO and are now responsible to shareholders. The problem is that there are few options for Yahoo. One good one that remains is a tight partnership with the telcos.