In a recent interview at Harvard University, the head of Google’s news division Richard Gingras compared Yahoo! to newspapers - in the digital world that's about as bad an insult as you can get. He said newspapers and portals like Yahoo! were alike in that they are still operating on the assumption that aggregating a lot of miscellaneous content together in one bundle is what readers and advertisers want. Yahoo! may have been at the cutting edge a decade ago, but in the social media enabled web landscape the implication is that it's a dinosaur.
That's showing up in its figures. Yahoo!'s share of US online display advertising revenue has slumped from 18.4 per cent in 2008 to 10.8 per cent in 2011, according to research firm eMarketer. 'Eyeballs', once the key metric that the likes of Yahoo! and co could tempt advertisers with, no longer matter in sheer numbers alone. What advertisers want are relevant eyeballs - the ability to deliver advertising appropriate to a particular users' specific browsing habits. That's because, unlike the scattergun approach of the early internet, it works. For example, whenever I stream a video on YouTube, I see countless banners run across the bottom of videos advertising childcare websites, or flights to the far East. And s much as I detest being a forgone conclusion, I'll admit to clicking on some of these well placed adverts.
For a company dependent on ad revenues that's a pretty major failing. But the worst part is, it hasn't done anything else, either. It doesn't have a social media offering. Its search engine, once a genuine challenger to Google, still doesn't work properly on mobile devices. Apart from fudging CVs, one can only wonder what Yahoo!'s bosses have been up to exactly while the rest of the web world soared on by. Unsurprisingly, the group is now paying a hefty price for its multiple failures. Yahoo!'s shares currently trade at a paltry $15.5 a piece - exactly half what Microsoft offered back in 2008.
So, what can the newly installed Mr Levinsohn's do to get Yahoo! out of its deep funk?
In the first instance, retrenchment seems to be the order of the day. Yahoo! has just inked the deal to divest half of its 43 per cent stake in Chinese business-to-business (B2B) trading platform (like an Asian B2B ebay) Alibaba for $7.1bn. That should please analysts, who have been urging Yahoo! to dump the stake for a long time. And it looks like a sensible move - it removes a troublesome drain on management time, crystalises value, and gives Yahoo! more firepower to pay dividends, enagage in the share buybacks so beloved of American companies, or make acquisitions.
Given how far Yahoo! seems to have slipped behind rivals, the latter would seem to be the most sensible option - use the cash to make a real strategic difference rather than appease shareholders in the short term. Indeed, while it may be simply too late for Yahoo! to go head to head with the likes of Google, and Facebook, it is still a powerful player on the web with relationships with millions and millions of users and the massive bank of data that comes with them. That's a good foundation to build from, and it finally seems to be delivering some of the tools it needs to turn this into hard cash. Its new tool for online advertisers, Genome, allows marketers to pool together Yahoo!'s extensive data with third party data from recent acquisition Interclick (an online advertising technology company) and with first party data from the advertisers. This will allow them to better manage, navigate and organise what Yahoo! called the "chaos of the data ecosystem", and deliver results that genuinely add to brand value, increase conversion rates and ultimately grow revenues.
Whether these steps mark the beginning of Yahoo!'s metamorphosis into a data-driven content company, which ticks buzz-word boxes like 'real-time metrics' or 'predictive analysis' remains to be seen, but it is certainly a step in the right direction. The trouble is beyond that, water cooler speculation aside, we don't really know where Mr Levinsohn plans to take the business. One thing we do know is that Mr Levinsohn, apparently an entertainment-media kind of guy famous for his smart deal-making abilities, acquired MySpace for NewsCorp, only to see users desert the site in droves. Maybe the safest deal he can make for Yahoo! and its investors will be to sell it outright.
