Post-GoogleClick, What Of Yahoo?

In his response last week to GoogleClick, Yahoo CEO Terry Semel pointed out that, in buying into the display ad business, Google "validate[s] Yahoo's strategy for the last few years." (Semel's quote appeared in The New York Times).

Semel pointed to a nice irony. As the world asks if Yahoo can catch up with Google, Google is becoming what Yahoo's been for quite some time: a business focused on several media channels at once, with search being just one of them. And if Google is shifting from search leader to a larger version of Yahoo, it's worth taking the time to rethink how Yahoo can even the score.

Before I start, I want to say upfront that I will ignore Yahoo's poor Q1 earnings report in my discussion. That report is largely a reflection of Panama; but Panama will take a few more quarters to operate at full speed. Which is why I'm much more optimistic about Yahoo than much of the Street is now.

Instead, I want to focus on how well Yahoo grasps the need for synergy. To understand why synergy is crucial, it's useful to go back to Google and Yahoo's respective mission statements.

Yahoo's mission has long been "to be the most essential global Internet service for consumers and businesses." Translation: Yahoo has hoped to rule every facet of the Internet, from search, to publisher portals, to e-mail, to mobile applications, to social networks, to everything else. It's a vision of winning by controlling the most real estate.

Google is different. "Google's mission," the company tells us, "is to organize the world's information and make it universally accessible and useful." As stated, Google's mission isn't to own everything. Google's goal is to make a single, manageable entity out of the many different elements of the world's knowledge. Google wants to power the unification of all media.

That synergistic mission is in keeping with Google's core search business. As many writers have pointed out, search changes the Web from a hodgepodge of pages into a single, understandable unit. Google's mission also explains why Google waited so long to expand beyond search in any serious way. If Google's on a mission to pull all information together, it needed to wait until the channels were close enough to be pulled. We're starting to see such a convergence now -- and Google is plunging in. Until now, the opportunity for that convergence just wasn't there. Yahoo's real estate grab hasn't been as concerned with that convergence, and Yahoo's paid a price for that strategy. Consider, for instance, Senior Vice President Brad Garlinghouse's description of Yahoo in last year's Peanut Butter Manifesto: "We [at Yahoo] lack a focused, cohesive vision for our company. We want to do everything and be everything... We end up with competing (or redundant) initiatives... in the different silos of our company." That's a brief history of Google/Yahoo, roughly to the end of 2006. By that time, it became clear that, to take back its throne, Yahoo would need to understand how to make its many different properties work together. It would need to focus less on land-grabs, and more on making its vast empire -- and its users -- work more closely together, in the same way Google has focused on pulling searchers and Web pages closer together.

And so now, post re-org and Panama launch, has Yahoo learned its lesson? I think it has. Consider, for instance, Yahoo's new mission statement, prominently displayed on its corporate main page: "To connect people to their passions, their communities, and the world's knowledge."

That sounds like a revamp of Google's mission, but it's something more. It understands that multiple channels, goals, and people all intersect in Web 2.0 -- and that Yahoo, which stands on top of a wealth of different media avenues and communities, is uniquely poised to provide that interaction. It's a vision of a business that provides access to many channels, thereby deepening users' engagement with any one of them.

Last week, as Yahoo grew its newspaper partnerships with 12 more news businesses, we got something of a snapshot of what that interaction might mean. The Yahoo partnerships, begun last November, provide newspapers with two benefits: the newspapers receive display advertising through Yahoo, and they split revenue from Yahoo search advertising off of searches conducted through the newspapers' Web sites. The deal draws on Yahoo's two core channels of search and publishing, and also draws those channels closer together. It's combining worlds by digging deeper into either of them, and leveraging Yahoo's best capabilities to do both.

That's the kind of synergistic thinking that let Google win in Web 1.0. Which is exactly why, in Web 2.0, I wouldn't rule Yahoo out.

" ** " Next week, I'll continue my discussion of the post-GoogleClick landscape. I'll look at how the buy will affect other players, and particularly Google itself.

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