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Yahoo: What Went Wrong

  • GigaOm, Friday, June 27, 2008 11:37 AM
Many wonder what's gone so horribly wrong that once-mighty Yahoo's market cap is now languishing near the $29 billion mark. Well, GigaOm's Om Malik sums it up quite wonderfully with this quote from German writer Dietrich Bonhoeffer: "If you get on the wrong train, running down the aisle in the opposite direction really doesn't help."

Yahoo, like Microsoft now, got an early case of Google envy. Luckily, Microsoft, unlike Yahoo, had a few established cash cows to fall back on. Instead of focusing on its core content and display advertising businesses, Yahoo invested heavily in search to compete with the runaway search leader. It got on the wrong train, and now it's trying to run down the aisle in the opposite direction by partnering with the company that bested it; meanwhile, its massive search investment will slowly become irrelevant.

Meanwhile, Yahoo missed the social networking train, which could have been a lucrative new focus for a company with the Web's largest user base, a great communications platform, and a strong display advertising business. As Malik says, "the company isn't really facing up to the fact that its layers of management have resulted in a state of masterful inactivity, masked perhaps as a culture of consensus." Instead of forging boldly ahead into new territory, Yahoo played somebody else's game, lost its identity and got burned for it.

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