Why is it hard for Yahoo to make more money?

The New York Times recently devoted a lot of ink to “Why Marissa Mayer is mediocre and couldn’t turn Yahoo around.” (See Thinking, Fast and Slow for “regression to the mean” and other reasons why sought-after job candidates often don’t work out that well; also see “America’s Worst CEOs: Where are they now?”)

Yahoo! has a huge audience and a very capable team of engineers. Computers and Internet applications generally don’t do what consumers want. Why is it hard for them to build the stuff that people want? For example, Yahoo Travel doesn’t seem to add anything to other travel booking sites (in fact they say it is “powered by hipmunk”), which means that it is okay for business travel (user tells server where he or she needs to go) but terrible for leisure travel (server should tell user where is best to go given date-time constraints and activities desired; see my February 2014 posting).

Yahoo Finance is the same as Google Finance (maybe because Google copied all of their features!). Why doesn’t the server ask you about your investment goals and tell you how much to invest and where to invest it? (if not specific funds then at least asset classes)

Yahoo Mail is the same as all of the other web-based email services (see this paper by Jin Choi on an RDBMS-backed email system from the late 1990s). Since Yahoo has a staff of capable managers in India, why don’t they offer a service where they’ll actually answer the email for customers? A personal assistant who can put stuff on the Yahoo calendar, delete spam that makes it through the filter, come up with a daily to-do list, organize parties from the contacts list, etc. It is a lot easier for Yahoo to hire and supervise an employee in India than it would be for an American consumer.

As a portal company Yahoo is uniquely positioned to offer something like the online community aggregation system I wrote about back in 2009. Instead they sat idly while Facebook drained users and page views away from all of the standalone online communities. But I still think it would be worth a few programmers.

Is it really the case that the superheroes at Google, Amazon, Apple, Facebook, and Uber have used up all the oxygen? It feels to me as though there is a lot of low-hanging fruit for a company with Yahoo’s resources.

What would readers do if they could push a few new products (or features for old products) out the door at Yahoo? I’ll start with a trivial one: add the ability to publish a narrated slide show from Flickr.

8 thoughts on “Why is it hard for Yahoo to make more money?

  1. 1. Make Yahoo!Pipes a priority and develop it to be the gluconnecting google+facebook+amazon+apple to generate value for the users. This should add a billion dollars of value

    2.Compete with Akamai by becoming a CDN provider to other business. This should add another billion dollars of value

  2. “Yahoo Mail is the same as all of the other web-based email ”

    Yahoo mail is one of several mails that I use, and it actually is worse in many ways. There are several trivial things that I want to do when I am going thru my mail that are hard, awkward, or impossible to do. Things that if if were my system I would fix in an afternoon. It is so ludicrous that my joke is that Marissa Mayer was sent to sabotage Yahoo.

  3. A lot of people in the article mentioned that Yahoo Mail has gotten WORSE, not better, probably as they tried harder to monetize it.

    What distinguishes a great application (the one that you use) from a crappy one (the ones that you DON’T use) is often very subtle and non-obvious. It’s like writing hit songs – if people knew what it takes to write a hit song , they would do it all the time (and a few do) but most people can’t.

    It would be OK if Yahoo apps were about as good as other sites – when I travel I look at several – Expedia and Travelocity, etc. and they are all roughly comparable so they are more or less interchangeable but Yahoo’s sites are WORSE. You have to be at least as good as average or you don’t have a chance in hell, and they don’t.

    I’m not sure your idea of an Indian personal assistant would work. First of all, people are used to getting things for free on the internet, esp. on Yahoo, so ANY amount that you charge is too much. 2nd we talked about the “you can’t get good help” phenomenon. What are the chances that the same people making 50 cents/hr who drive you nuts on the tech support line with their barely understandable English and their reliance on scripts would make great personal assistants? Or that they would not steal your credit card # when you used them to help you book a reservation, etc. Or that if you ask for a chicken to be delivered to your house for dinner, would have a live chicken delivered, because that’s what they would do in their culture?

    The fish stinks from the head. No matter how many capable engineers you have, they still need direction from above. The main brilliant thing that Marissa did was be one of the 1st 25 people to be hired by Google. At google they had “promoted” her to oblivion but somehow she parlayed that into a real job running a real company, which she had (has) no idea how to do. The Peter Principle in action.

    If all these things that you mention are so easy to do, why don’t you do at least one of them and become an internet billionaire? I’m serious.

    As the article mentioned, Yahoo had enough residual goodwill to become a “legacy brand” like Pepsodent toothpaste. They could hang on for decades that way – cut their marketing and programming budgets and rely on older people’s habits to stay with them. This is still good for millions. But Mayer wanted to be Steve Jobs and shoot Yahoo back to the top – that wasn’t gonna happen and all she did was waste a lot of money. If Yahoo didn’t have the Alibaba stock, they would be in bankruptcy court by now.

  4. Izzie: You asked if the ideas above suggested for Yahoo are worthwhile, why don’t I do them? Were you thinking that philip.greenspun.com and yahoo.com have similar numbers of users? An idea that can work financially for Google, Facebook, or Yahoo is not necessarily something that can work for a site with a few hundred thousand annual users. (Remember also that those companies run their own ad networks and therefore keep 100 percent of ad revenues.)

  5. Here is a good analysis of why $3.3B market cap AOL should buy $5.5B market cap (subtracting Yahoo Japan and Alibaba) Yahoo to form a new company with a $15.8B market cap (basically the new company run by AOL would trade at AOL’s earnings multiple of 6.2x, rather than Yahoo’s core business 1x):


    The perfect name for the merged entity would be “That 90’s Company”.

  6. As far as I can tell, even if you are talented and hardworking, it’s very hard to make significant profit from an Internet site aimed at consumers. Only a few business models work, and it’s a “winner takes all” scenario (eBay, Google). As the article pointed out, Yahoo has been hit by “death from a thousand cuts” as a jack of all trades, master of none, by more focused rivals. Yahoo ceased to be a product company years ago, and media companies have found publishing on the Internet to be a very hard way to make, or more likely lose, money. There’s no reason to believe that Yahoo has any significant advantage as a media company, over more established newspaper rivals. The main problem with a consumer facing Internet site is that there are very low barriers to entry. This makes it similar to retail. Hard to make a profit, and harder still to keep it. This isn’t about the CEO, it’s a very challenging business model. Lastly, until Yahoo decides whether they are a product company or a media business, they are going to struggle. All of the Yahoo CEOs have struggled with this. They gave up the crown jewels years ago, when they outsourced search to Microsoft. This was a major strategic error from which they are unlikely to recover. Imagine if Google outsourced their search to another company. Wow.

  7. I think everybody is missing the main point Yahoo can not be turned around and that is their mentality. Just like you I thought Yahoo was a tech company. However they themselves do not think so. They believe they are a digital content provider aka a media company and act like it. They are nothing like Google or Amazon or Facebook where engineers are gods. They are structured more like Time Warner or Sony.

  8. Your post identified several unmet needs. But an unmet need is not always an underserved market. It turns out that most are not. when Paul Allen and Bill Gates wrote a Basic compiler for microcomputers, what put them ahead of the pack was not superb engineering, but the discovery of an underserved market.

    It’s not at all clear to me that any of the unmet needs you identify are in fact underserved markets. They all have merit, but that merit may not translate into success.

    A giant unmet need is “Software for Dummies” (subtitle: an app for the rest of us”). But I’m pretty much convinced that it’s not an underserved market.

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