In the course of the last decade Yahoo! has lost out on every major initiative whether be Yahoo profiles and chat (To Facebook) or Search (to Bing) or Flickr (To Instagram). Once the most important Internet company, Yahoo! has been reduced to a state of profitable (shrinking fast) irrelevance. There was no major stake on how Yahoo! could influence Internet browsing behavior or leverage search or take a stake in the mobile bandwagon. Therefore Yahoo! Axis a refreshing new initiative from an almost dinosaur internet company. Axis essentially is a browser for iOS devices and a browser plugin for desktop computers. It has a premise and the intent is in the right direction.
Interestingly now, Axis will help Yahoo! skip trying to compete with the dominant desktop browsers and instead offer a plug-in that works on all of them. That enables Axis users to extend their browsing habits to the Axis apps for iPad and iPhone, which is much less settled territory. Mobile and tablet browsing is the next frontier, and Yahoo is wise to focus the next stage of its business there.
- It essentially seeks to integrate the browsing and search experience. Users will not be required to launch a new page. Both the experiences are well knit on a single page with the usual bells and whistles. Why waste time on the search engine when the search process is built into the browser. Axis does away with the blue links that have defined internet query results for a decade and replaced them with previews of pages that might provide the information being sought.
- Understandably the experience is touch led – which is a key to the mobility, smartphone and tablet platform. Finally then, Yahoo! has some ground on hand held devices with the Axis app.
- Also key is the seamlessness of the experience which can be shared across all iOS devices. It would be interesting to see how Yahoo! recreates the iOS type experience across a range of disparate platforms each not exactly talking to the other. Possibly the plug-in would do the trick… but experience is the key here.
- On the flip however, Axis is somewhat of a double edged sword because it by-passes the search results page. Yahoo still makes a quarter of its revenues from the sponsored links on this page.
However, Yahoo! is betting its future on the convenience and speed of this search concept. The seamlessness of the experience is the consumer hook. What keeps them there is the way Axis syncs browsing history between the desktop and mobile versions, so users can switch back and forth easily between devices. Once there is enough data on the users, Yahoo can sell you all its services by promoting them heavily in the app and its search results.
Of late Yahoo! has lurched from one crisis to another. It still makes money but the future is very uncertain given the mobile dominance building on the internet, advent of Facebook and Google. Axis is thus a step in the right direction. Yahoo! still wants to take one more fight..
The time has come for me to pursue other interests outside of Yahoo!- Jerry Yang
Yahoo! has not delved into details regarding Jerry Yang’s exit.. It didn’t really have to.
While Yahoo! remains one of the biggest draws on the web with about 600 million people visitors a month, but like AOL, that other dinosaur of the first era of the internet, Yahoo! has been left flat-footed as Google and Facebook emerged as the next generation of online leaders. Sales have fallen at Yahoo! since 2008 and Google and Facebook are taking an increasing share of its display ad business. The firm has cut costs and found ways to boost its profit margins and keep earnings up. But the pressure for change is on – and it shows.
In 2008, Microsoft’s Steve Ballmer launched a $44.6bn (£28.8bn) takeover bid for Yahoo! but it was resisted, especially by Yang, and eventually the deal collapsed. Yang was the man who fought hardest to reject Ballmer’s offer. Yahoo! is currently worth about $19bn but now that Yang has gone, it may require a more radical fix.
Yahoo! is still huge, but what is sort of company is it? They are not going to beat Google in search, or Facebook for the social network. They will continue to get ads because of their size, but if they are not seen as relevant – and they are not – the quality of those ads and the price paid will fall. In today’s environment, companies that are not seen as relevant are dead. Yahoo! is on its downward spiral. Yahoo! lost its way long ago. It’s big in news, sport, finance, email and it owns Flickr, the photo-sharing site. But somehow one of these sites add up to a whole. It will take a Steve Jobs to turn Yahoo! around. Someone needs strips it down to the core before building it back up again. Yahoo! recently appointed a new chief executive, Scott Thompson, former boss of eBay’s online payment company PayPal. He replaces Carol Bartz, acrimoniously ousted by a board she dismissed as doofuses. Given the firm’s shoddy record with bosses, she might have had a point. But so did they.
Bartz’s strategy – trim costs, sack people, sell stuff – did little for Yahoo!. According to comScore data, the number of minutes that US website visitors spent on Yahoo! sites during her two-and-a-half years as chief executive fell 33% while the stock price stayed flat.
The big question for Scott Thomson is what is he going to do that’s different. Thompson is likely to sell off Yahoo!’s Asian assets, a move many believe Yang was holding back.Yahoo! bought a 40% stake in China’s Alibaba in 2005 for $1bn. It was a great buy. Analysts calculate that the Alibaba holding, along with the company’s stake in Yahoo! Japan, is now worth $17bn.
But what happens after that? Yahoo! is undergoing a “strategic review” and competitors smell blood in the water. Microsoft is reportedly looking at Yahoo! again, albeit at a far lower price, and private equity firms have been sizing it up. Jack Ma, Alibaba’s founder, has also expressed an interest and is tipped as a likely buyer for Yahoo! Japan and maybe more. If Yahoo! were to be acquired by Alibaba that would be the biggest Chinese takeover of a US company in history.
Scott has the choice of turning Yahoo! around. However, that’s not really his skill set. The rumour in Silicon Valley is that he was far from the company’s first choice. Like Bartz, who came from a design software firm, Thompson does not have a media or advertising background. But if that doesn’t work, at least he’s a finance guy. He’ll know how to package this company for sale.
With Yang gone, a sale of all or part of the business looks more likely. It’s what comes after this that worries. Yahoo! is one of the top sites in the world. That’s a lot of opportunity. But if it can’t redefine itself, it could be scattered to the winds.
2012 promises to be a very tough year for Yahoo!, Blackberry and Nokia who having ruled their respective domains for a decade, suddenly risk redundancy due to lack of innovation. In the technology domain, historically, once an incumbent looses a pole position to challengers riding a new wave of technology, the incumbent no matter how large and dominant finds it difficult to come ahead and regain the leadership position. This has been the story with Yahoo!, Blackberry and Nokia.
• Blackberry and Nokia have eroded 81% and 50% of their m-cap in the last year and are 90% off from their historical highs. Same goes with Yahoo! which is 85% off from its historical highs in the heydays of dot com bubble.
• All three have leadership changes in recent/one year and have made a few hard choices and a few other risky ones to get back into reckoning. Can Stephen Elop turn around Nokia, Can Scott Thompson revive Yahoo and Who replaces Lazardis/Basilie at RIM (and more importantly how fast)
• The Market position of Yahoo!, Nokia and Microsoft is vastly altered from 2 years back. Yahoo! is gradually loosing its No.2 spot to Microsoft and the search relevance in the overall picture. Nokia lost its Smartphone leadership to Samsung and Apple in 2011 and as per reports, Samsung forecasts walking off with the Mobile Phone manufacturer crown in 2012. Blackberry has lost out to Android and Apple in good measure and its Playbook has been drubbed. There isn’t much that is expected from future releases of BB OSs and Devices.
• Blackberry appears to me as the worst in the lot and is a prime acquisition target. Same goes with Yahoo!. The Nokia Lumia series of Windows phone has seen some limited success and also been able to secure partnerships with T-Mobile and AT&T. However there is talk of Microsoft acquiring Nokia Smartphones which leads one to think how would Nokia compete without Smartphones?
2012 will need to be the turnaround year for these three and if not then there is a possibility that there could be partial or full acquisition and buy outs very soon.
There are two separate and contrasting reports on the fate of Yahoo! post the exit of Carol Bartz. Yahoo!’s which could be regarded as the largest Web 1.0 dinosaur has possibly seen all its glory days and is simply unable to find its niche in the fast changing, quickly evolving Web 2.0-3.0 space. That is a pity considering that Yahoo! Was one of the first social companies (Yahoo! Chat anyone?). But then it lost the plot in SEO (Search Optimization) and then again in SNS (Social Networking). By the time Yahoo! Moved away from its display advertisement focused domain, the landscape had changed very nearly completely and the likes of Facebook and Google were well past it. Yahoo again had the first movers in Mobile space with some early link ups with Nokia- Yahoo on the go! but again lost the plot. Read up on the Fall of Yahoo! here
Coming back to the reports: the first one was about Yahoo! Preparing for a strategic sell-out and the fact that Yahoo! board should have sold out to Microsoft long back when Ballmer made a very generous offer. Yahoo’s long-time advisers Goldman Sachs and Allen & Co are preparing to give potential buyers financial information which is a sign that Yahoo is about to put itself on the auction block. Sale appears to be the best way forward ro get rid of the biggest millstone about the company’s neck – its board.
Yahoo has been consistently underperforming and made some howler decisions. Attempts including a very aggressive positioning effort (by Ms. Bartz) to turn the company around failed and the share price is much lower than it was when Ballmer made his bid.
In this context, the second report quotes Shashi Seth, who heads the Yahoo!’s global search and marketplaces business and the efforts around Yahoo!’s (yet again) turn around. This comes at the face of the fact that key executives at Yahoo! are leaving in hordes. Seth re-emphasizes on focus on making great products, experiences and learn how to monetize them. The key according to Mr. Seth is redefining how search has traditionally been understood and breaking the old paradigm of search to focus on new growth engines. Yahoo!’s new growth mantra focuses on
• Creating a search engine for Apps
• Focusing on Mobile search
• Ability to search through integrated user linked information across Flickr, Picassa, e-mail accounts, tweets, FB updates
With due respect to Mr. Seth, the plan sounds nice (as did every other Yahoo! turn around plan) but there are huge many gapping large holes in the scheme of things that Mr. Seth puts. Firstly, the mobility space is taken… Androids will push Google, WPs shall push Bing and Apple doesn’t care, because the whole app experience in terms of App look up and search is so well integrated in Apple that they won’t need Yahoo! to give them the solutions. That kind of rules out Points 1 and 2 listed above as the platforms will inevitably push their native search engines. The UX of Yahoo! search could also be a dampener. This applies to the two of the largest device platforms: Smartphones and Tablets.
Ability to search through integrated user linked information across user accounts is a great idea, but I suspect that the Google’s of the world are already doing it in some measure and are integrating things faster. What really enables Google and Bing is that they have a teams of developers working on their platforms using the native Google and Bing search apps. Yahoo seems to have realized the potential in mobile a little late for any real action coming through to them.
Yahoo seems to be serially missing out on another huge property that they have in terms of 12+ years of content. A content management system with optimization could bet Yahoo!’s answer … much like the Guardian example. However, I don’t think that it has the ability to turn Yahoo! around.
Is it there yet?(Afraid not)-Bing continues to be drain money for Microsoft even while results are not as desired
2 yrs back, Microsoft launched an aggressive attack on Google’s search with its Bing search engine. It also put in place, an agreement with Yahoo powering the Yahoo search at the backend. 2yrs on, Microsoft is still at it, loosing loads of monies to the tune of $700 million a quarter. The costs for Microsoft, meanwhile, keep mounting. In the latest fiscal year, ended in June, the online services division — mainly the search business — lost $2.56 billion. The unit’s revenue rose 15 percent, to $2.53 billion, but the losses still exceeded the revenue.
While there are some results in terms of 14% of search market share in US, it isn’t as encouraging as Microsoft would have wanted it to be. Add the searches that Microsoft handles for Yahoo, and Microsoft’s search technology fields 30 percent of the total. It was always going to be difficult- Google was more than a search, it was a generic- a search behavior! (Read Launch notes of Bing, Part I, Part II, Part III, Part IV)
Microsoft’s assault on Google in Internet search and search advertising may be the steepest competitive challenge in business today. It is certainly among the most costly. Trying to go head-to-head with Google costs Microsoft upward of $5 billion a year, industry executives and analysts estimate.
As the overwhelming search leader, Google has advantages that tend to reinforce one another. It has the most people typing in searches — billions a day — and that generates more data for Google’s algorithms to mine to improve its search results. All those users attract advertisers. And there is the huge behavioral advantage: “Google” is synonymous with search, the habitual choice. Once it starts, this cycle of prosperity snowballs — more users, more data, and more ad dollars. Economists call the phenomenon “network effects”; business executives just call it momentum.
Bing’s gains have not come at the expense of Google. Its two-thirds share of the market in the United States — Google claims an even higher share in many foreign markets — has remained unchanged in the last two years. The share losers have been Yahoo and smaller search players.
Even while Microsoft is a big, rich company, investors are growing restless at the cost of its search campaign. The inability to make effective inroads into Google’s Search stronghold is seen to be a failure in Ballmer’s strategy. While the gas tank of investments at Microsoft is an seemingly an endless pit, the lack of results (as desired) on the Bing search engine and the drain on investments is beginning to show up in terms of Investors, Analysts questioning the path, intent and approach. Challenging Google in real terms on search is a long drawn battle and it all depends on how long is Bing ready to bleed as against how quickly does Bing get measurable real results for investors to approve the spends.
Revisiting the Bing Strategy (Contd)
Google still rules the Search Kingdom by a few hundred furlongs.Latest reports from IgnitionOne, show how Google commanded 81% of all US search advertising spend in Q2 2011. This figure is actually up slightly from the previous quarter and a 17.7% increase from Q2 2010. Meanwhile, Yahoo/Bing spending dropped 7.7% from Q2 2010.Bing, increased its US search market share about 75%, from 9.7% in May 2010 to 17% in May 2011. Meanwhile, Google lost 14% of its search market share in the same timeframe. The combined Yahoo/Bing also saw YOY declines in other key metrics, with cost-per-click (CPC) down 11% and effective CPM (eCPM, or effective cost per thousand views) down 9% year-over-year. Yahoo/Bing clicks (3.6%) and impressions (1.4%) grew slightly year-over-year. However, Google’s rate of growth in these two metrics was approximately nine times greater for impressions (12.8%) and five times greater for clicks (17.6%).Google’s AdEx saw nearly 230% growth in spend year-over-year on a same client basis, despite a 20.5% decline in CPM.
Search is going social, and so Bing’s partnership and integration with Facebook – the world’s biggest social network – could potentially materialize into a big advantage over Google. Furthering the social connect, Bing has enhanced the way it takes and uses data from Facebook (such as Likes and interests) to create personalised search results.
Quoting Qi Lu, director of Microsoft Online Services: Bing and Facebook are collaborating to create a search experience that doesn’t exist at the moment. What’s missing from search is the trusted opinion of people you value.
There are still industry debates about whether Likes do add a level of trust and whether they’re all that valuable in the context of search.
1. But if social is going to play a role in search, then having access to Facebook’s data (which Google doesn’t have), gives Bing the advantage of being able to try new techniques and models for marrying the two areas.
2. Android is activating around 500K devices every day. That is 15 million Android’s in a month which means Google is going full steam at the Mobile Search. Bing is not sitting it out there and has partnerships with RIM, Nokia, Verizon to make Bing the default search engine. Bing is thus not too far behind Google, if not abreast, in providing best vertical searches on mobiles.
3. Bing’s iPad app is hailed as a more complete experience than Google’s equivalent app and really maximizing the benefits of the high resolution touchscreen device. This is significant because Apple makes Google the by-default search engine on its devices. By holding a “better experience” Bing makes itself a better alternative to Google on Apple’s devices.
4. A tighter data privacy than Google, may give Bing an advantage. The issue of data privacy is growing in importance as people wake up to the wide range of information that is available about them on the web. Google has not been able to convince users wholly about the efficacy of its data privacy policies, yet.
5. Microsoft’s Xbox is much more than a games console. For many users it acts as the gateway to the internet from their living room, making it a central part of their online experience. And Bing powers the experience from these gaming consoles.
Google has been way ahead for quite some time now – and has done so many things right, that it’s difficult to say whether Bing will ever be able to catch up. And it’s worth noting that Bing has only been able to gain some critical market share in the US so far (where Bing plus Yahoo – which is powered by Bing’s search engine – jointly have around 30%), while Google has a very dominant 90% + share in most European countries.
So part of Google’s global success is partly down to its commitment to investing in international versions of its products and quick penetration of countries outside the US. Bing will definitely need to add internationalisation to its plans if it is to get closer to its rival.
But at least the intense competition between the two is fuelling innovation and change and is great entertainment for industry watchers.
There was once a time, when Internet was synonymous with Yahoo! and MSN and Google was a start-up. Those were still early days of what I call Web 1.0 and regardless of whether you loved or hated Yahoo!, you simply could not miss it.And then the script started changing and Yahoo! misread the entire Google search based ads and its potential. Yahoo! was enjoying being the No.1 in banner ads and it didn’t see any threat in Search. That is where Google turned the tables over and Yahoo! and since then Yahoo! has played catch up. In fact, it never even played catch up, it has been lumbering indistinctly ever since, a shadow of its former shelf.
In 2009-10,Carol Bartz launched an aggressive campaign to re-vitalize Yahoo!. On Search, it partnered with Bing to take on Google. A $100 million marketing campaign around re-positioning Yahoo kicked off. And Nothing happened! A few ads here and there, Yahoo has not made significant over-haul yet and worse, I don’t see any big future in the horizon as well.
So now, it does come as a surprise when Alex Linde, Director of Yahoo! Mobile advertising christened Yahoo! as a premier digital media company! There is not much doubt about its being a media company. Matter of fact, Yahoo!’s library of content over the last 14-15 years is second to none and Yahoo should ideally be the content king of Internet. The incongruence around “premier digital media company” is because Media today is defined more by YouTube, Google, Twitter and Facebook more than Yahoo. Media today is real time and not the archival internet bytes. Media today is shared discoverability it as it happens. And Yahoo! is not how Media is defined today. It is a great archives, a great library, but nothing current is Yahoo!
Ross Levinsohn, Yahoo! EVP defends it attributing that it still has 700 million people on its platform. That’s about 50% of the online population globally. Nine out of ten Internet users in the U.S. Yahoo! It features as No1. Or No.2 in 19 categories — sports, news, finance, and entertainment news, one of the largest entertainment gossip site, larger than ESPN in sports, larger than Wall Street Journal, Fox News and Bloomberg combined in finance. Yahoo is still the most trusted brand on the Web. Flickr is the largest generic crowd-sourced photo-sharing experience. The numbers are good, but somehow Yahoo! doesnot get credit for them. More importantly Yahoo! seems to be quite clueless as to how it could translate these numbers to strategy and numbers.
Yahoo! always has the massive audiences, scale, data that enables them to target and a canvas that brands and advertisers can actually tell a story on. Sure, its not as easy as the 1999-2000 era and Yahoo has to compete and contend with the company of Google and Facebook. Yahoo! is beginning to aggressive look at new formats in the ad space-video specially to tell a brand’s story. The criticality here is to integrate the diverse platforms that Yahoo! has presence in and leverage the scale of numbers as high as 700 million to provide the canvas to brands to target users.
According to Levinsohn- The important thing (for Yahoo!) is to figure out how all their big business categories will work together. It is also important to take a look at what Yahoo! does in search and figure out how to optimize that incredible rich product and history, how to integrate mail with other content pieces (and) search pieces, make sure that product and region are working hand in hand.
Yahoo! is clearly beginning to focus on its strengths and the online advertising space and re-organizing its businesses around the media-ad canvas vision. This is possibly the second act leading to Yahoo’s revival and though I am un-convinced about Yahoo!’s edge in delivering its intent, its worth a watch. Good Luck, Yahoo!
This post follows the developments around the Semantic Web space which i have been blogging about over the past few months.
In a significant development, Google, Microsoft, and Yahoo have teamed up to index and define an interconnected vocabulary of terms that can be added to the HTML mark-up of a Web page to communicate the meaning of concepts on the page. The initiative is called schema.org. The move represents a major advance in a campaign initiated in 2001 by Tim Berners-Lee, the inventor of the Web, to enable software to access the meaning of online content—a vision known as the “semantic Web.” By tagging information, Web page owners could improve the position of their site in search results—an important source of traffic. The Schema.org approach is modelled on one of the more straightforward methods of describing the meaning of a Web page’s contents. Being backed up by the biggest search engines, Schema has a very powerful Launchpad and provided that it can index right and more importantly learn from crowd intelligence and add to its vocabulary, this could be the birth of Semantic Web.
This data can be used by any software to cross-correlate things that are related, or to understand the relationship between information from different sources. Semantic information might improve artificially intelligent assistants or tools able to make good recommendations.
Independently Google is working on a Authorship mark-up options which indexes information on the web in terms of its creator. Google supports this by it +1 feature, a revised Panda search algorithm and a news algorithm.
While Schema.org still waits to have a affiliation from W3C, which the big 3 search engines have by-passed currently to unveil this semantics project and there are some code and mark-up led incompatibilities, Scheme.org definitely is a move towards integrating intelligent web services to further the consumer experience.
Loosing technology leadership and going from No.1 to an also ran within a few years. An interesting account of how Yahoo lost the Internet plot to Google by Paul Graham. Yahoo’s inability to see the major developing trends in terms of building up search based customer targeting finally led it to being a “also ran” from “the biggest thing on internet”.
This is a compelling reading highlighting how successful companies are blind to emerging trends in the face of their big successes.
What happened to Yahoo?
When I went to work for Yahoo after they bought our startup in 1998, it felt like the center of the world. It was supposed to be the next big thing. It was supposed to be what Google turned out to be.
What went wrong? The problems that hosed Yahoo go back a long time, practically to the beginning of the company. They were already very visible when I got there in 1998. Yahoo had two problems Google didn’t: easy money, and ambivalence about being a technology company.
The first time I met Jerry Yang, we thought we were meeting for different reasons. He thought we were meeting so he could check us out in person before buying us. I thought we were meeting so we could show him our new technology, Revenue Loop. It was a way of sorting shopping search results. Merchants bid a percentage of sales for traffic, but the results were sorted not by the bid but by the bid times the average amount a user would buy. It was like the algorithm Google uses now to sort ads, but this was in the spring of 1998, before Google was founded.
Revenue Loop was the optimal sort for shopping search, in the sense that it sorted in order of how much money Yahoo would make from each link. But it wasn’t just optimal in that sense. Ranking search results by user behavior also makes search better. Users train the search: you can start out finding matches based on mere textual similarity, and as users buy more stuff the search results get better and better.
Jerry didn’t seem to care. I was confused. I was showing him technology that extracted the maximum value from search traffic, and he didn’t care? I couldn’t tell whether I was explaining it badly, or he was just very poker faced.
I didn’t realize the answer till later, after I went to work at Yahoo. It was neither of my guesses. The reason Yahoo didn’t care about a technique that extracted the full value of traffic was that advertisers were already overpaying for it. If they merely extracted the actual value, they’d have made less.
Hard as it is to believe now, the big money then was in banner ads. Advertisers were willing to pay ridiculous amounts for banner ads. So Yahoo’s sales force had evolved to exploit this source of revenue. Led by a large and terrifyingly formidable man called Anil Singh, Yahoo’s sales guys would fly out to Procter & Gamble and come back with million dollar orders for banner ad impressions.
The prices seemed cheap compared to print, which was what advertisers, for lack of any other reference, compared them to. But they were expensive compared to what they were worth. So these big, dumb companies were a dangerous source of revenue to depend on. But there was another source even more dangerous: other Internet startups.
By 1998, Yahoo was the beneficiary of a de facto pyramid scheme. Investors were excited about the Internet. One reason they were excited was Yahoo’s revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of “Eureka!” I was shouting “Sell!”
Both the Internet startups and the Procter & Gambles were doing brand advertising. They didn’t care about targeting. They just wanted lots of people to see their ads. So traffic became the thing to get at Yahoo. It didn’t matter what type. 
It wasn’t just Yahoo. All the search engines were doing it. This was why they were trying to get people to start calling them “portals” instead of “search engines.” Despite the actual meaning of the word portal, what they meant by it was a site where users would find what they wanted on the site itself, instead of just passing through on their way to other destinations, as they did at a search engine.
I remember telling David Filo in late 1998 or early 1999 that Yahoo should buy Google, because I and most of the other programmers in the company were using it instead of Yahoo for search. He told me that it wasn’t worth worrying about. Search was only 6% of our traffic, and we were growing at 10% a month. It wasn’t worth doing better.
I didn’t say “But search traffic is worth more than other traffic!” I said “Oh, ok.” Because I didn’t realize either how much search traffic was worth. I’m not sure even Larry and Sergey did then. If they had, Google presumably wouldn’t have expended any effort on enterprise search.
If circumstances had been different, the people running Yahoo might have realized sooner how important search was. But they had the most opaque obstacle in the world between them and the truth: money. As long as customers were writing big checks for banner ads, it was hard to take search seriously. Google didn’t have that to distract them.
But Yahoo also had another problem that made it hard to change directions. They’d been thrown off balance from the start by their ambivalence about being a technology company.
One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a “media company.” If you walked around their offices, it seemed like a software company. The cubicles were full of programmers writing code, product managers thinking about feature lists and ship dates, support people (yes, there were actually support people) telling users to restart their browsers, and so on, just like a software company. So why did they call themselves a media company?
One reason was the way they made money: by selling ads. In 1995 it was hard to imagine a technology company making money that way. Technology companies made money by selling their software to users. Media companies sold ads. So they must be a media company.
Another big factor was the fear of Microsoft. If anyone at Yahoo considered the idea that they should be a technology company, the next thought would have been that Microsoft would crush them.
It’s hard for anyone much younger than me to understand the fear Microsoft still inspired in 1995. Imagine a company with several times the power Google has now, but way meaner. It was perfectly reasonable to be afraid of them. Yahoo watched them crush the first hot Internet company, Netscape. It was reasonable to worry that if they tried to be the next Netscape, they’d suffer the same fate. How were they to know that Netscape would turn out to be Microsoft’s last victim?
It would have been a clever move to pretend to be a media company to throw Microsoft off their scent. But unfortunately Yahoo actually tried to be one, sort of. Project managers at Yahoo were called “producers,” for example, and the different parts of the company were called “properties.” But what Yahoo really needed to be was a technology company, and by trying to be something else, they ended up being something that was neither here nor there. That’s why Yahoo as a company has never had a sharply defined identity.
The worst consequence of trying to be a media company was that they didn’t take programming seriously enough. Microsoft (back in the day), Google, and Facebook have all had hacker-centric cultures. But Yahoo treated programming as a commodity. At Yahoo, user-facing software was controlled by product managers and designers. The job of programmers was just to take the work of the product managers and designers the final step, by translating it into code.
One obvious result of this practice was that when Yahoo built things, they often weren’t very good. But that wasn’t the worst problem. The worst problem was that they hired bad programmers.
Microsoft (back in the day), Google, and Facebook have all been obsessed with hiring the best programmers. Yahoo wasn’t. They preferred good programmers to bad ones, but they didn’t have the kind of single-minded, almost obnoxiously elitist focus on hiring the smartest people that the big winners have had. And when you consider how much competition there was for programmers when they were hiring, during the Bubble, it’s not surprising that the quality of their programmers was uneven.
In technology, once you have bad programmers, you’re doomed. I can’t think of an instance where a company has sunk into technical mediocrity and recovered. Good programmers want to work with other good programmers. So once the quality of programmers at your company starts to drop, you enter a death spiral from which there is no recovery. 
At Yahoo this death spiral started early. If there was ever a time when Yahoo was a Google-style talent magnet, it was over by the time I got there in 1998.
The company felt prematurely old. Most technology companies eventually get taken over by suits and middle managers. At Yahoo it felt as if they’d deliberately accelerated this process. They didn’t want to be a bunch of hackers. They wanted to be suits. A media company should be run by suits.
The first time I visited Google, they had about 500 people, the same number Yahoo had when I went to work there. But boy did things seem different. It was still very much a hacker-centric culture. I remember talking to some programmers in the cafeteria about the problem of gaming search results (now known as SEO), and they asked “what should we do?” Programmers at Yahoo wouldn’t have asked that. Theirs was not to reason why; theirs was to build what product managers spec’d. I remember coming away from Google thinking “Wow, it’s still a startup.”
There’s not much we can learn from Yahoo’s first fatal flaw. It’s probably too much to hope any company could avoid being damaged by depending on a bogus source of revenue. But startups can learn an important lesson from the second one. In the software business, you can’t afford not to have a hacker-centric culture.
Probably the most impressive commitment I’ve heard to having a hacker-centric culture came from Mark Zuckerberg, when he spoke at Startup School in 2007. He said that in the early days Facebook made a point of hiring programmers even for jobs that would not ordinarily consist of programming, like HR and marketing.
So which companies need to have a hacker-centric culture? Which companies are “in the software business” in this respect? As Yahoo discovered, the area covered by this rule is bigger than most people realize. The answer is: any company that needs to have good software.
Why would great programmers want to work for a company that didn’t have a hacker-centric culture, as long as there were others that did? I can imagine two reasons: if they were paid a huge amount, or if the domain was interesting and none of the companies in it were hacker-centric. Otherwise you can’t attract good programmers to work in a suit-centric culture. And without good programmers you won’t get good software, no matter how many people you put on a task, or how many procedures you establish to ensure “quality.”
Hacker culture often seems kind of irresponsible. That’s why people proposing to destroy it use phrases like “adult supervision.” That was the phrase they used at Yahoo. But there are worse things than seeming irresponsible. Losing, for example.