In February 2008 Microsoft tried to buy Yahoo. They failed.
The Yahoo board, at that time still led by Jerry Yang, declined the offer because they felt "that Microsoft's proposal substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments."
Back then, Yahoo clearly saw themselves as one of the leading players on the web. And with a 20 percent search market share in the U.S., they played a substantial role. But even then search traffic was declining really fast and Yahoo was looking for different options.
Yahoo, Outsourced: Beginning of the End?
A year later, the deal between Microsoft and Yahoo finally is getting visible. Bing began powering Yahoo's organic results last week. This led to online proclamations about the end of Yahoo as a search engine.
Is Yahoo now getting ready to get out of search? Not according to Yahoo.
In a blog post on the Yahoo search blog, Shashi Seth, Senior Vice President of Yahoo Search Products, compared the search industry with other industries like airplane manufacturing, which outsource their engines or mobile handset builders who get their chips elsewhere. He puts Yahoo right in them: Yahoo's search engine technology is now outsourced to Bing.
Let's take this analogy and explore it a little further. Let's say Yahoo is a racing car competing in the Formula 1. It kind of feels like the racecar from 1970s trying to get back into Formula 1 with a new engine. Herbie the Beetle won a lot of races, but Yahoo is no Herbie. Yahoo will never play a big part in the search engine race anymore.
Is Yahoo really on their way out of search? Or is Seth right and will Yahoo become a big player again? The future will tell, because the past certainly won't.
Yahoo's 'Never Been a Search Company'... Until Now?
Perhaps Yahoo is in big need of psychiatric help. The company has had many faces in their history. They started off being a directory of links, becoming a portal, then going into search, and finally becoming a social network.
It seems as if Yahoo has a split personality. They don't seem to know what they are and what they want to be.
After all, Seth claims Yahoo is still a search company, but last year Carol Bartz proclaimed, "we have never been a search company. It is: 'I am on Yahoo. I am going to do a search.' "
So why this split personality when it comes to Yahoo search?
"Yahoo has always refused to define itself in singular terms," Stott said. "However, Bartz et al. have always pointedly remarked Yahoo is not a search engine. The slapped hand now is purely to ensure Yahoo remains somehow synonymous with search to ensure search volume remains healthy."
And she's right. Yahoo isn't search, but they don't want to be "out" of an industry that potentially could be a big money maker. It's like someone who doesn't want to break up with a girlfriend because he doesn't know if he will run into another partner or not.
Should Yahoo Even Want to Remain in Search?
For the Yahoo/Bing alliance, the Yahoo website should have a search engine, but the actual product search should go entirely to Bing. Simply to build that brand more and gain more market share that way.
For Yahoo, a focus on search wouldn't be good either. They can have a lot more value being a content company and maybe even play a bigger role in social media. After all, what's missing in social media is an independent player who will connect all the different social media together somehow. Why not let that be Yahoo?
But for now Yahoo still is lying on the psychiatrist's sofa, trying to figure out what they really are. Why don't we help them a little? Which way do you think Yahoo should go?