Has Yahoo Lost Its Yodel?

Is Jerry Yang ready to throw in the towel and partner with Microsoft?

It seems like only yesterday that Yahoo was the darling of the Web.

The Yahoo Way or the Highway?

The irony of this proposed relationship is palpable. In the early years, Yahoo cautiously and adroitly avoided confrontation with Microsoft. But one thing was clear in Sunnyvale: there was a Yahoo way of doing things, and often that way was the exact opposite of how Microsoft conducted business.

That is why this particular partnership is peculiar. It would be difficult to watch an iconoclastic brand like Yahoo slowly dissolve into nothing — just like many of us lamented the Cingular brand being absorbed by AT&T. Losing such a spirited brand as Yahoo would be a sad day.

We often joked when I was at Yahoo (less than 2,000 employees at the time) that you could slap the Yahoo logo on an old shoe and people would clamor for it. Yes, the brand was that powerful (credit Karen Edwards, John Costello, Murray Gaylord, et al.).

Have we heard the last of Yahooooooo!? Funny enough, a few years back, we all recall when Yahoo accidentally let lapse the royalty contract for this famous Yahoo yodel sound bite. What originally cost them $30 cost them millions in royalty fees to renew. At stake now is much more than dollars. At stake is one of the “brand souls” of the original Internet boom. Is it worth it?

Vulcan Mind Meld

The task of melding the culture of 14,000 Yahoo employees and 80,000 Microsoft employees would be daunting. It could take at least one to two years to properly get things aligned. And, while resources and energy are being spent on merging rather than innovating, Google will neither have the stiff competition nor incentive to evolve search results. As I pointed out in part two of my column, “Why Search Is Still Prehistoric,” Google sorely needs innovation. Is MSN buying Yahoo analogous to the second- and third-place runners in a sprint tying their legs together in a hope to catch the leader?

Instead, Google can focus more attention on other things, like its mobile strategy, which is becoming exceedingly important. Many non-U.S. citizens only access the Internet via their mobile device. They’ll be the most likely to connect with a Google Android.

The U.S., once a laggard in this realm, is rapidly catching up. Case in point: I’m typing this on my mobile device in the Toronto airport.

Google Morphs into Microsoft

It’s astounding to think Google has almost morphed into the next Microsoft. How else could one explain Facebook and Yahoo aligning with Microsoft? It’s a classic NIMBY strategy to keep Google at bay. Google is a much better fit for both Yahoo and Facebook culturally and demographically (Mountain View is in the back yard of Palo Alto and Sunnyvale).

Speaking of Facebook, wouldn’t Microsoft be better served to focus its efforts on cultivating this relatively new relationship? Even though Facebook has only 400 employees, they add 250,000 new users each day. That’s an astounding growth rate considering that they already have 64 million users. Of those 64 million, 50 percent visit Facebook every day.

Assuming Facebook is the next big thing, why wouldn’t Microsoft leap ahead with them rather than play catch-up with Yahoo? Or should they purchase a smaller player like Bebo? In South America, they didn’t invest in building landlines where they hadn’t previously been laid; rather, they went straight to building cellular towers. Hence, countries that were lagging behind suddenly jumped to the technological forefront. (It doesn’t always pay to be the first mover).

The Next Frontier

The same argument could be made here. Does it make sense for Microsoft to build up an arsenal with weapons that would potentially be less relevant (e-mail, portals, search, etc.) if the next battleground is social networking, mobility, and beyond?

One thing Yahoo and Microsoft could do in the short term is leverage Internet Explorer’s virtual ubiquity (90 percent browser penetration). Federal regulators and the EU willing, they could combine their impressive marketing power to inform the general Internet population there’s no need to go to a search engine to perform searches.

Instead users could type in their search query directly into the IE browser’s URL address field. (I realize toolbars perform this function, but many of the “Internet unenlightened” — think mom and dad — are unaware toolbars even exist.)

MSN/Y! would take you directly to the most relevant page with a list of other search results below (in case the page they took you to wasn’t relevant). This would save the users two steps:

  1. Typing in www.google.com
  2. Clicking on one of the results.

Of course this assumes MSN/Y! search results are fairly relevant. That’s the $40 billion dollar question isn’t it?

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