How Yahoo Got Its Mojo Back

A handful of blog-evangelists, a couple of key buys and some libertarian friendly moves have turned Yahoo from a dot.has.been to the new darling of the chattering classes. It is only a matter of time when mainstream media rediscovers Yahoo, and a stock market resurgence follows….

For Yahooligans, 2004 was a year of frustration. No one noticed the fact that company’s stock posted a hefty 72% gain, ending the year at about $38 a share. Overlooked was the fact that it had sales of $3.6 billion and net income of $834 million. That’s twice as much money it raked in 2003, and nearly three times the profit. It is no surprise that many Yahoo insiders felt like the Yankee fans – no matter what they did, they were going to be overshadowed by Google.

Google’s spectacular initial public offering (admittedly that lined Yahoo’s coffers nicely and helped with those profits in 2004) and ensuing hubbub where even political columnists were comparing the minimalist search engine to second coming of Jesus. Not a day went by when someone or the other theorized that Google was going to build a Web OS, a new kind of application framework or even a browser. In the other words Google will turn the web into a giant platform. Google was everywhere! Even in the pages of GQ.

That has tweaked the Yahoo insiders no end! Many had expressed their frustration, for rest of the world not seeing the true value of Yahoo, and how well the company was doing. It just seemed so boring, lacking the pizzaz of Google, its celebrity guests, and its wonderful chef. A few months ago, almost suddenly the tide turned.

Many starting to see that many of Google’s forays into anything but search have been like its search results lately – off target. Orkut is a bit of a blah! Blogger is because, blogger was! Google News and Froogle – well I think Jeff Jarvis has some choice words about that. AdWords/AdSense are great, but prone to click fraud. GMail is wonderful, but the ads on my content, no thank-you! An Autolinks brouhaha ensued.

This was precisely the opening Yahoo had been waiting for, to launch some sort of a media assault. Wired assigned Mike Malone, an Internet 1.0 guy to do a story on the company, and its comeback. The UnGoogle was a piece from the dot-com days, fancy wordsmith doing his thing, except it lacked the fire to get a “conversation” started.

The indignity is all the greater when you consider Yahoo!’s numbers: 165 million registered users, 345 million unique visitors a month, $49 billion market cap, and a 62 per­cent increase in revenue last quarter, bringing 2004 total revenue to $3.6 billion. Yahoo! makes more money and has more patents, services, and users than Google; it even has its own yodel.

And what it also has a couple of guys, I like to call them blog evangelists, who knowingly or not, have brought the right kind of attention to the company. Russell Beattie who recently joined Yahoo has been blogging furiously (much to my annoyance) about Yahoo and its wireless efforts. In normal course of events, Yahoo would have issued a press release, and many of us would have paid little or no attention. Jeremy Zawodny is the other and has helped the company focus on some of the newer social media trends. I have never met him, but if his blog is anything to go by, then perhaps he is spreading the open media religion at Yahoo. The blog-evangelists unlike press relations folks, only write when there is something important to say. That is if they want to maintain their credibility.

Russell and Jeremy are small part of the big equation. After sitting on its haunches for so long, and letting google walk away with the AdSense dollars, Yahoo’s Overture division is finally getting its act together and rolling out its small-publisher service. By buying Flickr earlier this month and OddPost last year, Yahoo has bought into the open-standards, web services business model, something which has gotten it much love from the bloggers who apparently care too much about this type of stuff. Adding RSS and blogs to My Yahoo, makes them cooler than the other two – MSN and Google. In an effort to best Google, the company has upped its free email storage to one gigabyte. Yahoo offered desktop search tool, just like Google. It is launching a blogging-meets-social networking tool, Yahoo 360. I have not seen it but count on blogsphere love for it. The company also announced today that it will search creative commons content. What that means is really nothing for many of the mom-and-pops don’t care about license information etc. But it will get boing-boinged and create the right karma for the company. If you look at all these features, it is not clear that if any one of these will bring any major dollars into the company. It will show to the chattering classes that Yahoo is on the right track. And is embracing new technologies etc. That’s until something new comes along.

Just had coffee with Gautam Godhwani, one of the co-founders of SimplyHired and he pointed out that Yahoo was an Internet 1.0 company that adapted to Internet 2.0 very quickly, embracing the open platforms and social computing phenomenon. “Yahoo changed, and changed really fast, reacting to market trends that were not favoring them,” he says. Like some of the more thoughtful in Silicon Valley, he thinks Yahoo is a more solid, a more mature company. Google in comparison is more of a young buck, running rampant. Good points, but I think in many ways what has changed is the perception of Yahoo. And that is the key point here.

These are not moves that will have a material impact on the company’s bottom line. Yahoo’s future, as far as I am concerned is in broadband and mobile. It has partnerships with phone companies where it is their content partner, and is forging many such relationships in the wireless space. How critical all that is to Yahoo, I repost this bit from a previous column by Alex Rowland.

Yawhoo? With Terry Semel at the helm, Yahoo!’s foray into entertainment has been aggressive. By forming tight relationships with distributors such as Comcast and SBC, Yahoo! is attempting to become a super-aggregator of rich media content. Recent deals to simulcast shows like “Fat Acress” with Showtime combined with their strong support for Media RSS standards should telegraph their aspirations. If they manage to tie up enough (potentially exclusive) arrangements with the old media goliaths, while simultaneously aggregating large quantities of niche media assets, they can scale the network quickly enough to make competing with them very expensive.

Could Yahoo become the preferred music store on SBC’s Project LightSpeed? Sure. A preferred distributor of online movies… possible. There is a good piece in Fortune on SBC/Yahoo relationship, but unfortunately its behind the wall, so I am not linking to it for now.