Where Yahoo! Went Wrong

There is an abundance of news recently regarding the big Y!, and in this case the expression "any news is good news" does not fit. By almost all accounts, the company is circling the drain, and trying to find a new direction that is anywhere but down. This post by a former consumer of Yahoo!'s products is anecdotal and opinionated, but hopefully relevant.

A Culture of Arrogance

Let's face it: In 2000 Yahoo was the portal of choice. In a one-stop shop I could get e-mail, instant messaging, games, shopping, auctions, and both an excellent ontological directory of web pages and good search results (via this new search company named Google). They brought the utility of AOL and Prodigy into the open web, where anyone with a 14.4k modem could access it for free, and their site traffic was enormous. Yahoo! was the top dog of the time, and they knew it.

Now here we are in 2008, and Yahoo! really hasn't changed much. They've changed the layout of their portal page a bit, and the "My Yahoo!" page has support for more widgets, but true innovation has been conspicuously absent. The company's current offerings are evolutionary, not revolutionary. It is my belief that innovation has, with a very few exceptions, died at Yahoo!, largely as a result of arrogant thinking and stubborn resistance to change with many of their products.

The Failings

In the early 00's, people started to realize that they could get the same search results that Yahoo! provided in a minimal interface free of graphical ads by going directly to Google. The day that Yahoo! decided to switch to their own brand of search was the day I stopped utilizing their search engine. Their algorithm was, and continues to be, inferior to PageRank.

On April 1, 2004, Google introduced GMail, which was not just another webmail client, but an entirely new way to think about email. Sure, the initial doorbuster was the free 1GB of storage (several orders of magnitude greater than any provider at the time), but the GMail interface was revolutionary, and to this day is unique among webmail providers. Yahoo! did eventually release a "modern" mail client - an AJAX rendition of the same, tired interface of Eudora mail circa 1996.

It seems that Yahoo! has made some effort, but it's marginal at best. They continue to restrict the functionality of their free email service and request $20/yr for such "advanced" services as POP access, Forwarding, and "No graphical ads", all of which I can get from GMail for free. Why would any new user ever subscribe knowing that they would be provided a significantly inferior service to other offerings?

On a more personal note, I have also seen this arrogance displayed from the customer support side at Y!. Specifically, when my wife's account was obviously hijacked, we tried to jump through so many hoops and provide as much relevant information as possible to get the account back, but to no avail. Since the hackers had changed her personal information in the profile, there was no way that we could convince them that we were the rightful owners. For fun, try searching for site:profiles.yahoo.com "Hack AZ" and look at the over 100 accounts who have this peculiar first and last name. Hint: all of them are hacked accounts that were never reclaimed, yet Yahoo! asserted to us that there was no problem with account hacking. Of course if your name is Sarah Palin they will resolve your email hacking issues very quickly.

The successes

It's not all bad for Yahoo!, and part of the reason the deal fell through with Microsoft ages ago is that their portfolio is under appreciated. They still have one of the best Sports websites around, and their Games page is still a good place to go for simple online gaming. I've also recently found a bit of innovation living at Yahoo! Pipes, a fantastic new mechanism for aggregating information feeds of various types.

They also have in their portfolio some non-Yahoo! branded sites such as Flickr and Delicious that are amongst the leaders in photo sharing and social bookmarking, respectively. I feel that it was a very good decision to let these entities remain mostly independent of the Yahoo! label, and believe that they continue to thrive largely because of it.

How to survive

For Yahoo! to even have a chance at success in the coming years, I believe that they have to follow these steps:

1. Get over yourselves and crawl out from under your rock. You were once the leader, and are no more. You've been out-innovated but refuse to acknowledge superior technology. Your email service is an artifact of the 90's, polished to look like it belongs in the 21st century, and few people are going to pay for webmail services that others provide for free. If you're concerned about monetizing these services, maybe you could attach small text advertisements to the bottom of forwarded and POPed emails?
   
2. Monetize your unbranded assets. I'm not a huge fan of advertising, but I know what pays the bills. It seems to me that Delicious, Flickr, etc. could definitely use more contextually relevant text advertisements. You may lose a few consumers who refuse to have their bookmark and photo streams polluted with advertisement, but I think overall it would be a huge gain.
3. Focus on innovation. Concentrate on revolutionary ideas such as Pipes. Explore new avenues of search that aren't just minor improvements on your ranking algorithm. Improve the quality of service of your products by looking towards the future while being aware of what is available in the present.

Considering its current state and the overall economic climate, a long, challenging road lies ahead for Yahoo!. They still have plenty of high quality assets and consumer base, but it will not be sufficient to rest on these laurels.