Wednesday, April 6, 2016

Yahoo's Identity Crisis

Over the last decade, Yahoo has experienced one embarrassment after another. The latest of these debacles being when it announced its plan to spin off its stake in Alibaba, only to publically retract the statement later.  Yahoo has lacked purpose and vision. Its self-description has changed 24 times in 24 years, and a mission statement has not been published for the public to view [1].  At this point, there really is not anything that only Yahoo can do for a customer. Yahoo did not pass the Coherence Test beyond the first few years of its conception [2]. It has not been clear about the unique value it wants to provide, nor has it aligned its products towards any particular direction. Yahoo bet on the wrong technology and lost critical opportunities by turning a blind eye towards change [3].

Yahoo started off as a place where users could keep track of all their interests online. It was a dashboard where various blurbs of content were related only by the user viewing them. As time passed, users did not need this dashboard anymore. They did not mind visiting multiple websites. This was when Yahoo should have realized their central business strategy was going to fail. Rather than innovating and leading the market to a new direction, it has been putting out fires since. These fires are caused by one central reason: why does Yahoo need to exist anymore? It can be seen by comparing its interface from a decade ago to what it is today. It is just an incremental version of itself.

Yahoo 2006:



Yahoo 2016:


An example of Yahoo betting on the wrong technology was highlighted by Yahoo Messenger. Yahoo Messenger 6.0 was released in mid-2004. At the time it, there were two messenger services that had larger market share, MSN (internationally) and AIM (nationally). Network effects contributed to the fact that most users used multiple messenger services [4]. Yahoo had to differentiate itself. Executives conclude the main service they could provide, that could not be easily copied by other services, was an integrated platform. Yahoo was invested in games, horoscopes, e-commerce, blogging, and news, just to name a few. It wanted to integrate all its networks in each of its products. For example, users would be able to play Yahoo games on the messenger platform itself. Yahoo stated that since it had so many competitors from different services, it could never provide the best product, but it could create place where someone could get all their products [4].  A majority of Yahoo resources were invested in network integration. It invested in technology that most of their target consumers did not care about.


In conclusion, it is clear where Yahoo went wrong. Among other mistakes, they invested in developing the wrong products, and refused to change with the market. This was a consequence of not having clarity about who they were as a company, and so did not work to be the best in class in any segment.

References:

[1]http://knowledge.wharton.upenn.edu/article/a-tale-of-two-brands-yahoos-mistakes-vs-googles-mastery/

[2] The Coherence Premium (Mainardi , Leinwand)

[3] Seven Ways to Fail Big (Carroll, Mui)

[4[Yahoo Messenger: Network Integration (Eisenmann, Wagonfeld)

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