Wednesday, April 26, 2017

The Yahoo! Geek Tragedy

Yahoo was the biggest internet company in the world at the turn of the century. It was the de facto standard home page of the early internet. It was a web ‘portal’ in the truest sense, with search, sports, finance, news coverage, job services, video streaming, original entertainment among other things. This breadth and lack of identity without a singular strategic outlook, I believe, led to Yahoo’s sad decline.

But how did Yahoo specifically go from being synonymous with the early internet, to being a shorthand for a business spiraling into irrelevance?

The three critical components of a competitive game-plan, identified by Michael G. Rukstad & David J. Collis in ‘Can You Say What Your Strategy Is?’, can be found deficient in Yahoo’s story;

Objective – Yahoo was never certain if it was a media company, or a technology company. They aspired to be a ‘web’ company, and the fact that they set the ball rolling in the internet company culture possibly hurt them. Dabbling in search, news and email, it was never sure what it wanted to be. Marissa Mayer, the current CEO-President of Yahoo (Mayer was brought in as a last-ditch attempt to revive the company), even once said that she was always willing to consider ‘Strategic Alternatives’, highlighting the mess that Yahoo strategically was/is. Rukstad & Collis say that an objective profoundly impacts a firm and the stakeholders involved. A lack of objective, thus, seems to have had a profoundly negative impact on Yahoo.

Scope – Knowing and sticking to the scope in terms of offerings, location, and vertical alignment, allows a firm to reap benefits of simplicity, standardization, and experience, according to the authors. Instead, Yahoo is characterized by a myriad of offerings as a portal. In Mayer’s tenure, the buzzword was ‘MaVeNs’, an acronym for Mobile, Video, Native, and Social, indicative of Yahoo being a mare’s nest of epic proportions. Yahoo has maintained a start-stop nature of operations around many locations around the world, not helping the scope cause. These unclear boundaries have in-turn proved damaging to Yahoo’s cause (if there ever was one).

Advantage – A firm’s advantage is characterized by its value proposition and its differentiating nature. Yahoo although a pioneer, did many things wrong to maintain a clear advantage. As we now know, tech companies are defined by their hacker-centric cultures and innovative worldview, whereas Yahoo downplayed the importance of tech and lost out early. After losing out, Yahoo made a slew of acquisitions to maintain advantage (rather, stay afloat). With Flickr, Tumblr and Yahoo Mail all teeteringly close to insignificance, Yahoo currently has only a romanticized brand-name as an advantage.

Yahoo never hit what the authors call ‘The Strategic Sweet Spot’, where it meets customer needs in a way rivals cannot. Because Yahoo could never do this, their downfall was always impending. This occurred in 2017, with the sale of Yahoo’s core businesses to Verizon for ~$4.5bn.
I believe the sale was still a coup for Yahoo, given its non-existent strategic approach, since inception.

Ref.
A Tale of Two Brands: Yahoo's Mistakes vs. Google's Mastery - Feb 23, 2016 Opinion Strategic Management Global FocusNorth America - http://knowledge.wharton.upenn.edu/article/a-tale-of-two-brands-yahoos-mistakes-vs-googles-mastery/
RIP Yahoo: Why Marissa Mayer Failed - Steve Tobak - http://www.foxbusiness.com/features/2016/07/26/rip-yahoo-what-caused-its-very-slow-painful-death.html

Yahoo: 9 reasons for the internet icon's decline - Cara McGoogan - http://www.telegraph.co.uk/technology/2016/07/25/yahoo-9-reasons-for-the-internet-icons-decline/

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