As a Yahoo enthusiast and shareholder it’s been hard to watch the company struggle so hard over the past few years only to lose ground to Google, especially because Yahoo’s social networking efforts and web 2.0 initiatives have in most ways been superior to Google’s. Flickr is the best example of a superb Yahoo application that is more used than Google’s Picasa (which is also excellent but was late to the scene so most early adopters are sticking with Flickr, which is somewhat better anyway in my view).
Henry Blodget at Silicon Valley Insider is reporting that Yahoo will proceed soon with the drastic layoff scenario – rumored to be some 1500-2500 people.
Human issues aside, this will likely be very good for the stock price and company’s future prospects. Google learned early on that the key to profitability was scaling up systems without comparable scaling up of staff. Google thus leveraged the incredible efficiency of computers to generate more profits. Yahoo, on the other hand and especially with Terry Semel in charge, sees themselves as more of a media and content producer with all the labor intensiveness and lack of internet efficiency that approach entails. Google was right, Yahoo was wrong. Even Google’s own Youtube, a masterpiece of creating cheap content without staff, is struggling to monetize all the content and traffic.
I’m oversimplifying the relationship of content production to profit here, but in general terms I continue to believe that the expression “content is king” was *never* true on the internet, and that in many ways sticking to this mantra cost Yahoo a big part of the ballgame. Yahoo actually used Google search as Yahoo’s search tool for many years, and could certainly have aquired Google in the early days for millions of dollars rather than becoming eclipsed by Google which now has a market capitalization of about five times Yahoo. Why didn’t they do it? Google was “search”, not “content”, and Yahoo foolishly believed content was king.
Content is a pawn in the big online chess game, and don’t forget it.
Joe Duck 
I know there is a bit of “20/20 hindsight” in all things but wasn’t it all rather obvious that Yahoo was misallocating its resources and trying to become a content provider?
One need only look at TV and the Movies to see that a stream of content is vital but the important thing is the low acquisition costs. Old movies, reality TV, … all this is content that is cheaply acquired. New and original programming may win awards but not from the investors.
A bunch of screaming housewives in Orange County may not be such great content but its cheap to produce and brings in advertising revenue. A few dozen 20 somethings with skimpy attire and no brains brings in revenue.
Did anyone think the internet was going to be different. Sure quality is important…you win awards for it. But massive content is best obtained by letting other empty headed twits talk about the empty headed twits on the show.
Scaling up real cheap brings in revenue. Scaling up at high cost brings in awards and eventual pink slips.
the important thing is the low acquisition
Although you are exactly right, I don’t think Yahoo even appreciates this fully right now. I remember watching a PBS show about 3 or 4 years back which featured Google’s Schmidt and Yahoo’s Semel. The difference was striking in that Schmidt appeared brilliant, agressive, and prescient where Semel did not even seem clear on the advantages of email (his background was in big old style entertainment media).
I do think the core concept here is both simple and elusive to all but Google, explaining why they are eating everybody elses revenue lunch right now: Spend NOTHING on content, and EVERYTHING on monetizing the content of the social superswarm, including revenue sharing with those minions of content producers. I don’t think this will last forever though – eventually the ability to repurpose the oceans of existing free content will really challenge Google’s model and I think lead to a niche model where people will gravitate to smaller, highly focused sites that meet their specific needs. I also think socialization is starting to trump search in terms of interest, though I think it will always lag way behind search in terms of revenue potential.
Sure. Eventually the utter drek proliferates and just as TV is now annoying degrees of cheap reality eventually something of quality will emerge, if only an analysis of those screaming Orange Housewives or something.
Video clips of ididiotic teenage skateboarding stunts or gang bashing gets tiresome to produce or annotate but no one ever gets tired monetizing it.
Cheap common vulgar idiotic content produced by cheap common vulgar idiots makes some people rich. Its sort of like lottery tickets. Idiots buy them; smart people sell them. Same thing with internet videos. Idiots produce them, idiots view them, smart people monetize them via canned algorithms.
Consider how extremely profitable the various PennySaver publications were: local listings of items that were for sale, not highbrow literature.
Then along came the internet and people were suddenly so surprized that Ebay was successful but writers of The Great American Novel were not.
For a long time TV has been empty headed twits rather than highbrow stuff, so along came Video on the Internet and people are surprized that its still Empty Headed Twits babbling to one another about utter nonsense that makes money? Why is this surprizing? Did Yahoo think creative content writers with quality could outproduce or outsell the masses of idiots out there who want to see a rich broad in Orange County swilling booze and screaming at people?
Idiots buy them; smart people sell them.
Ha – good one…
I’m not sure where you’re getting your info, but great topic.
I needs to spend some time learning much more or understanding more.
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