Sell Search Now

I tend to not blog much here recently about the larger technology industry but the recent developments at Yahoo! compel me to write.

YHOO gave its investors a tremendous return (and if you bought YHOO on the day of the IPO you're still looking at a nearly 10X return, in fact if you bought $1000 worth of YHOO on the day it went public and $1000 worth of GOOG on the day they went public, your YHOO shares are still worth a lot more than your GOOG shares).

There was a time in the late 1990s when Yahoo! was the most respected brand on the internet. It built tremendous products. Its communications products, its finance products, its news products, its entertainment products (which I had something to do with) were industry leaders (many of them still are).

The one thing that YHOO never did well in house was search.

Search was outsourced to Alta Vista (~1997)

Search was outsourced to Inktomi (~1998-9)

Search was outsourced to Google. (~2001)

Search was not a core competence of YHOO. They were NEVER going to beat Google at search.

Earlier this year Microsoft tried to buy YHOO. That fell apart. Then Microsoft tried to buy YHOO's search business. That fell apart.

YHOO tried to fight back, but frankly Jerry is too nice (I knew Jerry quite well 10 years ago, he is very nice). YHOO has a ton of dead wood and Jer doesn't want to be the guy to fire folks, but that's what Y! needed.

Now MSFT has expressed interest in buying the search business again. Please, for the love of everything purple; please SELL SEARCH!. Let Google kick MSFT's ass in search not yours. Focus on verticals. Focus on mobile. Pocket MSFT's money for the search business and watch them fail.

Fight the battles you can win, not the battles you will lose.

Jerry is Back

Jerry Yang is back in charge of Yahoo!. I've seen a ton of blog commentary in the last few days, some of it good, some of it incredibly misinformed. The best comment I've seen is from Jason Calacanis

Jerry should rebuild the management team to focus on product and forget about hitting numbers for a year or two. The focus has to be on making better products than Google--not an easy task.

Jason is totally correct. When I started at Yahoo! everything was about the product. Get it out, iterate it, and integrate it with the rest of the network. That was the mantra. Somewhere in late '98 or early '99 it stopped being all about the product. We had beaten Excite, Lycos and Infoseek and Y! was in cruise control. The focus turned inward. Y! built a campus. Office politics became rampant. They opened a Santa Monica campus. The focus was off product. People got scared to take product risks. Lots of new hires were in "vesting-in-peace" mode from day one.

And along came Google and they kicked Yahoo!'s ass. They did it by building a better product in an area that Y! had long been neglecting; search.

Now Jerry is back and his mandate is clear, take on Google.

I don't think taking Google on in search will be successful even if Yahoo! does search better than Google does, there's just too much momentum. Incremental improvements are not enough, you'd need an order of magnitude improvement. That won't happen unless Google eases up on search technology and rests on their laurels (unlikely in my view, there are lots of ex Y!'s at GOOG who know first hand what happens when you do that).

But Google is vulnerable in other areas. Mobile is one of them.

Right now mobile is where the web was in 1995. It's wide open with a huge market just opening up. Yahoo! can win in mobile using the same techniques they used to win online in '96-'98.

Yahoo! won online by addressing the big audience. Yahoo worked the same on every OS and every browser, no plug in needed. The pages were lightweight and loaded fast. They need to do the same in mobile. They need to be carrier and handset agnostic. They need to build apps that don't require 3G. It's not about distribution deals. You need to end-run the mobile carriers. Y! did countless distribution deals (MCI, HP and countless others long forgotten), I don't think combined they amounted to a hill of beans. Distribution is not their problem, good product is. If you build a good product that works consistently across all platforms you will win.

I'm pulling for you Jerry.