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Has Yahoo Lost Its Mojo?

The jury is still out. There are those who believe Yahoo has lost the clarity of vision needed to complete with a juggernaut like Google, and an increasingly hungry Microsoft. They’re convinced Yahoo has lost the pulse of its community. Other observers believe Yahoo can recover from its recent stumbles, if it recaptures the cachet it once had.
Let’s quickly review some of the facts. Yahoo is battling slowing sales growth, a slumping stock price and a steady stream of executive departures. In spite of these troubles, it is still the dominant player on most of the web. Yahoo is the most visited website on the Internet today with more than 412 million unique users. Since November, 2006, it’s been battling MySpace for the title “Top US Visited Website.”
Google keeps gobbling share
Yahoo is #2 in search, but Google continues to gobble-up share and monetizes search much more effectively. Google’s share of search queries has climbed steadily from less than 20% in 2001 to 45% in 2006, according to ComScore. Hitwise scores them even higher. According to the same sources Yahoo has been holding steady at just below the 30% mark.
Yahoo has some valuable assets in its portfolio. Google recognizes this and is emulating some of Yahoo’s offerings. The corporate reorganization in early December, the most extensive in five years, is a sign of Yahoo’s acknowledgement that it needs to make a lot of improvements in certain areas, especially refocusing on customers and speeding up the development cycle.
Many services, little traction
Although it has a vast collection of services–from search to e-mail and instant messaging to music and e-commerce offerings–Yahoo hasn’t been able to corral them into coherent offerings. It also needs to find a way to make money off its new community oriented services, such as photo-sharing site Flickr and it social networking service Yahoo 360.
Yahoo openly admits they have fallen behind in their tech savvy. The company needs to accelerate its tech projects, especially the Panama Ad Network. This long-delayed initiative to improve the way it matches ads with search results is critical to prevent losing even more ground to Google. Advertisers are Yahoo’s key revenue source, but they don’t yet compete well with Google on algorithmic search.
Will reorg lead to resurrection?
There is something to be said for rooting for the underdog. Google’s arrogance is legendary. It has inspired fear in the blogosphere, the company controls the Internet in some powerful ways and they appear to be the gateway to the future.
If Yahoo sharpens its vision and improves its financial performance to keep a closer pace with Google, it may have a chance to regain its luster. During an employee all-hands webcast in December to announce the company’s reorganization plans, CEO, Terry Semel, summed it up best. “At the next all-hands meeting, I’m gonna put up all of the press reports on how Yahoo was going out of business five years ago. And how we were going to get swallowed up by AOL, owned by Time-Warner, and by Microsoft and by everybody else. . . those headlines, of course, were used to wrap a lot of fish in a lot of people’s houses, as the expression goes. [T]hey had no idea what we had planned for them. And they do not know now as well. To hell with what Valleywag, TechCrunch or the Wall Street Journal say, we are still approaching the market from a position of strength.”
Is this the resurrection of Lazarus? Stay tuned–we’ll see if Semel can deliver again.

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