Yahoo! A social networking strategy that makes sense

There’s a reason you don’t often see someone compile a top-10 list of the coolest Yahoo applications. Yahoo isn’t cool enough to attract cool applications, and until this week it wasn’t that easy to build on top of them. Now that it is promising to remove the first barrier, it might be possible for Yahoo to overcome user inertia, too.

At the Web 2.0 Expo this week in San Francisco the portal player’s CTO, Ari Balogh, announced a plan by which Yahoo will build on its existing open API strategy and streamline the process by which developers create tools on its various platforms. It will also bring all its user profiles – a Yahoo visitor’s e-mail account, instant messaging, Flickr albums and so on – under one virtual roof.

Though it is being touted as a radical depature, Balogh’s strategy is very much in keeping with Yahoo’s traditional modus operendi. While Google pushes visitors out to other sites through its search engine, Yahoo was more concerned with keeping visitors within its borders, whether it was to read news or look at photos. It took a wrong turn with Yahoo 360, which would have been a great social networking service if it hadn’t lagged so far behind MySpace and Facebook.

Like a lot of other startups that flame out (but which receive far less attention), Yahoo was forcing asking users to create yet another profile, when few of them have time to do any of that. Instead, the company has realized it can mine its installed base and the information they have already entered into its database. This is, effectively, a master data management project, one that recognizes how much easier it is to get more business out of an existing customer than it is to find new ones.

What a difference a couple of years make. Not long ago Yahoo was behaving like enterprises in the early days of the Internet, who would announce a Web site redesign as though they had created a new model of automobile. Now the company has realized it can get a lot more mileage out of simply following the lead of the social networking services which have sped by it. If Yahoo doesn’t get swallowed up by Microsoft – which may have its own API strategy for a combined entity – it might become a much more interesting player. That’s not to say Yahoo entirely gets this market.

“We don’t think of social as a destination. We think of social as a dimension. It infuses every element of the consumer’s experience on the Web,” Balogh told IDG News Service. Wrong. Social is not just a destination but a series of destinations, which is why more developers are thinking about Facebook than MySpace, and why they’re probably thinking more about both MySpace and Facebook than they are Yahoo. There’s no point in creating, say, the next Scrabulous if you put it on a platform where no one’s going to play it. Social networking is about real estate. Yahoo’s three biggest priorities right now are to prove it is an choice location, location, location.

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