Why Yahoo

As Yahoo Inc.‘s newly appointed chief yahoo, Carol Bartz will have to appease nervous shareholders, bolster employee morale, and try and catch up with the search advertising empire known as Google Inc. But before she tackles any of that, according to one IDC Corp. analyst, Bartz’s should officially put the talk of a marriage to Microsoft Corp. to rest.

With former CEO Jerry Yang out of the way, speculation about a proposed Microsoft-Yahoo partnership has spread rapidly among tech circles yet again. In recent weeks, Microsoft Corp. CEO Steve Ballmer reiterated his interest in a search partnership, but was quick to point out the uncertainty that has surrounded Yahoo’s ongoing CEO search.

With the appointment of Bartz, a former chief executive at Autodesk Inc. and a key player in that company’s turnaround over the last decade and a half, the possibility of Yahoo outsourcing search and search advertising to Microsoft is now likely, according to Karsten Weide, IDC’s program director of digital media and entertainment.

But it’s also something he said the company needs to avoid at all costs.

“If you look at what a new media company needs to do to be successful, you need to look at where the most money is being made today and where the most money will be made five years from now,” Weide said. “In both cases, the answer is search.”

With roughly half of all online advertising spend focused on search today, Weide added, Yahoo cannot risk giving this capability away and simply hoping for the best.

“Hopefully, [Bartz] will realize that this would be a big strategic mistake,” he said. “There’s no reason why Yahoo alone cannot do to Google what Google has done to Yahoo within five years.”

For Weide, Yahoo’s best option to catch up with Google is to address the search experience issue found across all search engines. In studying user search behaviour, Weide discovered that about half the time users will not find what they are looking for in an online search.

“There’s no reason why this could not be improved a whole lot and it doesn’t have to be Google coming up with it either,” he added.

Weide said that Yahoo’s search results quality is not catastrophically bad, but it’s still noticeable worse than Google’s results. The same argument can be made about Yahoo’s advertising algorithms.

Improving search results might require the company to look at recruiting better programming talent, he added.

“Bartz has a good chance to fix these things because she’s coming from a technology company,” Weide said. “She’s not an engineer herself, but she’s dealt with engineering products for a long time, so she knows how to fix software development.”

“That’s an excellent starting point for Yahoo,” he added.

In her first press conference as CEO Tuesday, Bartz said that Yahoo has been pushed around by outsiders for too long and should now concentrate on its own course of action for the future.

“More than anything, let’s give this company some friggin’ breathing room,” Bartz told reporters, including the IDG News Service, in a conference call. “It’s been too crazy, everybody on the outside deciding what Yahoo should do, shouldn’t do, what’s best for them. That’s gonna stop.”

According to Weide, an area that Yahoo might want to explore – if it ever gets that breathing room, of course – is mobile advertising. Yahoo Go, a service which connects users to Yahoo services, is available on pretty much every phone out there.

“And even though it’s not a big business for them today, this has some strong potential as mobile advertising becomes more important,” he added.

But just like its search business, Yahoo will face stiff competition in this space from Google, which likely launched its Android OS platform last year in an effort to eventually own the future of mobile advertising.

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Jim Love, Chief Content Officer, IT World Canada

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