Disclosure: I work at Yahoo. These opinions are random-ass thoughts that don’t really refer to, relate to, or in any way is based on what anyone thinks or do at the company.  I write this for my own dorky pleasure.

Whether by luck or design, Yahoo is one of the biggest companies on the Internet.  It’s struggling at the moment and here’s what it should do.

  1. Learn from WWII.
  2. Be BMW.

What has transpired is a classic B-school case study: company stumbles onto/ingeniously discovers something good, grows big and gets dumb. Now quick, how many MBAs does it take to a) manage a business, b) grow a business c) create a business or d) doom a business? [Answers: a) 1 b) 0 c) 0 d) 1]

Yahoo took advantage of how people found and consumed content during the transition from the PC to the Internet.  I’ll emphasize: content, not information.  Yahoo has never been good about information, but it’s been quite good at content.

But now Yahoo faces death from a thousand cuts sprung by search, social and mobile.  Those are all platforms.  And they are awesome evolutions in how things are done.  Yahoo has never been a platform play.  And it has never changed how people do things. Instead it’s been great at putting content on various platforms so people can do the same things they’ve always done, but easier and better. Now it has an adjustment problem. It’s trying to run a horse race when it should really be in a rodeo.

So here’s lesson #1, from WWII: interdependence is good.  The pre-war world saw countries isolated and protective, which gave rise to resource problems that combusted in cataclysm. The post war world, on the other hand, saw living standards rise through cooperation, free trade, etc. (The Cold War’s end was inevitable because of growing inter-dependence). The pie can grow. It’s not a zero-sum game. What does that mean? It means Yahoo doesn’t need to play Apple’s game, or Facebook, or Google’s.  Yahoo is certainly dependent on those platforms, but it can create it’s own value and be successful in its own game. (Microsoft, meanwhile, still is mucking around in its own gilded cage.)

Here’s lesson #2, be BMW: Anyone can read the basics of BMW, the propeller logo-ed company, from Wikipedia.  BMW was an airplane equipment manufacture turned motorcycle specialist because of external realities (search) turned super duper luxury car brand (media) to the present day.  Here’s the set piece: In the early 60s BMW faced insolvency because it didn’t know who it was.  Instead of folding, the company grew cojones, doubled down on cars, aggressively licensed technology and focused with crazy intensity on becoming the best car experience for its customers.

So Yahoo, be crazy and either fail big or become the BMW for the tech world. Here’s how:

  • Focus on your strength. Your media businesses are awesome: sports, finance, entertainment and travel.  Stop messing around and focus on reliability, design and give your users reasons to turn to you when they’re bored or feeling spontaneous.  Hire superstars.  Have them attend meetings that have more than 5 people and ask what all those employees do.  If people can’t describe what they do in ten words or less, fire them.  Make your brand stand for something instead of trying to explain everything.
  • Play leapfrog. It’s funny how directories gave way to portals – and how portals gave way to search, and now search is giving way to apps.  In 5 years, I’m willing to bet that most people will access what they want directly via apps and their online equivalents versus search.  Why should I go search through 5 random sites for a camera when I know Amazon can synthesize my choices for me reliably?  People want simplicity. But now people want serendipity, too. Yahoo, you have great properties. Don’t go chasing Google or Facebook.  Build on top of existing platforms and springboard into your users habits.  You don’t need to be the luxury brand for the tech world but my goodness, be something definitive.
  • Be aggressive. Fail big. Learn from it.  Buy shit and break them and make them better.  Look at complementary businesses. It’s a big ‘duh’ but ok, you have all this great content, now build communities around them.  Content is useless if it’s not consumed and you can’t separate consumption from conversation right now. Some more thoughts:

A couple of things Yahoo should look at:

  • Vimeo: a great community that shares quality content.  Yahoo has Flickr and IAC has Vimeo.  What is Vimeo worth?  At ~4M visitors a month, I’m going to do some quick math on membership percentages, paying members estimation ($50/year) and revenue multiple (15x) and base value the current biz at $45M-$55M.  Vimeo is a great complement to the photo business, providing a steady supply of good content that can be shared on other platforms.  That is a wicked awesome position to be in.  Their revenue is never going to blow anyone’s minds and video capital expenditures are high, but the halo effect on the rest of Yahoo’s businesses makes sense. Video and photos, the ligaments and tendons for online interactions.
  • Tumblr: content by itself has no value.  Only when people consume content does magic happen.  The Tumblr team has figured it out.  Calling it a blogging platform is to mistake 2010 for 1999.  Tumblr is what Delicious could have become in a perfect, crazy Robin-Williams kind of world.  RSS feeds? Buzz? They’re missing that key ingredient that Tumblr has bottled: conversation.  And not the stupid, crass, ignorant conversations found in every comment section of major media outlets, but a different kind of social activity, one that contributes to exploration, serendipity and increases the value of participation instead of degrading it.  Value? Based on expected/desired returns of 50% or more on the $10M in capital raised, I’d put the buy at $20M-$30M.   I’m just imagining stumbling across a Tumblr 'follow’ button in a lot of places in the near future.  What is it if not an awesome bookmark/discovery mechanism? Oh, and conversation does not not communication tools. There is a difference.
  • Foursquare: ok, so that rumored $100M offer wasn’t good enough, but location isn’t the game – local is.  Local services, local experiences are going to be a tremendous force in how people translate their offline activities online.  Foursquare has the potential to disrupt not only review sites like Yelp, but also search and advertising in an app-based world. Game mechanics aside, the real value is going to come from real savings/currency of participating in the Foursquare world. How much for Zagat? Fandango?
  • Core biz expansion: local guides, food, personal finance, news – honestly, take a look at the types of magazines found near checkout lines at grocery stores, find their online equivalents and make them into something easy to use and immersive.

My hope? That Yahoo believes in starting small instead of growing big - that quality will bring reach instead of the other way around.  Focus on best in breed products, shelter them and give them the resources to attract voracious, passionate and dedicated followings.  Then allow smart expansion and let the products speak for themselves - your consumers’ appreciation is worth more than any machinations for share price.  Be BMW.  Play your own game.  Everything will fail at some point, so why be afraid of it?

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