Yahoo! learned a painful lesson from the slump it experienced up until this year – that relying on Internet advertising is great when companies are willing to pay for advertising but not when those companies don’t have the money to spare for Internet advertising campaigns! It’s recent ventures into “paid for” services is likely to be complemented by continuing ventures into subscription-based services, perhaps involving Earthlink.
Terry Semel took the reigns of Yahoo! just in time to avoid Yahoo! succumbing to the internet bubble burst syndrome by steering the company away from the purely “free content and services model” for customers, and into the world of customer-oriented revenue-generating services – often against the instincts and principles of Yahoo!’s founders, Jerry Yang and David Filo. With the help of the extremely sharp, and greatly respected Susan Decker, Terry guided the company through its difficult adolescence into adulthood.
Terry certainly had the right motives, though some of the ventures have yet to pay off – Yahoo! Personals has been a goldmine, and Shopping and Finance have been worthwhile, whereas Yahoo! Auctions has been, predictably, less successful (primarily due to the late entry into a market where Ebay had already established its loyal user base). Yahoo! has also done well offering paid premium services – not only offering larger email storage space (Gmail put a dip in those earnings but the earnings are still there) but also extra web space premium services, spam blocking services, and others.
Longer term, customers will recognize the benefits of Yahoo!’s mail solution over that of Google’s. Long before Google came up with the idea of offering huge amounts of storage space for free (supposedly primarily aimed at users who wish to store photos and mp3s), Yahoo! was already offering free “unlimited” storage space for photos via its associated services such as Yahoo! Photos, large amounts of free storage space for web sites and mp3 files via Yahoo! Geocities, and for documents via Yahoo! Briefcase.
Being able to access these services, as well as myYahoo! (the personalized portal), games, calendar, greetings, clubs, toolbar, messenger, chat, mobile, finance, and a host of others all from a single login and password, will give Yahoo! the edge over Google for a long time to come.
Especially with the recent announcement that Yahoo! is going to purchase MusicMatch, arguably the best music player on the net! What a great complement to its existing Launch music services, recently declared the best on the net! Integration between the Google properties just is not there – even if you signed into Gmail already, you have to sign in again (often with a completely different userid and password) to get to Google Groups or to Google Adsense, for example.
Yahoo!’s respect for the consumer, and recognition that the consumer always has the option to go elsewhere, will also win through. Already, Gmail has shown itself to be bug-ridden and problematic for the end consumer, and with its security and privacy issues, it is clearly a far inferior product to Yahoo! Mail, a professionally engineered solution, architected by some of the sharpest minds on the planet. Every change to Yahoo! Mail is planned, designed, reviewed and tested as thoroughly as the code that runs the NASA space shuttle missions. It is clear that the Google Gmail solution is less well-architected, and that is being very kind to Google.
The same goes for Overture compared to Adsense – Google’s marketing campaigns may have given Adsense the edge up until this point, but Overture is clearly a far superior (and far cheaper) product to use. And, of course, the Google search engine is great when your company is at the top of the listings for your selected keywords, but the Florida Update made a lot of Google customers extremely unhappy, as they lost a vast number of customers overnight, with no warning - something Yahoo! has never done to its customers (another sign that Google’s engineering and testing of its software is not up to Yahoo! standards). Why Yahoo! has not capitalized on this big mistake by Google is beyond me – their ethics and professionalism probably prevent them from running down the competition.
Customer loyalty is something that Yahoo! has down to a fine art, and it is this that will mean that Yahoo! will win out over its rivals in the end.
Yahoo!’s ventures into partnerships with DSL providers such as the UK’s BT, Roger’s in Canada and of course, the US’s SBC, will help Yahoo! to capitalize on this customer loyalty and earn a steady income based on its excellent services.
The great branded toolsets that Yahoo! offers to its DSL customers (portal services, popup blockers, spam blockers, parental controls, integrated messaging, search and a host of other integrated services – all for a comparatively very low total Broadband cost), again, excellently engineered, give the Yahoo! brand the quality reputation it deserves and places Yahoo! nicely to take over many disgruntled AOL customers, who find that they have to pay for AOL on top of the cost of their broadband services, and that AOL slows down their PCs so much that the advantage of using broadband is much diminished.
The recent rumour that Yahoo! and Earthlink are in talks is extremely exciting for anyone watching both companies.
In Earthlink, Yahoo! would find a partial answer to its quest to acquire more customers who use Yahoo! to connect to the internet, and are willing to pay for the excellence of the Yahoo! experience.
Earthlink also has an excellent product set (including some of the best on the market - Accelerator, Parental controls, Virus blocker, Spam blocker, popup blocker, spyware blocker, scamblocker and privacy tools) which would complement the Yahoo! set of products dramatically.
And, of course, both companies are very interested in venturing further into the provision of better email tools – especially client-based email toolsets.
Earthlink’s troubles with “churn” (customer turnover) would be eradicated by the customer loyalty associated with the Yahoo! brand. Yahoo!’s marketing team would be a great asset to Earthlink – as would Yahoo!’s sales force – who could capitalize on the lost opportunity that is Earthlink’s. Earthlink’s revenues from advertising, content and commerce are lousy in comparison to what they could be given the Yahoo! treatment!
There is a great amount of synergy between the two companies – both see their mission as customer-oriented – Earthlink’s mantra is “Earthlink revolves around you”, and has 5 million subscribers, while “Yahoo!” wants to be seen as the consumer’s “best friend”. Each has bases in Atlanta and in California, both have a laid back, informal (no ties – shorts and t-shirts) culture – and both have excellent professional engineers who really know the technical side of the Internet, and are keen to make customers happy.
Both companies have a base of engineers who are well-versed in the more “open” technologies (i.e. not simply focusing on Microsoft software), which is key to gaining and retaining customers in the Unix and Mac realms. Both are looking into more open solutions (using XUL, the Mozilla-sponsored open object manipulation standard, which offers the potential for connection-less rich content across platforms) for messaging, wireless and mobile technologies in a big way.
While I recognize my message is an old one – George Mannes was telling Yahoo! to buy Earthlink in 2001 – I believe the time is right now for both companies to make the big move. So it will be interesting to watch them over the next few weeks.
About the Author
Michelle is an Ebusiness Consultant and writer with 16 years experience - mainly in Internet /ISP / Ecommerce projects