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Yahoo: Time to Reframe the Debate


Everybody thinks companies should focus on search. Everybody's wrong.

Search is a good business for Yahoo. Search is a great business, period - in the same way that the Yellow Pages were the saving grace of RBOCs like US West/Qwest. In 2003, Qwest (Q) sold its DEX business for almost double the market cap of the company itself!

Forbes reported that it sold for $7.05 billion. (Yes, billion with a b - a word that's certainly become devalued in recent months.) Their market cap at the time was $3.76 billion.

Google is the yellow pages of today. Maybe that's an oversimplification, but it's pretty much that.

Fundamentally, will Yahoo ever be Google-esque? No! But that's okay. Will Google ever be a competitor to Yahoo in content and display? Maybe. Google is aggressively pushing into display, and has also recently cut a deal with content creator Seth McFarlane, so they're certainly dipping their toe into that bucket.

Yahoo has proven year over year that they're the next generation digital network -- Tech Ticker, on finance, is a great example of where they're going. They're providers of the best content - not all produced by them, and not driven by search or paid placement advertising. Stick to your knitting.

Yahoo being acquired by Microsoft is not a 1-plus-1-equals-3 proposition. It will be a 1-plus-1-equals-1-and-a-half – if that. Advertisers spending $5 million on Yahoo and $5 million on MSN (of which there are many) won't spend $12 million on a combined entity - they'll demand efficiency. They'll demand the same media for $7.5 million. This marriage will be about as good as Daimler Chrysler!

Yahoo is different from Google. Yahoo must reframe the debate about who they are and where they're focussed. TV viewing is waning. Dollars are going to continue to move online. Display advertising online may soften, but this is short term.

Yahoo is the network of the future, and should seize these management changes as an opportunity to cement their destiny. Sure, search is a great revenue driver - but it's only one part of the mix. Content and experience is king, and Yahoo is one of the leaders in defining what the new content delivery channel is and should be. You can't argue with close to 400,000,000 eyeballs a month!

It's time to reframe the debate.
Position in YHOO
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