What Will It Take to Fix Yahoo!?

Analysts: Ditch Yang, Get a Strategy, ‘Grow Up’

If Yahoo! doesn’t spell out its direction soon, it runs the risk of stagnating, said Taylor. Averting that risk starts with replacing both Yang and President Susan Decker, according to many industry watchers.

“Bring in somebody who understands the value that the existing team has, but who has a vision for the company that’s broad enough and inclusive enough to incorporate more traditional media, other types of business models,” Taylor said. If Yahoo! figures out how to consolidate platforms — i.e., Internet, mobile, video — it will be on to something big, he explained. But he added that the company is not likely to achieve that until it hires new leaders.

That said, for a dot-com survivor with one of the most-recognized brands in the world, defining a strategy shouldn’t be an insurmountable task. Yahoo! is strong in search engine technology research and it’s trying to make the most of its social networking and user-generated content assets, said Timothy Deal, senior analyst in the broadband advisory services unit at Pike & Fischer. However, what Yahoo! has failed to do is match Google in terms of search technology, Deal said.

“I see that as a leadership flaw, not a flaw in the inherent offering of the company,” he added.

One solution would be to sign new execs with “the forward-looking vision that will make Yahoo! the sole provider, or early provider, of next-generation Internet technologies, particularly within the area of search engine technology,” said Deal.

‘Stop Doing’ Same Old, Same Old

If Yahoo! lands the right executives, addressing video and targeted advertising should top their list of priorities, analysts said.

“They have to have a video strategy,” said Krishna. Google snapped up YouTube — “an excellent, excellent acquisition for Google,” Krishna said, and that left nothing comparable for competitors Yahoo! or Microsoft Corp. (MSFT).

Yahoo! also ought to determine how to make video profitable, said Taylor.

Beyond finding a focus, Yahoo!’s more pressing need is to implement an advertising strategy that speaks to users. Yahoo! must track trends “to more effectively push advertising that is much more relevant,” said Krishna. To be sure, Yahoo! wants to do that with its proposed Google ad-outsourcing partnership, a deal that has yet to secure federal approval. Several Wall Street analysts doubt the transaction will materialize.

On Oct. 22, the day after Yahoo!’s third-quarter earnings report, Imran Khan of JPMorgan wrote in a client memo that “it is increasingly unlikely that the Google/Yahoo! partnership will be approved by the DoJ in its current form.” If that happens, Yahoo! might have to “strike a search partnership with Microsoft,” wrote Brian Pitz and Brian Fitzgerald of Bank of America.

Such an alliance would bring the Yahoo!-Microsoft saga full circle. The very takeover Yang fought against so vigorously — to the displeasure of powerful investors including Carl Icahn — could be what Yahoo! requires to thrive, some observers said earlier this month.

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