While the tsunami of buzz surrounding the Wolfram|Alpha reference service (by their own claim not a search engine) seems to indicate a desire for novelty at least as much as interest in its actual merits, the service is one of a few major announcements this week which indicate a shifting attitude towards online publishing that is catching up with the realities of today's publishing technologies. Wolfram|Alpha offers a simple "white box" query interface with semantic parsing of requests that access a fairly limited, curated set of reference data feeding through display functions such as tables, charts and graphs. The W|A team is careful to note that these images and data displays are not search results but useful publications unto themselves - hence a bit of static about their terms and conditions, which emphasize that query results are W|A's intellectual property.
Wolfram Alpha is an interesting reference tool for people wanting to chart and graph contrasting points of data, but it's hardly alone in the movement towards more robust on-demand content. Recently Google announced at its Searchology event a range of enhancements to its emerging Universal Search capabilities, including search options that enable one to embed relationship trees, videos, reviews and other displays that relate to a query - in addition to already embedded rich content such as maps. For example, the image to the right shows a relationship tree for people relevant to Apple CEO Steve Jobs as well as relevant video clips. Included on this menu of options is a feature called "rich snippets," which enables publishers to encode content that's related to a particular item from their Web sites that appears in a search result using a microformat specification provided by Google. Examples of this feature in use are fairly thin so far, but it holds out the promise for a wide range of content sources to be placed in context with content returned from Google searches. Google's open approach to helping publishers to develop search-embedded display applications for their content returned from queries, as opposed to Wolfram|Alpha's "it's our content" approach, is far more likely to accelerate the development of rich content applications cued by queries into a wider array of databases.
The team at Yahoo has been looking at this emerging landscape for enriched queries and is trying to steer somewhat of a middle course between the Wolfram|Alpha approach of tight curation of sources and applications and the content available on the open Web. As noted in SearchEngineLand recently. Yahoo is ceding the "all the world's information" indexing battle to Google and is instead focusing on doing a better job of curating specific types of Web sources more effectively and serving them up through a variety of display objects. Yahoo's Search Monkey display capabilities, similar to the "rich snippets" microformats announced by Google at Searchology, already help to power rich content in Yahoo search results, and will be folded into broader use of digital objects that get served up via Yahoo queries.
This is all a way of saying that search was never really about "just search" to begin with. Search results are and always have been content in and of themselves, a collection of content sources that are arranged to enable people to determine what's the most relevant information on a given topic. In other words, search is an editorial function, albeit one that's highly automated, but it performs much the same function as an editor working on a news article or an encyclopedia entry - except that it is done on an on-demand basis. We've seen many efforts through recent years to enrich search results with more robust graphics and related content, making a given search result more like a reference compendium rather than just a listing of links. But what we seem to be moving towards at a faster pace as of late is the realization that the digital objects served up by search engines are increasingly likely to be the objects where people get their answers and insights in full, rather than trudging off to various links to get more in-detail answers.
Now, this is usually where some of my good friends in publishing start to howl about the evils of search engines, but realistically this kind of aggregation is happening whether publishers want it to happen or not. The only question is how they want their own content to participate in this automated just-in-time editorial environment. I believe that the most constructive answer for publishers is to embrace the increasingly object-oriented environment of search warmly and to recognize that there are opportunities abounding in getting more of the right content in front of the right audience at the right time through enhanced search services. For example, instead of having to compel someone to click on a link to read a news story on your own Web site, you could have either a lede paragraph or an entire article come up in the search results page. That article could have your own embedded ads, or links to a subscription or micropayment monitoring service that would enable the publisher to expose premium content in a search context.
However it's done, query results on a search engine represent the point of highest demand for much of today's content. Getting the right content into those results with the right monetization scheme gives a publisher a potential jump on the competition that hopes that someone will click on their link into their Web site. Destination Web sites serve an important purpose, but in the world of distributed online content aggregation, but relying on them solely is a little bit like saying that one should only buy newspapers at a publisher's printing plant. Search engines and other content technologies that allow on-demand contextualization of content for an audience are the newsstands of today, leaving publishers with but one choice: do you want to hide your content behind the counter or do you want it where people can see it? The serving up of rich content through digital objects asks the question more loudly and with more and better answers to the "how" of meeting this challenge, but it's the same challenge that's been with us for many years.
The most important innovation that publishers can embrace over the next several years are the technologies that enable them to have cross-platform digital objects that are easily monetized and licensed for monetization through a broad array of partners adept at on-demand contextualization of content. While the Wolfram|Alpha platform offers an interesting view of how a limited range of sources could be curated into a useful reference service, ultimately it's a model that is far too limiting to allow most publishers to succeed. A handful of content-serving graphs and charts is useful for only a few types of information sources. Publishers need a robust array of content-serving objects, ones that enhance their own content and that allow it to trigger the integration of other content sources more easily for enhanced value.
Search engines and social media tools have empowered a new generation of editors and curators who have the power to put a publisher's content in its most valuable context more quickly and more effectively than traditional distribution media. Hopefully the efforts by Wolfram|Alpha, Google and Yahoo begin to make publishers think more actively how their content can be served up more automatically in more contexts through their object-oriented publishing technologies.
There's been a whirlwind of announcements, commentary and downright bad blood beginning to steam up around the Associated Press' moves to position news content from its own reporters and its member organizations more effectively in the online environment. The latest developments in the war for news organization survival were kicked off by the AP board's announcement that it would be moving aggressively to identify and to challenge Web site publishers that were using unlicensed AP content illegally. The "why" of this move, largely ignored by media reports, is contained in the rest of the announcement: AP is introducing a new schedule of lower fees for its member news organizations that will make it easier for them to participate in AP distribution and news use. Faced with having to respond to the revenue crunches experienced by most news organizations this year, AP has no choice but to ensure that their online revenue streams from organizations consuming AP content can be captured as effectively as possible.
From the perspective of public relations, any constructive aspects of the latest AP moves appear to have been lost in a sea of furor rising up from bloggers, Twitters and other online voices. TechCrunch viewed AP's moves as being akin to the RIAA's moves to prosecute consumers for downloading relatively meager quantitites of music on to their PCs - legal moves that have backfired in many ways both from a legal and public relations perspective for the music pubishing industry. TechCrunch also highlighted a cease-and-desist order sent by AP to a Web site using AP-posted video from YouTube in an embedded video player. Of course YouTube videos are made for embedding in other Web sites, and the site that happened to be using it was that of WTNQ-FM, already an AP affiliate member. Google CEO Eric Schmidtcommented in the wake of these PR fiascos by AP that it's a good idea not to "piss off your customers"- especially those who are doing their very best to abide by fair use policies for the reuse of copyrighted content. AP could certainly take some lessons from Google's efforts to get publishers to swallow some of their own bitter pills with much kinder and gentler approaches to public and professional-level communications.
The question is, though, what is really the most effective path towards revenue growth for AP at this time - and are they handling the rollout of new strategies in a way that will help those new revenue streams to materialize? From the looks of things, AP is still struggling to find answers to that question. Certainly pursuing legal enforcement against blatant content pirates is one possible route, and it's not without its merits. Data published by Attributor indicates that nearly half of the Web sites taking content from major publishers are copying more than 90 pecent of the original text of articles. Knocking out parasite Web sites that copy unattributed content strictly for the purpose of sucking up ad revenues that would go otherwise to the original publishers would do the bottom lines of all online publishers a great favor. It's a shame that AP's initial efforts along this vein have resulted in embarassing misfires - it's an important goal that should not be sidelined by a mishandling of the policies built on top of the underlying copy detection technologies.
But the larger concern is whether AP is really "getting" how to make money in the online publishing environment. The AP board announcement included a statement indicating AP's intent to build a search portal that would feature only content from "authoritative" news sources. While this is a constructive goal of sorts, we've had such search engines for years already. The Topix search engine focuses primarily on traditional media sources, and, for that matter, Yahoo! News and other major portal news services have focused on aggregating and searching mainstream news even longer. Both are good efforts in their own ways, but they're not floating the boat for most online news publishing revenues and they're not growing in any significant way. Why would yet another search portal wind up being the solution to news publishers' concerns?
The future that AP needs to embrace can be summed up in a fairly simple phrase: get news content that people really want to read to where it can make money. In broad concept that's pretty much what AP's mission has been all along, but in insisting that that mission cannot be expanded or altered significantly in light of how news is created today is holding back both AP and its member organizations from surviving and thriving in online news markets. Media organizations need to become better at aggregating sources of news more agnostically: if someone is streaming live video via Qik from their mobile phone at the site of a plane crash, then AP should be the natural source to which news organizations would turn to find such content as breaking news, not "i-reports." The idea of "authoritative" news need not always be synonymous with editorial and news-gathering methods that grew up in the era of printing presses. With today's publishing technologies editorial values can be implemented in many ways that can expedite the most compelling information getting to the right audiences at the right time.
This recognition that its own members need better agnostic aggregation of news sources is key to AP supporting the economic performance of those news organizations. Thomson Reuters CEO noted recently at a conference, "Why does The New York Times need to have 600-700 journalists? Why not 30 journalists with 30 apprentices?" In other words, if the economics of news have shifted permanently, why try to justify subsidizing jobs that need to move elsewhere in the news economy simply because you want only specific people in specific organizations producing news a specific way? With billions of people around the world equipped with real-time news publishing tools, including increasingly successful independent journalists, the world's attention span has permanently embraced this "Content Nation" as a source of information that they trust. That's a fact that will simply never go away. Trying to make it go away is about at pointless as anyone who tried to sift the tea thrown overboard in Boston Harbor back in 1775. Even if you could do it, who would want to drink it?
Instead of arguing with people who are both consumers and sources of news, AP needs to take a deep breath and think about how they can power the profits of today's news organizations using whatever content - news, metadata, links, video, anything - will help them to make money. In some instances this may mean new members and approaches to membership, in other instances it may mean playing a very different role with existing members and in how they participate in its editorial efforts. This can be a hard thing for any organization with a venerated history as rich as AP's to do, and I know that they are trying their best to move in that direction. But if they were able to leave the confines of Rockefeller Center behind to set up shop in dot-com West Side digs, one would hope that AP could help to carry both its traditions of excellence and of innovation to new levels of performance in the news industry that take it in directions that others have yet to dare to imagine. The time to dream a new dream at AP has come. I do hope that they start to envision and to realize that dream aggressively some time soon, both for its own sake and for the sake of its members.
Last week's Social Media Club meeting was great for any number of reasons that I covered in my Content Nation blog post, but it was capped by one of those moments of serendipity that come along only so often. As I settled in to my train seat on the way home, I noticed that my friend Jim Hirshfield was sitting in the seat behind me. Jim and I had last seen one another at last year's Cluetrain@10 celebration in New York City, just as he was looking to re-enter the startup space. Today Jim is VP of Business Development of Zemanta, a European startup with development offices in Slovenia that has developed a nifty platform that enables publishers to enrich their online content via their semantic language processing tools.
Zemanta technology operates via a plugin for popular blogging and Web CMS platforms and with popular brower-based email services such as Yahoo! Mail and Gmail. As with other semantic processing services that parse documents to suggest related links, tags and content, Zemanta semantic processing technology pumps text that's being typed in by a document author through its semantic filters to come up with relevant rich content that can be inserted into these documents. This in and of itself is not terribly revolutionary: publishing platforms have had similar tools for years to facilitate the development of rich content that can attract search engine traffic and keep audiences engaged in their content. What's highly interesting about Zemanta's approach is that it is a free download that can be integrated within seconds into platforms that are popular with both bloggers and professional publishers. A "pro" model is available that can be tailored for a publisher's own content on their own platforms.
Best of all, the stuff just plain works. As you type along, Zemanta's suggestions for images, links, tagging and related content pop up in convenient spots near a page's editing window. This real-time analysis is quite impressive and remarkably effective: it seems to take only a few sentences to get going and it gets only better as you type in more. A quick click or drag of the mouse and rich content is integrated into a blog post or article easily. It's giddily easy to enrich your articles: virtually every link, image and tag in this article was implemented with Zemanta. Zemanta's free download links into 10 million-plus items of content from free sources, including rights-cleared images from sources such as CrunchBase, Flickr and Google Maps, articles from key bloggers and Wikipedia as well as information posted on social networking services and content from Crunchbase, Amazon, YouTube and other popular sources. "Reblogging" content to other sites with trace linking to the original source is applied automatically to each post.
High-end services may provide more features, content and functionality for semantic content integration, but for publishers that don't have the time, money or project bandwidth for such solutions and that need to get more enriched content quickly Zemanta offers remarkable power in its free version - as well as the ability to upgrade to the premium version that enables publisher-specific sources to be integrated easily as well. This can be particularly important for a publisher that may have blogging or open-source CMS platforms that will not be so easily integrated into some of the high end semantic services. Zemanta allows these publishers to make rapid integration of content from their existing sources a very short project. In a world in which publishing platforms with 80 percent of what one would expect from a professional package now dominate the bulk of content being generated on the Web, Zemanta gives those platforms yet another "pretty-darn-good" asset that can help their content to compete effectively in online content markets. My thanks to Jim for being in the right place at the right time with a great tool for publishers of all sizes.
The New York Stock Exchange has been careful through the years to keep feeds of trading data released to public media outlets hobbled with a fifteen-minute delay - in part to protect its revenues from financial institutions being charged for real-time data and in part to offer their member firms an information advantage that would help them have an upper hand with retail investors. But with most of NYSE's competitors being far more lax about releasing real-time trade reports and the definition of "real-time" having changed with powerful new low-latency trading systems for professional traders NYSE has re-evaluated its position on real-time trade reports for the public. Today NYSE Euronext launched its "Realtime Stock Prices" product for media, allowing unlimited distribution of real-time quotes to the public without tracking individual use. The product requires a distributor to pay an undisclosed bulk fee for the rights to public data distribution.
With NYSE's share of securities trading slipping and it's reputation as a market friendly to small investors slipping along with it real-time quotes from the public should have been a default position years ago, as we've argued oftentimes in ContentBlogger. Today's retail investors have more options than ever for making money in the markets, with NYSE's stumbling "blue chip" stocks being far from the most attractive alternatives for many. Forcing people to pay for real-time trade reports was only discouraging further participation in NYSE equities markets by retail investors - especially when other exchanges seeking market share were more than glad to use market data as a lure to new traders.
CNBC has long been a leader in public market data - I led the development and installation of their first delayed data system years ago for Quotron - so it's expected that they've opted to be on the edge of NYSE's release of this product. But the other announced client - Google - is one that was expected also but one that couldn't have come at a worse time for Yahoo. Real-time quotes from NYSE have been available from Yahoo at a premium for many years, so in a time when they have been trying to look plump to acquirers it's not surprising that they didn't opt to give up their NYSE quote revenues ("back door" real-time quotes from private electronic markets on Yahoo aren't strongly representative of the full market). So by default the go-ahead went to Google, whose Google Finance portal has become a very strong content offering. If nothing else the public knowledge that full NYSE real-time quotes are available at Google will provide some needed publicity for Google Finance at a time when Yahoo is slow to give up existing revenues.
I would hardly be alone in chastising NYSE for dragging their heels on releasing real-time quotes to the public, but it's sad that it has taken this long to get NYSE to make this move. It is, unfortunately, a familiar refrain in the content industry: major institution covets proprietary content revenues, squeezes them out for as long as possible while the markets move to find both acceptable substitutes and better ways of doing business. Publishing is in essence a very conservative business, so it's not surprising that NYSE would try to keep this formula going for so long. But in an era when the buyers of securities have and demand information at least as good as most selling institutions failing to serve the buy side in financial markets effectively is to ignore the fundamental shift in the content industry that empowers people with independent access to content from around the world. Your content may seem safe as a proprietary asset, but if it's not driving your clients' profits in its most valuable user-defined contexts it is far from a safe bet in today's content markets.
In what promises (for now) to be the end of the Silicon Valley soap opera known as the future of Yahoo, AP reports that Yahoo opted to seal a deal with Google for both the use of Google's ad network and enabling the interoperability of their instant messaging networks shortly after having announced the suspension of their attempt to revive talks with Microsoft on a potential acquisition deal. Yahoo shares tumbled immediately afterwards, leaving the long money on Yahoo holding a devalued stock but a deal that is likely to be one of the best ways forward for ensuring a reasonable future for Yahoo.
As noted two months ago in ContentBlogger, a deal with Google seemed to have been the best route for Yahoo all along, promising lots of new Yahoo page inventory for Google's more robust ad inventory and complementary media and technology profiles that were never as much at loggerheads as people made out some years ago. As for Icahn et al., while some may have been looking out for shareholders wanting short-term money out of what they had assumed was a cooked goose they never really seemed to have the goose's best interests in mind - or, for that matter, the best interests of Microsoft shareholders. After Yahoo would have been carved up it would be hard to believe that there would be a whole anything that would be greater than the sum of the parts.
As much as people tried to paint this as a Yahoo desperation deal clearly it was moreso a desperation deal by Microsoft to buy some time to build a broader position in online markets for its faltering ad network, with virtually no apparent upside for Yahoo properties. There was a lot of Ballmer bluster but underneath it all Microsoft was rolling the dice heavily for a very risky deal that had little solid strategy behind it beyond a temporary ad revenue boost from peeling away Yahoo ad accounts.
By contrast the deal consummated by Yahoo with Google is expected to pump in significant new ad revenues to Yahoo from Google's superior ad network, a total win-win any way you look at it. The deal is non-exclusive, so Yahoo can choose a plan "B" any time that it wants. In the meantime the other huge win-win is the promised interoperability of instant messaging networks. Google already has interoperability with AOL's still-popular messaging network, so the stage is set for the next major deal to whisper about - a Twitter acquisition that will provide a unified front end to the world of instant messaging.
With a generation of Web users coming of age focused on IM, Facebook and other platforms, email systems creaking with offensive and virus-laden spam have become a legacy messaging technology that wil die a slow and largely unprofitable death in much the same way that the telegraph lingered well past its prime. We use email because we have to - not because we want to. Focusing on accelerating the growth and usefulness of IM systems while leaving their email services to take their own paths is a smart move for both Google and Yahoo. A merger of Yahoo mail accounts to either Google or Microsoft's mail networks would have been a long, painful and largely unprofitable endeavor.
I felt all along that an independent Yahoo would be better for the content industry as a whole so I am glad that at least tonight we can go to sleep knowing that there will be a wider variety of good platforms through which to publish content than if the Yahoo deal with Microsoft had gone through. Jerry Yang's team still has a lot of challenges ahead of them but with an improving stable of user-friendly destination content properties and a progressive approach to supporting brand advertisers Yahoo promises to have a strong place alongside other major online portals for some time to come. At least I hope so - I really don't relish a deal war as ugly as this one any time soon.
Yahoo CEO Jerry Yang adds to his signature in his weblog posts the moniker "Chief Yahoo," a label that seems to be more of an epithet in the mouths of some shareholders and dealmakers disappointed by Yahoo's recent and apparently final rejection of a potential Microsoft takeover. With Yahoo stock plummeting on the first market day after the deal fell through the sore attitudes towards Jerry Yang's rejection of Microsoft's offer claims of needing some Prozac seem to be at least tied with the claimed "high fives" amongst some Yahoo executives when news of the deal failure came through. Even Yang himself on Yahoo's corporate weblog claimed that "No one is celebrating about the outcome of these past three months… and no one should." It was a tough battle with bad blood generated both inside and outside of Yahoo in the process.
But there's no doubt in my mind that Yang made the right decision for Yahoo shareholders as well as for the company itself. While there were some important synergies that would have come out of a Microsoft deal, in general it would have been an acquisition by a company driven by old concepts of intellectual property value of a company that is starting to move far more aggressively into new concepts for realizing the value of intellectual property. CNET News notes that Yang is betting heavily that its more open approach to content integration using its own APIs as well as emerging APIs such as OpenSocial will increase significantly the exposure of Yahoo content to audiences in increasingly valuable contexts. Combine that with a completed deal to use Google's ad networks and to integrate in AOL's user base and you have the makings of a company that will shine in building highly engaged audiences using content from many sources. Think of Yahoo as an enormous warehouse of content, commerce and community that can be rejiggered into countless social media applications. Sounds like the man has a plan to me.
In the meantime Microsoft is left licking its wounds from what was perhaps their last great opportunity to leverage their way into more secure online revenues in the face of stagnating income from its traditional product lines and modest growth from its online ventures. The Yahoo acquisition would have brought them some synergies but at the end of the day it was largely a cash flow fix and an attempt to buy an audience for Microsoft's online tools that may or may not have succeeded, given their history of coming in very strong and proprietary with such efforts. By the time they would have focused on Yahoo's existing efforts to open up their content and to focus on contextualization rather than IP ownership as the key to revenues it's not likely that they would have survived Microsoft's more traditional outlook on IP value generation.
In this parting of the ways Yang will face angry shareholders and some shell-shocked employees for some period of time and softened share prices as the new(er) Yahoo takes shape. It's unclear that he will survive this unsettled environment in his current position but hopefully his vision for a Yahoo more in tune with today's most valuable opportunities for content will continue to move on. In the meantime Microsoft needs to consider both new cash cows and new stars on its matrix of properties to help it make a transition to a future that is moving away steadily from proprietary software on proprietary platforms as the most certain long-term bet for steady and growing revenues.
Yahoo joined the list of online companies reporting rosy quarterly earnings, with earnings stronger than anticipated and profits nearly tripling based in part on earnings from new Chinese acquisitions. In the meantime Valleywag notes that Amazon's 1Q sales were up 37 percent over last year's 1Q results and earnings up 29 percent. Meanwhile Google reported revenues up 42 percent over last year's 1Q and net income was up 31 pcercent, powered in large part by continuing strength in U.S. markets and rising strength in overseas operations.
For those who invested in the future of publishing and ecommerce, the payoff has been handsome indeed. For some the growth of Web services in overseas markets in which they invested heavily is a key factor but in the instance of Amazon it's a combination of people who have time and money to shop online and less of a motive given high gasoline prices to sally forth to the mall. In both of these instances there's the continuing emergence of self-service for goods and content. the tendency for people to what what they want where they want it and to favor those who are best at doing this. "Find a need and fill it" was the succinct definition of marketing given to me years ago, one that online services have done well indeed.
In the meantime over at the Web 2.0 conference there are the usual nods of the head towards Tim O'Reilly and other gurus of social media, but at least according to one report the conference is as revealing for its emerging political correctness as it is for a meaningful exchange of ideas. As now-traditional online properties come up rosy in earnings, is Silicon Valley getting bored with social media's long-term promise but short-term question marks? Perhaps so, given a toughening economy and a lack of fully effective monetization tools: just as the dot-com crash came before contextual ads made monetizing search and non-mainstream media profitable, we're sure to see a short-term fall-off in new social media investments as quick exits begin to seem less likely and the over-saturation of the market with publishing tools fragments opportunities for both marketers and publishers alike to reach scale effectively. This, too, is reminiscent of earlier dot-com days, when many publishers adopted a "wait and see" attitude - and eventually lost major market share and brand value.
What's likely to light up the charts over the next few months for new investments is "social knowledge," a loose label that combines the ability of analytics software and aggregation services to divine patterns from social media and online expert services such as WikiAnswers that build repositories of how-tos from topic experts. Whatever the particular play, being able to get more definitive insights from social media seems to be where the money is being spent.
Missing in this mix so far is a huge push by traditional publishers to counter these trends. Most social media investments by major publishers are still largely incremental, moving at a pace that's not likely to lead to strong offsetting revenues any time soon. For enterprise-oriented publishers this is probably not a major concern right away, as traditional publishing methods for scientific papers, while under great scrutiny, are not likely to hit a breaking point this year due to social media. But we're starting to see more signs of services such as content federation and software as a service creating new competitors for enterprise publishers that are going to be worrisome as service renewals begin to come up against budgets in any long-term economic slowdown. Toss in a slow start to developing social media services and we could be in a relatively brief period in which traditional database services have an opportunity to catch a new uptick in their value proposition.
This all adds up to a pattern that is clear and unmistakable: good content will find good markets, but building good brands for good content requires more new contexts than ever before. The biggest mistake that dot-com naysayers made was disputing the value of those "eyeballs" in the long run. Those fettered to quarterly returns may have felt differently about that in the short run, but once effective monetization and contextualization tools took off, the revenues and the profits followed surely. Monetizing contexts will continue to be a hot spot, and those with the tools to monetize them - not necessarily synonymous with those who own the content being contextualized - are going to do just fine for years to come. More to the point, social media is drawing us to a time when microcontexualization will increase the value of these types of venues for monetization, enabling higher-value transactions to be monetized more effectively than ever before.
So yes, it's a gloomy time for the global economy as a whole, especially for those services that depend on people walking through a doorway that might cost a fiver or so just to get there. Great for the carriage trade, but not so good for mass market sales. This will put more pressure on social media services to provide not just interesting chats but interesting opportunities to survive and thrive - as I am outlining in Content Nation. It may turn out that the greatest motivating factor for social media will be not Silicon Valley greed but worldwide need to build a more effective economy. Anyhow, congratulations around to all those who enjoyed glowing earnings reports, let's not forget that it was less then a decade ago when your revenues were mere blips on the corporate charts.
In war it's said sometimes that the enemy of my enemy is my friend. If business deals are a form of warfare then we're seeing some interesting friendships in Silicon Valley these days. The Wall Street Journal covers an emerging wrinkle in the battle for Yahoo as they march closer to a deal to replace their ad network with ads from Google's more powerful stock of advertisers. WSJ speculates that this will make it harder for regulators to approve other acquisition offers from Microsoft and News Corporation to take over Yahoo - or at least slow down a potential re-upping of a bid from them. That may be the case, but it seems as if step by step Yahoo is navigating to a peaceful conclusion to its current woes - and forming a more healthy revenue picture that could help it to define a more comfortable independent future.
With the USD billion -plus boost it's likely to receive from Google's ad networks for ads displayed on its search pages and other page inventory and a potential pickup of already Google-friendly AOL, we're beginning to see the outlines of a duopoly to counterbalance the strong push of Microsoft and News Corp to dominate online media. In broad terms, think of Google as the search, video, database/API and ad backbone for the commercial Web and Yahoo as the media licensing, aggregation and community backbone. Each of these specific domains will overlap, of course, but in broad terms there's a symbiosis between them that offers each a path to revenue growth and the industry as a whole two distinct partners with two distinct strength sets.
This is probably the way that it should have been a while ago. I don't think that there was ever really a strong rivalry in many ways between Yahoo and Google on the product level. Each has always had their specific strengths, and probably both would have benefited greatly for earlier cooperation of this kind. Google was never going to "do media" as well as Yahoo and Yahoo was never going to "do technology" with quite the intensity and neutrality as Google. But between the two of them they both do online content very well indeed. And between the two of them they will have oodles of page inventory for ads to help them weather tougher economic times with fewer concerns - hopefully a key factor that can appeal to Yahoo shareholders being faced with choices.
More to the point, perhaps, such a duopoly would restore some natural balance to the Web that would enable marketers and publishers to understand who to deal with more effectively. There have been too many players with designs to be a "new number one," too much time wasted on kingmaking and not enough time spent on product development. It still leaves Microsoft plenty of room to focus on new and better platforms for content with mobile operators, auto manufacturers and appliance makers and to try to lock up entertainment deals for those platforms. News Corp may prove to be a stepchild in this situation for the moment, but with MySpace still chugging along healthily I doubt that it will be out of the game in any long-term sense.
The key loser in this deal would seem to be not so much Microsoft as Microsoft's strategy of domination by selling intellectual property. Be it software or content, Microsoft's continuing focus on proprietary consumer goods and services is distinct in many ways from the more open and collaborative assembly of value found in many Web-oriented environments. This may work to Microsoft's advantage where they can provide new and powerful platforms for content, such as in their Sync line of automobile communications technologies, but with ownership of content being more at the mercy of companies that own contexts it tends to be a strategy that conflicts with successful online media. It's that conflict that seems to be at the heart of their failure to convince Yahoo that a marriage would be good. At its heart, after more than a decade of online development, Microsoft still doesn't "get" the Web in some fundamental ways - nor does it seem to want to.
I'd be very happy if this path towards collaborative independence for Yahoo works out the way that it's headed currently. None of the acquisition paths for Yahoo were looking very positive for either Yahoo or the industry as a whole, even if they would have been good portfolio matches for potential stockholders. Here's hoping that we can let this deal fracas die off so that we can get back to focusing on the growth of the Web's greatest strengths - great content and powerful contexts.
One of the more interesting things about coming back to blogging after a short hiatus is that the Yahoo deal drama has only gotten worse. There's great coverage from many sources, including a good summary of recent analyst takes on paidContent.org, as well as a New York Times story now circulating that News Corp may combine with Microsoft to complete a deal for Yahoo, presumably to combine MySpace's social media strengths with MSN and Yahoo's strengths along with a combined ad network. The counterfoil to this is a possible deal to merge AOL into Yahoo.
Certainly an AOL/Yahoo merger would help Time Warner's plan to get out of the portal business and help Yahoo to grow market share significantly - and certainly working towards one set of user accounts, one messaging network and other combined infrastructure could become very valuable over time. But one wonders how much time and effort would be spent on merging plumbing on these two legacy platforms to get a unified portal business when they could have been focusing on the growth in traffic comes from social media products that operate largely via other platforms.
By contrast the Microsoft/NewsCorp/Yahoo combination may offer a lot more punch for a shareholder's money. Leveraging the power of MySpace, a still-powerful social media platform well-attuned to mass media markets with Yahoo's strength in content aggregation and user accounts and Microsoft's strength in software development, platform strength and ad network brokerage, all in one package, has a lot of interesting parts that could produce more value in the long run. AOL and Yahoo combined, for example, will do little to penetrate mobile markets more effectively. Yahoo, Microsoft and MySpace, by contrast, could make some interesting things happen in mobile between platforms, social media, user accounts and ecommerce.
This is all well and good, but why are we so fixated on this deal, anyway? It's not that it won't create some sea changes over time, but the strengths of a deal with Yahoo come largely from what the partners may offer in combination. Yahoo is big, still powerful - but for the most part in its lifecycle a cash cow with relatively low new product investment waiting to be turned into hamburger. The real issue is what this means in terms of exit plans for online content and technology companies, as pointed out by Fred Wilson over on A VC - that is, if a company with fairly obvious marketable attributes like Yahoo has a hard time cashing in, what does this mean to online plays in general? If there's no exit at the top, what does that say to other players?
Somehow a deal will be forged for Yahoo in the next few months if the company's staff doesn't implode before then from takeover stress. But in the meantime I honestly don't think that it's all that significant a deal to watch from the overall industry's standpoint. Big will get a bit bigger - and that combined entity will still look nothing like Google. I think that we're seeing that overall getting any bigger is not necessarily going to solve anything in online markets. Online publishing is still in its infancy, still requires an enormous amount of investor patience as new ideas face daunting risks and still will have periods of high uncertainty that don't lend themselves to quarterly reports, much less private shareholder reviews. In other words, while some people are still focusing on making larger dinosaurs the long money is still probably in making more and better mammals. Be patient, be foresightful - and don't get too caught up in the scuttlebutt.
What does it mean when a company announces disappointing earnings and has no strategic plan to move forward? It means that you've been shopping your company like crazy and you're waiting to see what comes out of it. It should come as no major surprise that Microsoft finally made an offer for Yahoo that it will in all likelihood not refuse - USD 44.6 billion to be exact, more than double Yahoo's closing shares value. With an expected 23 percent drop in earnings over Q406, Yahoo's ability to fund a better position in the marketplace in the face of a looming recession was dimming rapidly. Microsoft wisely waited to buy low.
Six months ago I poured cold water on such a merger, seeing News Corp as a far better partner in the long run. I still believe that a News Corp acquisition would have been a great exit for Yahoo in many ways, as the negatives in a Microsoft deal that I pointed out in that earlier post still stand. But at the end of the day this is a merger of necessity, not of opportunity. Neither Microsoft nor Yahoo can compete with Google effectively at this point, a factor that's only going to be exacerbated as Google's mobile strategy begins to unfold this year.
While one can crow about "the merger of content and technology" or some such meme and marvel at the combined online audiences that these two megaportal providers can offer advertisers through the powerful combination of Microsoft's ad-brokeraging system and Yahoo's own ad marketing services there's one key and overarching problem for both companies: they've been slow to bring hit products to the marketplace. Old media and old technology product cycles are not Web product cycles, and neither company has done well in figuring out how to build online hits as effectively as they know how to buy them. Google may not pop out perfectly conceived products and has product issues of its own, but they're constantly letting new things hit the fan to see what new markets they can open up while others spent time trying to build perfect products for old markets.
The big plus of the deal - there is now going to be only one dominant portal for established content brands and marketers looking to position their own brand advertising - is certainly important, but for an upcoming generation of Twitterers who see their own Facebook homepages or newsreaders as the portals that matter most to them it's not clear that this will be a great solution for either company as the new generation of content consumers gains pruchasing power. If you want corporate content and corporate advertising on corporate technology, one certainly knows where to go now. But in three to five years corporations eager to eliminate the "middle man" of media to manage their own market conversations directly may not see as much value in this union as they might today.
The potential feather in the cap for this deal could be the opening of mobile broadband. With a strong position already in mobile devices and now armed with tons of content and a great ad network Microsoft could stake out an early advantage in broadband mobile frequencies now being opened to all devices based on their existing momentum alone. The struggling Vista platform will continue to be refined for enterprise purposes but Microsoft's mobile Windows CE operating system may become instead the default Windows platform for Microsoft's media efforts as home entertainment shifts between mobile gizmos and HDTVs. This is likely to bring strong profits over the next few years and is a very viable strategy overall.
But in the meantime one wonders whether there will be enough focus to make this happen. Having just survived a failed marriage between Hollywood media culture and Silicon Valley culture Yahoo must now adopt to Redmond ways. Microsoft has been redefining its own culture and focus rapidly in postitive directions as the Ballmer period fades away, but the scale of this merger is going to require some major dust settling. All this as a looming recession slows down both enterprise and media markets cannot be helpful.
It's a "Brangelina" marriage that's bound to eat up media cycles, but at the end of the day the fame of these brands is not necessarily going to yield substance out of thin air. This will benefit Microsoft in the short run, to be sure, if it can get to the short run issues in time, but in the long run onie wonders whether two overripe old brands can make a fresh and effective new brand. Time will tell, but at least we can read about this openly now and watch it play out.
Sramana Mitra at GigaOM tries to makes sense of the recent reorgs, cutbacks and general malaise at Yahoo. Mind you it's sometimes hard to figure out how people can cluck about a company that has over 500 million unique audience members, but clearly a USD 20 billion loss in market capitalization since its peak is bound to bring soul-searching in many major company. Sramana's suggestion is for Yahoo to focus more on excellence in specific vertical markets rather than to get lost in trying to out-everyone everyone else. Oddly Sramana gives as one suggested change the addition of photo processing service Shutterfly to Yahoo's Flickr photo community, even though Flickr has had the QOOP photo printing service for some time now.
This points out a major problem that many content aggregators face: it's almost impossible for an all-singing, all-dancing content vendor to buy enough good content to compete cost-effectively with specialists in any one market vertical. Yahoo could buy its way into a more dominant position in verticals such as travel, jobs and real estate classifieds by purchasing market leaders and then position management that wouldn't stop until they had dominant positions, but there are only so many verticals in which one can dot this effectively and still manage to maintain both rapid responses to market needs and the advantages of scale. Thomson has discovered this to a large degree as it has chosen to divest itself of market verticals in which it was both not possible to dominate effectively and to take advantage of common infrastructure for legal, scientific and financial markets more deeply.
The main problem Yahoo faces is that its brand does not resonate effectively with many of its holdings as well as many of its core offerings. In terms of breadth of content that it licenses or manages there's no single provider larger than Yahoo in online markets. That's a fine position to be in if you're a Google with a brand that is functionally oriented more than vertically oriented, but when you're more about destination content it's hard to get a broad encompassing brand to work for both functionality and destination content - even when there's comparable functionality or content available. People gravitate to Google for search over Yahoo as much for branding reasons as they do for its technology: that is, Google is a "techie" brand, so it's viewed more as a tool for solving specific problems. Yahoo has great content, but with a handful of exceptions it's not really seen as a tech tool intuitively. Strangely Yahoo's focus on well-designed user interfaces only seems to exacerbate this branding issue. By looking more user-friendly and idiot-proof than Google and other tech-oriented brands it continues to send signals that it's a company focused more on destination content than leading-edge content technology.
I'd hesitate to call Yahoo a dying brand, for it has a wealth of assets that are hard to beat in many arenas. But it is a brand in search of its soul, captive in large part to an earlier generation of the Web when aggregating content from existing media brands seemed to be a lot more powerful business concept than it is today. Google's more agnostic approach to content aggregation and more askance perspective on marketing alliances with established content brands has enabled to keep its content acquisition costs relatively low and its ability to focus resources on transformative technologies and approaches to markets relatively high. In an era in which a brand creates trust moment by moment Google's more contextual and flexible approach to brand management carries with it inherent advantages, as do many social media brands focused on transformative technologies.
Yahoo need not become another Google from a branding perspective, but it does need to think about the positioning of its brand far more carefully before it tries to focus on improving existing product lines that may not be well aligned with a repositioned Yahoo brand. I remain optimistic that this can happen over the next few years, but I don't expect a short-term turnaround.
You have to hand it to Yahoo: there is a lot of pressure on them from pundits and analysts to come up with something that would put them in the game with major social networking portals. But while still incubating their Mash social media platform they've come up with a product that says in effect that they know that they have a long ways to go. As such the introduction of Kickstart by Yahoo needs to be looked at through kinder, gentler eyes than might otherwise be the case. Instead of rushing a "we're everything to everyone" portal to market that would be sure to be met with disappointment Yahoo has gone to war with the platform that they've got and has chosen specific battlegrounds as a starting point.
The specific focus of Kickstart is young adults making the transition from college into professional lives. This is a gap that may be more theoretical than real given the strength of services such as LinkedIn, Facebook and Classmates.com in covering alumni relationships, but by focusing specifically on young adults making a transition Yahoo may have an opportunity to catch a toehold of acceptance with these people just at they're considering how to move out of campus mode into corporate mode. Sounds good on the surface, but this may be a case where traditional marketing analysis will leave Yahoo several yards short of their goal. Many of today's college-age generation see a strong blend between personal lives and careers that carries over well into their twenties - the odyssey years, some have termed them. The "prosumer" concept is something very comfortable to this generation, so sharing photos and videos is not necessarily something that conflicts in their minds with professionalism. The division between the Mash project and Kickstart seems like it's aiming at a gap that their audience may not perceive.
At the same time, though, there may be a few young adults who look at their Facebook profiles and say to themselves, oops, I did it again. The danger in mixing consumer and professional outlooks is that it takes a fair amount of maturity to show that you know how to balance these lives effectively. So Kickstart may be named as such to suggest the notion of "fresh start" to those young adults who didn't make the best use of social media to put their most adult foot forward. But at the end of the day it's far more likely that a service like Facebook can help these young adults to maintain meaningful relationships that can include their professional personnae than a service like Kickstart can loosen up and make networking seem to be a little more fun. From this perspective the dead-serious LinkedIn network seems like a more likely target for Kickstart than Facebook, creating a new generation of highly professional networkers that can make the most of people in their networks with great skillsets.
At the end of the day it's not Yahoo that's broken in designing products such as Kickstart but an information industry as a whole that focuses on databases more than the audiences that they serve. Social media is far less about what is stored on a server and far more about what happens in the browsers and mobile phones that connect peers to one another. Social media can yield highly valuable data and demographics for licensing and advertising support but as demonstrated in Facebook's new socially contextual ad and marketing program the premium value in social media is in the contexts that databases can generate on the fly based on interests and activities. Facebook may yet be trumped by a maturing brand out of a Yahoo that can manage some of the details of one's life with more professional panache but by separating the content experience from the networking experience Yahoo seems to have missed out on developing a platform that will create the most rich environment for both advertisers and content licensors.
Hopefully Kickstart can get some quick yardage for Yahoo to consider its next move in social media but in the meantime the rest of the teams are moving to a more sophisticated playing field altogether. Whatever way you slice it Kickstart is trying to define a niche product, in effect ceding the ground already seized by other social networks. With the introduction of Google's OpenSocial the Yahoo crew is becoming that much more isolated from the greater social media environment, becoming increasingly an island for copyrighted content and traditional brands that are powerful in their own right but missing out on many of the contexts in which they can find their greatest value. There's money in that model, but not necessarily money that has a future.
I have enjoyed using the Compete.com traffic analysis service, which provides some useful data to compare Web site traffic performance more accurately and finely than the oft-bashed Alexa statistics. While Compete offers a more limited range of sites for analysis and only a year's worth of data to mull through it's able to track real visitors, audience engagement and growth with more meaningful data. On the Compete blog recently was a post that looked at how major search engines are performing in comparison to one another for both traffic and performance. While Google leads Yahoo and Microsoft with 67 percent of market share, the Compete stats claim that Yahoo comes out on top in terms of search fulfillment - the percentage of searches that actually result in someone clicking on a link in a search results page. Compete claims that Yahoo's search fulfillment rate is 75 percent, compared with Google's 64 percent and Microsoft's 61 percent.
Does this mean that Yahoo's search results are more "clickable" than Yahoo's? Maybe so, but it's a rather ambiguous claim to make. One has to assume that with only 20 percent of people using Yahoo for searching to start with that a minority find its search results to be more useful than Google's. So for that minority they seem to use them more effectively. Overall, Yahoo searches are more optimized for people in a purchasing mode than Google search results, which tend to be optimized more for people seeing general information. With this in mind it could be that Yahoo tends to lead shoppers somewhat more specifically to product information that they're seeking - a factor that's likely to attract the brand advertisers that are at the core of Yahoo's marketing strategy.
Yahoo search benefits from doing fewer things better for fewer people, but Compete also shows that Yahoo as a whole performs far better than Google in the total attention that it gets from audiences:
While Yahoo's strong destination content helps to bolster its attention ratings it's losing ground to Microsoft in total page views as Microsoft bolsters its Live.com search engine:
In the middle of this is Google, still the overall search leader but beginning to stagnate as a destination as other search-oriented sites bolster content that transforms search portals more into destination content sites. Google has these abilities also but focuses more on solving a broader array of requirements for a broader search audience. Google also has more partners using its search technology as well as mashups and other API-based services so to some degree the Compete statistics are not revealing the full strength of Google's market presence. Google's growth as a destination search engine may have slowed, but its presence as a technology platform that influences where and how people find content in valuable contexts is growing in highly profitable directions.
All of this should serve to remind us that there is no longer one clear answer to how to create marketable value through search. You can focus on becoming more portal-like, you can focus on being more embeddable, you can focus more on a specific function such as ecommerce or you can focus on a range of functions - but regardless of the focus it's no longer a matter of just having great ranking algorithms or great server farms. Search has become just one of many tools for contextualizing Web content effectively on demand, one that will continue to grow in importance but just one tool in an arsenal of methods to be used for more effective audience engagement.
CNET News reports in the past tense on the net neutrality movement, the effort by a coalition of online publishers and technology companies to keep U.S. telecommunications companies from charging different rates for Internet access based on arrangements with content partners. CNET notes that in the wake of last year's successes in stalling changes to current policies and new focus on carving up the 700 MHz radio spectrum for wireless broadband access the movement has become fragmented. The original "It's Our Net" group has reformed as the Open Internet Coalition, trimmed down from 148 to 74 members, with major technology and portal players such as Microsoft and Yahoo out of the picture. Notably Apple was never a part of this coalition, a fact underscored by its interests in acting as a "toll gate" of its own sort as it uses its iPod and iPhone proprietary platforms to pressure media companies into price cuts for premium content.
All of this could be relatively moot except that while legislators and companies may be focused on other things the communications companies who have so much at stake have certainly not forgotten their original goals in opposing net neutrality. In a parting gift to communications companies outgoing U.S. Attorney General Alberto Gonzales filed an ex parte filing (PDF) with the U.S. Federal Communications Commission suggesting that net neutrality regulations were not necessary to ensure open competition. The absence of Yahoo and Microsoft from the coalition and their advancing plans to develop premium content services may also imply that they see themselves becoming more like Apple and being able to dictate content pricing and licensing terms to a broader array of content providers through alliances with communications companies.
In the bigger picture, then, the fight for neutral access to publications over public infrastructure is far from over and in fact widening with the 700 MHz spectrum also in play. In all of this traditional publishers have been largely in the background, with no apparent major role in the lobbying efforts. This seems to be wishful thinking at best, akin to the efforts of publishers to ignore the Web in its early days, but now only worse since such a large percentage of their growth depends on it. The New York Times reported dwindling revenues from their ever-smaller print editions yet a 28 percent increase in online revenues, to cite one example of robust online revenue growth. If there were a chance that newsprint or mailing costs would go up publishers would be all over it: why do they ignore potential regulations that may have a huge impact on the profit margins of their most promising new source of revenues?
In the meantime the opting out of Microsoft and Yahoo from the net neutrality movement and the non-participation of Apple points towards what many publishers hope: that a handful of major portals can help along with communications providers to re-create the cable television model and create a brand advertising Nirvana where consumers behave as they ought to and pay for premium access. Yet with user-generated content and search engines providing more context for content than ever before it's not clear why consumers will be persuaded easily to opt for being charged premium prices for access to specific sources when flat-rate access has been such a successful way for them to determine for themselves what's worthwhile content.
In largely ignoring the net neutrality debate publishers' hopes for controlled access are more likely to fall prey to communications companies and portals who will take higher percentages of their revenues from their online content through access channels that are not optimized for audience growth and that will give them less autonomy on pricing. The open Web may be a bit more of a wild and wooly place for some publishers but for those that have embraced it most efficiently it has been the most promising revenue and profit driver in an era where many channels are becoming far leaner and meaner. It's time for publishers to think about what's really in their best long-term interests and to begin to embrace net neutrality as an essential component for both audience and margin growth.
Bloomberg News covers Stanford Group analyst Clayton Moran's claims that the seeming listlessness of Yahoo's management since Terry Semel's departure and sinking share prices are laying the groundwork for an inevitable and likely sale of Yahoo. Moran cites Microsoft as the likely bidder and beneficiary of online synergies that would boost both properties into a newly competitive position against rival Google. There are a lot of things that still argue for this combination - invigorated search technology and online office components from Microsoft, advertising know-how and effective destination content development from Yahoo - and a such sale is certainly not improbable. Yet I can't help thinking that this may be one of those "perfect" marriages that would go south far more quickly than people may imagine.
The main rub that I see is that both companies suffer from two similar maladies: weakening market mindshare for their brands and dysfunctional product development cultures. Microsoft has had a remarkable string of product introductions that have been flops, duds or near-misses, in spite of having a near lock on many key technologies. Its Internet Explorer browser, once the unchallenged ruler of online Web content consumption, now boasts only about 70 percent of the European marketplace, a problem only exacerbated by mobile content markets moving further away from Microsoft technologies. Yahoo has many comparatively healthy and innovative initiatives, but some of its most innovative properties such as Flickr, del.icio.us and Yahoo! Pipes are either standalone brands or initiatives that are relatively orphaned from the mainstream Yahoo offerings. The Semel legacy of traditional media development stalled the effective development and integration of social media, a strategic error that Yahoo is working hard to correct but nevertheless a legacy of poor market timing that Microsoft will do little to bolster.
Moreover a Yahoo acquisition will do little to help Microsoft penetrate the enterprise/prosumer space very effectively. Yahoo's withdrawal from enterprise services a few years back left the playing field open for Google, which is still at the foothills of enterprise content but building a steadily growing array of products and integration resources to build that base over time. On the consumer side the addition of Microsoft properties to Yahoo's ad base would be a strong plus, but not one that could not be offered by other parters as well with greater online growth potential.
Which brings us to the question: who would want to buy Yahoo? I think that it's far more likely that News Corp will see a Yahoo acquistion as a perfect complement to its holdings.Its online management team is both upbeat and highly experienced with social media via Fox Interactive Media's MySpace platform and would offer Yahoo a better chance to develop as a dominant media brand with a strengthened advertising base. Yahoo's strong online finance portal would complement potential content fed in from Dow Jones holdings should that deal close, a deal that would have already provided News Corp with good enterprise revenues and technology platforms. Yahoo entertainment offerings would complement MySpace nicely and its enormous base of user accounts would offer MySpace a shot in the arm as Facebook builds a stronger market share.
The only real question for a Yahoo sale is timing - and it's likely that Yahoo's nascent social media replacement for its less-than-booming 360 portal may be the timing telltale. If the introduction of this effort is not stunning or if management becomes discouraged in its early testing phases then it's highly likely that a deal will be executed fairly quickly one way or another. But don't be surprised if quiet talks are already in the works - no doubt awaiting News Corp's finalization of Dow Jones details before focusing on Yahoo. Other potential suitors such as TimeWarner could enter the picture (AOL round two? Probably not.) but few offer clear synergies. We'll see whether Microsoft has the gumption to pull the string on a Yahoo deal, but my guess is that they have their hands full with many core competitiveness issues already - and that News Corp will be able to define more profitable synergies and longer-term brand strength before Microsoft gets to pop the question.
Will Yahoo's replacement for its 360 social media product take off, StumpleUpon helps publishers in the long tail of content and Springer deals with an Open Access publisher who turns out to be quite vocal about their early efforts' shortcomings.
A preview of the SIFMA show, thoughts on Jerry Yang in it for the long haul against Google, Reuters Interactive and Science Magazine's content previews. Let us know what you'd like to see in our ShoreViews reports!
AP reports on Terry Semel's stepping down from the CEO role at Yahoo after challenges to his leadership at a recent stockholders meeting made a swift move to restore investor confidence an imperative. The move is notable as much for what didn't happen as what did: Yahoo co-founder Jerry Yang will be taking on the CEO role to re-establish both investor sentiment and Valley creds for the short term while Susan Decker, thought to have been Semel's hand-picked probable successor, notches up to President from overseeing ad operations. This may mean a wait-and-see period for Decker while the company as a whole adjusts to Semel's departure before moving up to the top role but more likely it's a move for Semel to have a proxy for his vision at Yang's disposal to ensure that his initiatives have some leadership to prove out his legacy.
Semel's media background was seen as a plus when he took over at Yahoo, promising "adult" leadership and the ability to lead Yahoo towards deals with mainstream content providers that would help to build up its portal in the eyes of online audiences. But a funny thing happened on the way to the earnings reports: search engine Google proved that being able to contextualize the world's content was more important than trying to build a bigger and better AOL. Yahoo has made some strong moves in recent months towards building up the power of user-generated content to drive Yahoo traffic, but the key revenue driver - contextual ad performance - continues to lag.
What are the prospects for Yahoo in the wake of Semel's reign? All in all, pretty good. While Yahoo has suffered from focusing too intently on traditional media products in the past, its push towards stronger social media offerings and innovative reuse of these assets for new portlets for consumer goods and hot topics offers Yahoo a role as a lead innovator amongst traditional media companies. With Semel out of the picture it's likely that staff trimmings will cut through some loyalty factors and allow Yahoo to gain some momentum in deal-making to shore up its innovation position and market share. Yahoo is building high-quality content that appeals to mainstream Web users, effectively bridging the gap between AOL-like neophytes and seasoned users with highly focused interests with an array of well-designed content products.
But the key problem remains that Yahoo has mapped out a strategy that weds it largely to the goal of most traditional media companies: build market share and viewership for a destination portal. While its ad network will help Yahoo to expand past that footprint effectively, their dedication to making it work for brand advertisers is likely to make it too focused on the declining footprints of traditional media companies to build market share quickly enough to be fully competitive with Google's ad campaigns. As pointed out by TechCrunch recently the "long tail" of content is getting only thicker, placing a premium on products that can absorb and interpret its content for highly focused audiences. This will continue to play to Google's advantage as it builds both revenues and margin from an abundance of less-expensive content sources that can be monetized through its contextual ad technologies and dominant search engine.
Yahoo has also neglected its enterprise strategy for many years, effectively ceding this arena to Google and a host of other services that are effective in contextualizing both enterprise and Web-sourced content. With "prosumers" dominating online markets increasingly Yahoo has little to offer professionals online beyond its dominant financial portal. Google's enterprise efforts may be also-ran in comparison to efforts by IBM, FAST and Autonomy, but increasingly it's an also-ran that just happens to have at least some footprint everywhere. On the publisher's side of the equation are subscription database services struggling to hold on to revenue and margins through more sophisticated content integration services - not likely candidates for partnership via Yahoo's highly consumer-oriented efforts.
New management can help Yahoo to take advantage of its considerable media assets but it's going to have to be a team that's willing to make some tough decisions regarding its traditional media partners fairly quickly. As more of these partners take a multi-channel strategy for content distribution the advantages of paying hefty percentages for the use of their content only props up the potential revenue streams of Yahoo competitors who go to play with mainstream media players. Yahoo must dance delicately as it works to continue its strong relationships with existing media companies while managing to be much more stingy in its licensing negotiations, so as to free up more capital for deals and product investment.
What will be Semel's ultimate legacy? I think that it's easy to lose sight of how disjointed Yahoo was when Semel took over. While balkanization still plagues some Yahoo operations overall he helped to forge what it arguably a well-run company that has created a dominant position in many forms of destination media. The ad game was already moving out of Yahoo's grasp when he came on, so while he can't be credited for a triumphant reversal he laid the groundwork for a good product strategy. The largest spot on Semel's record will be the loss of major deals for online video. With Google Video emerging as a leading search engine for video content across the Web and YouTube firming up as the leading source of user-generated online video it can be argued that Semel's media roots failed to prepare him for the most rapid shifts in online entertainment in the past ten years. But this blind spot was hardly unique amongst major media companies.
We'll see how rapidly Yahoo repositions its considerable assets in the months ahead, but my guess today is that Yahoo will emerge a year from a now a far leaner operation more focused on user-generated content and on making content from all sources more usable. Mainstream media and brand advertising will still be a very important part of Yahoo's revenue mix but we're likely to see Yahoo acting more as a better bridge for media companies to Google-like strategies that lead mainstream media content away from the confines of fixed portals. Better widgets, better feeds, better toolkits for developing branded portlets, better user-enabled aggregation tools - there are a lot of ways to make Yahoo content grow beyond its current destination footprint. That is, if Yahoo is willing to challenge traditional media companies more aggressively to move beyond their roots.
Read/Write Web notes the following comments by Tapan Bhat, Yahoo's vice president of Front Doors, at the recent NextWeb conference in Amsterdam. Tapan told attendees that search would not dominate the web in the future:
"The future of the web is about personalization. Where search was dominant, now the web is about 'me.' It's about weaving the web together in a way that is smart and personalized for the user."
Well, yes and no, Tapan. Yahoo's personalization plays are exploiting the trend towards audiences aggregating their own content from various sources, including feeds, widgets, bookmarking services and other social media tools. User-defined aggregation plays a key role in defining where and how people look for and find content. But where is most of that content coming from? Search engines power many of the mashup and widget-oriented aggregation plays that are touted as the leading edge of social media. Be it through Google or more enterprise- and media-oriented services such as MuseGlobal, Mark Logic, Nstein or Really Strategies search services are evolving into the back ends for value-add content services that place valuable content in customized contexts well beyond traditional search results. So there's no escaping the importance of search and its ability to return the most relevant and useful content.
Where Tapan may have a point is that people aren't really looking towards new search engines to solve their problems. paidContent.org noted the arrival of Ask3D, a refreshed version of the Ask.com interface that, well, looks pretty much like the old interface but a little prettier. Ask.com is a good search engine, but I think that the personalization movement is a little bit off target. It's not so much about "let me personalize my search results" as it is "tell me what I want to know." If user-defined personalization accomplishes this, great, but Google's emphasis on anticipating what users need on a more personalized basis is probably closer to what will succeed for the 80-percent crowd. As noted by Information Today the new "Universal Search" interface does a lot to customize search results to a specific context automatically, a concept that Google will expand upon as it integrates content from its wide array of search-based services even further over the past several months. For the 20 percent or less who will demand more control and features sooner there's now Google Experimental, which includes early-stage features that may make their way into the Universal toolkit soon enough.
So is search really "done" at this point? As the hottest problem to solve perhaps search is indeed past its peak, even though search engines will still continue to be refined. But the new generation of content services have search at their core and will add in feeds, Web mining and other capabilities to aggregate content on the fly far more effectively than information services have done to date. We all applaud Factiva's new integration of audio and video content into its search capability, for example, but the real proof of the pudding will be the applications that Factiva's clients choose to build off of such content. Consider search at this point the ad hoc database building tool of choice for millions of users that is only beginning to be used to its fullest extent to create highly valuable content services.
The wires are ablaze with takeover rumors, the leading buzz being about an offer from Thomson to acquire Reuters. Reports put NewsCorp in the race as well, but this sounds like a tepid "Plan B" as a backup to Murdoch's intents with Dow Jones. The matches in a Thomson-Reuters merger are fairly obvious - Thomson gets Reuters' low-latency content delivery and automated trading platforms for the investment bankers that they've been unable to woo in quantity as well as online ad revenues from Reuters' media offerings, Reuters gets fingers into the securities industry "buy side" and retail operations - but I wonder whether EC regulators are going to feel comfortable with such a dominant combination. On a global basis that would leave Thomson and Bloomberg as the only really viable content alternatives for supporting large-scale securities trading operations.
Then again, perhaps that's all we need these days: the content that's driving securities transactions increasingly comes from sources outside of traditional vendor databases, leaving enterprise-oriented content vendors to perfect data plumbing and desktop tools. In a rapidly consolidating global securities marketplace two may be the magic number for the years ahead. With plenty of cash on hand for just such a takeover Thomson is in an excellent position to tuck away a revitalized but still-fragile Reuters team.
Two may also turn out to be the magic number in online content as Microsoft and Yahoo reopen talks to figure out a better fit. The Wall Street Journal reports that the shelved discussions have been brushed off in light of Google's now-leading Web presence. Yet again, this may be a merger or alliance of necessity. It would cede that Yahoo has largely missed the boat on enterprise content while Microsoft has stumbled with consumer content, even as Google has forged highly profitable paths into both arenas.
As in the securities marketplace for Thomson and Reuters the potential for a Microsoft-Yahoo alignment is as much about global competition as it is with any U.S.-oriented concerns. Asian and European markets are tipping Google's way in comparison to Yahoo and Microsoft, a trend that may be accelerated by Google's office automation tools that would allow developing nations just starting to come online to avoid the dominance of Microsoft Office tools as a prerequisite for playing in the digital economy. It's not clear that a Yahoo-Microsoft merger would help either party in developing markets but it may be powerful enough to act as a brake of sorts on further Google dealmaking and advertising alliances in developed markets.
In both of these potential deals, as well as in the potential acquisition of Dow Jones by NewsCorp, is the looming presence of gigantism in publishing that seems somehow unable to counteract the emerging trend of micropublishing. Huge collections of copyrighted content and patented technologies don't seem to be able to make a dent in the explosion of content developed by and for peers who are able to collaborate effectively with relatively little help from media giants. If there's anything to be said for any of these potential deals to deal with micropublishing it would be to acknowledge that Yahoo has been good at attracting user content while Microsoft has an improving stable of collaboration tools. On the enterprise side Reuters has decades of experience in enabling market conversations and promises to do moreso with emerging social media technologies.
But in both of these instances it may very well be the case that the distraction of merger politics would decelerate rather than accelerate these crucial efforts, leaving these companies further behind in the race to capture value from social media. The time may be right for these potential super-mergers and the resulting balance sheets are likely to look pretty healthy at the end of the day, but gigantism may prove to be a very temporary stop-gap measure in efforts to counteract changes in publishing that seem to favor small and medium publishing efforts that grow organically from open source tools and Web-based communications standards. Which bring us back, as always, to Google, which is glad to sell people valuable contexts for monetizing all of this content in whatever medium is of interest to marketers. I'll avoid the usual dinosaur-versus-mammal metaphor and just say that in a rapidly changing publishing ecology we're better off chasing the mammoth of contextual content value than focusing on building city-states of traditional publications that rely on a vanishing economy based on the value of copyrighted content.
CNET News and many majors go all apey over an announced distribution alliance between NBC Universal and News Corp. to provide full-length ad-supported and premium video content to media-friendly portals AOL, MSN and Yahoo. CNET and others hint at talks with Google about bringing this presumably rights-protected content into their YouTube video portal, but it sounds like speakerphone-ware at most for now. In general the whole effort sounds a little panicky and ill-formed, with partners confused about what's going to be free or not and no real details as to how this will all hang together. There are promises of user-generated content being in the mix but no sense as to how it would fit in with centrally produced video content.
At the end of the day it's probably going to be a step in the right direction for media companies to get more aggressive about building broader distribution of content with their own monetization built in to the packaging. But for all the talk about "ubiquitous" distribution it's a very limited initiative with scads of professionally-produced content well outside of the packaging schemes - including some of News Corp's and NBCU's flagship shows. It also increases the sites at which one can get content from these partners from two to a whopping...five. Wow. Bump it up to thirteen and we could fill up an old-timey television dial.
It's all a sadly inadequate response to user-generated distribution that doesn't begin to provide video the flexibility that will be required to respond to the user-generated media phenomenon. At most it's an acknowledgment that a significant portion of their audiences would be just as glad to receive programming over an Internet connection instead of a digital cable or broadcast service. This will be a plus as PCs become more integrated into home entertainment centers: why muck around with distribution deals with other partners when you can stream the programming that audiences want right to their PC/HDTV server. But a response to YouTube and other user-dominated distribution channels? Hardly.
Instead of circling the wagons of "friendlies" video producers need to face head-on the challenges of making user distribution of their content a plus rather than a frightening minus. The longer that they wait on this inevitable requirement the tighter their circle of wagons will be as the user "savages" develop increasingly flexible - and entertaining - alternatives to traditional video media. We'll see how this goes, but my bet is that in the short term it will be a fairly large ho-hum as users wait for the dust to settle around a less-than-spectacular service debut.
In some ways it seems preposterous to be laying low the number one global destination Web site but that hasn't stopped Seeking Alpha's Eric Jackson from delivering a scathing review of Yahoo's financial performance in light of Yahoo's stock price sinking 7% for the past 2 years, compared to Google’s 151% increase. Jackson trashes just about every major Yahoo media initiative and lost deal-making opportunity in recent memory - not to mention CEO Terry Semel's half-billion=plus U.S. dollar compensation package over the past four years. Notably Jackson calls not just for the ouster of Semel but as well for the exit of six others from Yahoo's boardroom and steeper investments in R&D.
In other words Yahoo has become just another top-heavy media company trying to focus on old world dealmaking and brand advertising plays while Google creates infinite reserves of user-tailored page inventory from its search results pages and embedded ads on any Web page that wants to host them. It's not an entirely fair characterization of Yahoo, given some of its good moves as of late into social media, but it's fair enough as a reflection of how many traditional media companies have failed to put their money where the growth is. Put simply, acquiring and generating traditional content is not generating the needed page views to justify the investments that Yahoo has made in recent years leading to an overall decline in site traffic. It's going to be hard for Yahoo to make the kind of radical moves that Jackson suggests, but shareholders will be pushing them in that direction soon enough.
The hardest part of this shakeup will be that Yahoo's outlook on online media has been a major force in propping up many other media companies' hopes for being able to build traditional models for brand ad-supported content online - and in the process provide those with skills attached to those traditional methods and channels a comfortable career migration path. Ousting Semel and complicit board members is as much a slap in the face of the broader hopes of traditional media companies as much as it is for anyone at Yahoo in particular. Yahoo's significant traffic and membership assets are not going to disappear overnight, but the fundamental failure of Yahoo to fund growth in directions that build valuable user-defined contexts does not augur much for other media-centric portal plays. Here's hoping that the changes come in time to save many of Yahoo's best assets from becoming under-invested properties in a too-little-too-late belt-tightening exercise.
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Yahoo joined the list of online companies 
