More NewsWhat’s Really Wrong With Yahoo?

What's Really Wrong With Yahoo?

Yahoo!'s problem doesn't lie in its business model, or even in its balance sheet. Dana argues it's simply that Yahoo! is horrible at acquisitions.

Last week, The Standard asked a question that would have been unthinkable a year ago.

It asked, “What’s wrong with Yahoo?” The article went into exhaustive detail about the company’s finances and the limits of an ad-supported business model. But it never really answered the question.

That’s because Yahoo’s problem doesn’t lie in its business model or in its balance sheet. The real problem is that Yahoo is horrible in dealing with acquisitions.

When Yahoo buys a company, its first move is to change the brand name to Yahoo, thereby destroying the old brand. GeoCities was an interesting idea. Yahoo GeoCities is not. eGroups was a great idea — Yahoo Groups is not. WebRing was a great idea — Yahoo WebRing is not.

Compare what Yahoo has done with its acquisitions (I won’t even get into the former Broadcast.com) with what Lycos did. Wired is still around. HotBot is still around. Lycos, unlike Yahoo, didn’t throw millions of dollars in goodwill out the window when it bought brands — it invested in those brands. (Come to think of it, my home ISP’s email address is still mindspring.com, even though EarthLink has owned MindSpring for more than a year.)

internet.com uses the Lycos acquisition model, not the Yahoo model. Had Yahoo bought ClickZ, it might have changed the URL to clickz.yahoo.com, maybe even renamed the whole thing YahooZ and tried to send lawyers after any other organization using that last letter in its site name.

If the company you’re buying is viable, why change it?

There’s more involved in changing a site’s brand than just changing the home page and advertising. Every address and link in the site has to change. It’s usually impossible to give everyone adequate notice of such changes. Even if you give the notice, it may be forgotten. As a result, links are lost, and people get angry when the change occurs.

This is especially important when the site at issue is the creation of its users. This was the case in most of the sites listed above. Yahoo didn’t create the content of GeoCities, eGroups, or WebRings — users did. One such angry user has taken to calling Yahoo “the big bad wolf.” The problem is worse in this case because both administrative power and access IDs were changed.

Lots of big media companies have used the Yahoo strategy in cyberspace. They’ve taken down the brands they bought and replaced them with their own brand. Worse, as in the case of the late Go.com, is to create an entirely new brand to replace the old brands and then fail with the new brand. Now you’ve got nothing.

When you go out of your way to anger thousands and thousands of people, you’re not building, you’re destroying. And it’s totally unnecessary. It’s a waste of money, a waste of goodwill, and a waste of precious equity. That, not the advertising market and not the business model, is Yahoo’s problem. Sometimes pride (and brand hubris) does go before a fall.

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