Yahoo Stronger Without Search? Learning From AOL Model

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As Google, Yahoo and Microsoft are battling over who will acquire Facebook, who will buy part of Yahoo and who will compete with Google, an Internet giant is stocking its armory with some of the best and most integrated offerings to one day topple all three companies.

AOL has just closed its deal with Bebo, securing a social networking plan to connect all AOL properties, and effectively monetize within AOL and beyond with their Platform-A advertising arm. AOL is combining Bebo, AIM and ICQ along with other AOL platforms to being a top contender in the social networking realm, with their new People Networks.

According to AOL, People Networks has over 80 million unduplicated users.

Strong display advertising? Strong social networking? Strong content?

If anything, AOL reminds me very much of what Yahoo should be doing. How can Yahoo learn from AOL?

Is AOL the new Yahoo?

What strikes me as ironic timing is that with reports of “Yahoo and Microsoft teams bunkered down in a Palo Alto hotel hammering out the final stages of a transaction that will have Microsoft picking up the Yahoo search business,” is this : AOL is laying the ground work for the new path Yahoo is following.

Yahoo plans (it seems like they are always planning) to socially connect their entire network of 500 million + users (I do not know if those are duplicated users or not, but I have about 15 Yahoo accounts myself). If Yahoo sells their search division to Microsoft, then they may be making themselves even stronger.

Yahoo Stronger Without Search?

Without the burden of search, Yahoo can actually focus on its potentially massive social network and then tap its userbase and reach to expand its content and display advertising deals.

AOL is doing the same thing more or less, having Google power its web search and handle a lot of its paid search advertising, AOL has focused on building a robust selection of multimedia search products, expanded its channels, and with today’s AOL People Networks news, is one of the largest social networks on the globe.

AOL did not forget search. But the security of being able to “set it and forget it” with Google powering their search platform has let the company grow in other directions.

AOL has positioned itself to be more important as a Google partner, and even perhaps launch its own search technology in the future, leaving Google behind for something bigger or better.

Yahoo is in the same boat if they sell their search to Microsoft. The company will probably contract its search out to Microsoft, or even use Google to fuel its AdWords, while the company becomes more efficient in social, news, its channels and partnership expansion. Yahoo Search could even be more profitable running AdWords or the Microsoft hybrid of Yahoo Search Marketing / AdCenter because of the minimized overhead.

Yahoo Could Reinvent Search by Going Semantic

Then, once Yahoo is big and profitable again, it can acquire a new organic search technology, such as Hakia, Teoma, Powerset, Gigablast or other cutting edge search technologies which are ripe for the picking.

If Yahoo were to emerge from this deal with a stronger core, stronger partners and display ad network and then a new and stronger search via acquisitions, the company itself would emerge from its limbo, and really give the Googles and Microsofts of the world a run for their money.

Perhaps Yahoo has a lot to learn by following AOL’s direction. Personally, I’d hate to see Yahoo unload its search engine technology or even its paid search offering (best case scenario is that it unloads Yahoo Search Marketing and keeps Yahoo Search Technology AND Yahoo Answers), but let’s look at the return on investment for Yahoo.

  • In 2002, Yahoo purchased Inktomi for $235 million.
  • In 2003, Yahoo bought Overture for $1.63 Billion
  • Overture had bought Altavista at $140 million
  • Overture had also bought Fast Search & Transfer for $70 million.

Surely the company can unload its search engine business for far above the $2 Billion it spend to acquire these companies and the millions (if not billions) it has spend to develop them. If Yahoo walks away with an extra $15 to $20 billion in their pocket to fund their new direction, maybe Microsoft acquiring their search division would not be so bad after all.

Your thoughts are appreciated in the comments below.

Loren Baker
Loren Baker is the Founder of SEJ, an Advisor at Alpha Brand Media and runs Foundation Digital, a digital marketing strategy & development agency.
Loren Baker
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  • Yahoo is much beyond just search, there is no doubt about that.
    yahoo shopping, answers, finance, music, news….No one can under estimate that power and Microsoft has all that in mind on frequent acquisition attempts.

  • Loren, Interesting analysis. I’d love to hear your take on the Yahoo Open Strategy (YOS) as it relates to the Microsoft bid in this new form. While you mentioned in your April 24th post how the YOS concept might perform, I’ve seen just a few Search commentators discuss in depth the potential for that initiative – maybe because nobody expects them to pull off the grand plan. But it seems to me as though Yahoo just might have a couple of tricks up its sleeve with that play. I think it brings external developer and entrepreneurial creativity to an otherwise closed network and I believe success will follow – but search is a big part here and shouldn’t be dismissed (or sold I beleive). How do you see YOS affecting any possible deals with MSFT?

  • While I love some of what AOL’s doing from an outsiders perspective – and how they are connecting all of their services together, and strongly encouraging outside development; and their two steps of Yahoo on that, they’ve also completely lost the search Game.

    I think Yahoo has a different user experience in search, that’s not necessarily worse than Google. In fact there was research done in the past that shows Yahoo search results as being better than Google.

    I think Yahoo needs new branding – to become more “hip”, catch the early adopters, but more importantly, to really get someone who can provide them with a unique vision.

    They just don’t know what they are? Are they a media company at their core, a search company, a content company?

    They have a number of extremely valuable properties. In fact, I bet that if Yahoo were sliced and diced that they are right about their valuation to Microsoft – it’s worth alot more.

    There’s just way too much going on, and no core vision.

    I do think that Microsoft has the drive and the vision to make it happen, however, I don’t think that they have enough experience with the consumer content systems – like Yahoo answers, Flickr, mybloglog etc.

    Also, I am wary from a Search Marketer’s side to see all of the search share split in between two big companies.

    I do think that Yahoo and AOL have alot in common. I had thought that they Yahoo AOL deal had alot of potential, as AOL seems to have a decent vision – from the little I’ve talked to people about.

    It doesn’t necessarily match all of the user networks that Yahoo has, but it definitely has potential.

    Additionally, one of Yahoo’s big problems is that it doesn’t own a large social (lifecycle) network. Flickr focuses on images, and each of their other properties has a specific focus.

    If not for the fact that I’ve heard that the Time Warner / AOL deal has really screwed up AOL’s Management staff, I’d love to see Yahoo and AOL hook up.

    In short, I don’t think Yahoo should give up their search – it’s pretty good, and a hell of alot better than Microsoft’s. They just need to keep improving it.

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  • Yahoo’s social network “Answers” is bombarding the SERPS. I would think that they are getting a lot of click through revenue on those pages.

    I would prefer to search Yahoo for things I just thik they are more accurate with results.

  • Yahoo’s social network “Answers” is bombarding the SERPS. I would think that they are getting a lot of click through revenue on those pages.

    I would prefer to search Yahoo for things I just thik they are more accurate with results.