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.

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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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