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Yahoo! Can somebody save WWW falling star?

After Yahoo CEO Terry Semel announced he was stepping down, speculation was rife on whether his successors could put the lustre back on the fading Internet star.

india Updated: Jun 21, 2007 13:20 IST

After Yahoo CEO Terry Semel announced he was stepping down, speculation was rife on whether his successors can put the lustre back on the fading internet star.

Semel was ousted after a concerted campaign by shareholders aggrieved that the former Hollywood dealmaker drew a $71-million salary last year even as the company fell further behind Google in the race to dominate internet advertising.

At the same time the company seemed to have missed out on the other hot trends of internet media, like the social networking sites of MySpace and Facebook and the hot video sites exemplified by YouTube.

Now the question is what Yahoo can do to avoid becoming a new AOL or Excite - other portals that once promised to dominate new media but eventually fell by the wayside.

Yahoo is also strong in Asia and focused on cementing a lead in the emerging markets for mobile phone content. On Tuesday it signified that it intended to build on those platforms, announcing a new version of its Yahoo Go technology and content pacts with companies in the Philippines, India, South Korea, Malaysia, Indonesia and Taiwan.

The people that Yahoo hopes have the answers are Jerry Yang, the Taiwan-born founder of the company, and Susan Decker, the mother of three who's been a rising star at the company since taking over as Chief Financial Officer in 2000.

But they will have to perform an amazing corporate revival if they are to even keep Google in their sights, much less catch or overtake it.

According to new figures released on Tuesday by web-tracking firm Hitwise, Google now accounts for 65 per cent of all web searches, compared to Yahoo's 20 per cent.

Google also is constantly releasing new products designed to leverage its popularity to other products, and has the high-flying stock, cash reserves and cachet that allow it to attract the best workers in Silicon Valley and other high-tech regions.

Yang, 38, who started Yahoo as a Stanford University undergraduate 12 years ago, said he understood the challenge and is gearing up for a long fight with Google.

"I'm ready to dig in and make sure we can take Yahoo to the next level," said Yang, a self-made billionaire. "I'm absolutely not interim. We want someone for the long haul."

Many analysts advise him, however, to forget about ever catching Google and to settle for second place. Google has much larger cash reserves than Yahoo and so starting a spending war could quickly backfire.

"Yahoo can't out-Google Google - and it's likely that nobody can," says Scott Karp of the website Publishing 2.0. "They should get out of Google's wake and look for less exploited territories. You don't catch up with a faster ship by steering the same course."

So what will this new Yahoo look like? Farhad Manjoo, the tech columnist at salon.com, says that the company will have to start building web applications that excite the tech community.

"If Yahoo wants to be relevant again, it's got to do things nobody else is doing," he says. "Building a better search advertising plan is important, but nobody goes to a web site for search ads."

Plenty of other analysts believe that Yahoo is done as an independent company and needs to merge with another media firm.

"It wouldn't surprise me to see Yahoo join forces with MySpace or another large portal like AOL," said Jordan Rohan, analyst with RBC Capital Markets.

But not everyone was so gloomy about Yahoo's future. Dylan Tweeney, the editor of blogs on Wired said that the company has a number of compelling advantages over Google.

"Yahoo still has more users than Google and each of its users spends twice as much time on the site as Google's users do," he said.

Tweeney also argued that Yahoo's content and community sites were far better than Google's, while its personalized home pages were still the industry leader.

"Among the vast majority of internet users, Yahoo is still the destination of choice," he said. "Clean up the management mess, restructure the ad network, and implement a better PR campaign, and Yahoo would start looking a lot better than it does today."