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Monday, May 19, 2008

4 Strategic Alternatives for YHOO

Now that YHOO and MSFT are talking again, perhaps this scenario isn't so unlikely:

YHOO + MSFT

The wording of today's YHOO press release is peculiar:
Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!'s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value.
Stockholders interested in the long term might not want a deal with a company like Microsoft, or Google, for that matter. Short term, a deal might seem appealing but remember when Yahoo outsourced organic search to Google? Why make the same mistake with paid search? (BTW, why are so many eager to see YHOO outsource paid search?) Instead, I propose these 4 strategic alternatives for YHOO stockholders (none of these are new* but now seems like a good time to restate these options):
  1. Buy the search.com domain from CNET CBS
  2. Allow pure search advertising (no search syndication) via Yahoo! Search Marketing
  3. Build a domain parking distribution channel separate from pure search advertising
  4. Continue to innovate the core, organic search product
These strategic alternatives basically come down to improving the quantity and/or quality of search traffic. Improving those will have the side effect of attracting more advertisers, which will lead to a network effect. Part of the reason search advertising is so effective is because paid search ads are, in essence, content. Search ads *are* search results. Having a larger pool of advertisers will lead to higher quality ads which will improve the search results. That will, in turn, attract more searchers. That will attract more search advertisers. And so on...

Options #1 and #3 probably deserve their own posts. Options #2 and #4 have been covered.*

Regarding #1, Yahoo knows how many people search for search.com on their system. Imagine how many people go directly to search.com rather than look it up on a search engine. People who navigate directly to search.com are looking to, well, search. What about people who go to yahoo.com? Where do they want to go today? Google is synonymous with search. Yahoo is not. YHOO should buy search.com and rebrand search.yahoo.com as search.com, powered by Yahoo!

It might sound too simple, but getting people to switch from google.com to search.com will be much easier than getting them to switch from google.com to search.yahoo.com. People have become accustomed to going to "www dot [insert name here] dot com" or, more lately, to simply "[insert name here] dot com" rather than a subdomain like search.yahoo.com.

Plus, search.com could be used to brand Yahoo's search engine. Think about how effectively domains like hotels.com have become brands as well as domain names. Yahoo needs a search brand. Google *is* a search brand. A domain name like search.com could become that Yahoo brand name synonymous with search.

If YHOO implements #2 (pure search advertising), that could pave the way for #3 (pure domain advertising). Clearly, they'd have to change the sausage ingredients. If they were willing to do so, however, this could lead to a PPC advertising option more effective than search advertising. Think about that for a minute. As Google advertisers are starting to realize they're paying for garbage traffic via the AdSense for Domains product, YHOO could create a brand new alternative to search advertising by separating domain ads from their sponsored search product and keeping it clean (only generic keyword domain names). Now, that's a strategic alternative I'd support!

*Previous YHOO Suggestions on Apogee Weblog:
Apogee Tags: , , , , ,

3 Comments:

Anonymous Anonymous said...

Yah, 'search.yahoo.com' seems complicated.

Tue May 20, 11:02:00 AM EDT  
Anonymous Nate Nead said...

I was a much greater fan of the original inventory dot overture dot com that went down when yahoo took over a couple years back. It'll be interesting to see this through.

Tue May 20, 05:02:00 PM EDT  
Blogger Richard said...

Hi Nate. That tool is actually available intermittently, albeit with stale data. Yahoo can't seem to decide what to do with it. Wasted opportunity, IMHO.

BTW, nice sleep talking.

Tue May 27, 10:46:00 AM EDT  

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