Can Yahoo Get Out of its Own Way?

Obviously this past month has seen tremendous market volatility but I thought it important to point your attention to Yahoo being near a fiver-year low. The company could have been taken over by Microsoft and returned shareholders over $13 billion more than their recent value. Ouch. This is a tremendous hit.

So many companies consider Microsoft to be an enemy and obviously, Yahoo has competed with Microsoft for a number of years and is no different. But why does Yahoo not seem like it is reenergized after this deal broke off? From the outside, it seems like there is no momentum at all.

In a slowing economy, advertisers look to spend money where there is immediate accountability. how is it that Yahoo is capitalizing on these opportunities more effectively. Don’t get me wrong — I respect Yahoo a tremendous amount… If you are looking for information on virtually any topic, you can find it on Yahoo.

Moreover, it seems everyone I know goes to Yahoo for some reason each day. Their Finance portal is second to none for example.

What I just can’t understand is how they cannot monetize this traffic more effectively.

In April of last year I covered this topic peripherally and specifically I discussed a candid Business 2.0 interview with Yahoo!’s Dr. Usama Fayyad the company’s Executive Vice President of Research & Strategic Data Solutions. Fayyad is a veteran of Microsoft and NASA and has numerous degrees such as PHD and has published over 100 technical articles in data mining and AI.

Here are some of the quotes I cited:

Yahoo has 12 terabytes of user data flowing through it everyday and to put this in perspective, this amount represents more data than the entire Library of Congress! Fayyad proudly says he can predict with 75% certainty which of the 300,000 monthly visitors to Yahoo! Autos will purchase a new car within the next three months.

In addition Fayyad points out there are times when advertising works best out of context. In other words once the computer knows what your intentions are… Let’s say trading stocks — it can display a highly effective ad for a trading company while you are tracking your fantasy football team.

I agree with Fayyad. In fact it is beyond scary to think of how effective Yahoo can become if they can actually show advertisers higher click-through and purchase rates as a result of churning the mountains of data they own.

The stars are aligned. Advertisers want more accountability and the web is the place where accountability lives. Yahoo has the most traffic, tons of analytical data and smart people who can figure out how best to place ads for maximal efficiency.

By now, Yahoo should own the world. Many people say the disconnect is a corporate culture of complacency and bureaucracy. Although I have no first-hand knowledge of this, I can’t imagine what else is keeping Yahoo from making new highs in the market and really taking over the advertising world.

What do you think?