Business
11:01 pm
Wed September 7, 2011

Yahoo Must Search For A Clear Focus, Analysts Say

Yahoo's future is up in the air. Earlier this week, the Internet company's board of directors ousted its chief executive officer, Carol Bartz, who was hired two years ago to try to revitalize Yahoo.

Though it is still very profitable, Yahoo has been losing its relevance, and it is less clear where the company is headed.

Gregory Thune, an industrial designer in San Francisco, not far from the company's Sunnyvale campus, represents one of Yahoo's biggest problems: He's never once used Yahoo.

"I think I mistakenly landed on the Yahoo page maybe once in the last 10 years," Thune says. "But I get through my life and I answer the questions that I need to answer, and I search things ... without them. I don't even kind of know what they do anymore, honestly. I don't know what their main focus is."

And that, in a nutshell, is Yahoo's challenge.

A Quirky, Profitable Brand

Yahoo is tremendously old by Internet standards. It started 17 years ago, doing Web searches, and evolved into an online portal — a central place for accessing email, news and instant messages. Later, the company ventured into online entertainment.

Yahoo is an acronym. According to its official history, it stands for "Yet Another Hierarchical Officious Oracle." The name, like its corporate brand, was quirky by design. For a time, it advertised itself on television using what came to be a familiar yodel jingle.

The branding worked. The company is very profitable and generates more than $6 billion in annual revenue.

To this day, Yahoo has a gigantic Internet audience. According to comScore, a company that tracks Web traffic, Yahoo's monthly U.S. audience is still bigger than that of Microsoft or Facebook.

But it's slipping by other measures. Compared with three years ago, users spend less time on Yahoo sites, while time spent using Google and Facebook has increased.

Losing Sight Of Search

Analysts say Yahoo started to lose momentum when it took its focus off of search.

Tim Bajarin, a tech-industry analyst and futurist, says Yahoo tried to become a media company, a field where the competition was fierce and the money was not as good. Meanwhile, the company let other opportunities slip by.

If Yahoo wants a promising future, Bajarin says, it needs to find a leader who can help the company get back on track with what matters, and can make money.

"Whoever they bring in at this point, I believe, has to understand the new world of advertising and the new world of mobile, because that's where it's all headed," he says.

Bajarin says there are some things Yahoo still does well. It's still No. 2 in display ads that it serves up on other websites. Its finance, news and sports content sites are also very popular.

But if the company were to try to sell itself, it's not clear who would buy it.

Three years ago, Microsoft offered a hefty $45 billion to buy Yahoo. The deal fell through. Now, Yahoo is worth far less than half what Microsoft offered, and the two companies forged a search partnership that effectively gave Microsoft everything it wanted from Yahoo anyway.

Still, with a market value of $17 billion, the company is a pricey takeover target, which is why there is also talk that the company might break up into smaller pieces and sell off its Asian assets — including its share in Chinese search giant Alibaba and Yahoo Japan.

Yahoo said in its press release that the company is "evaluating possibilities and opportunities" but declined a request for additional comment.

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