Yahoo, a dinosaur doomed to failure?

yahoo-xtra-hackedHow many times has it made the headlines now? Yahoo email delivered as Telecom’s New Zealand’s Xtra service has been breached. I’ve lost track of the times over the past year but it comes as no surprise it isn’t being fixed with a company that is in the odd’s on bracket to fail at some stage in the next few years.

Chris Keall at the NBR writes that “Telecom has drawn praise for a push to encourage users of its web mail service to adopt SSL – a new security layer of protection recently introduced by Yahoo, the company that hosts Yahoo Xtra mail.” – Source

It’s amazing, given that SSL was created twenty-one years ago, that they are only just getting around to using it.

Telecom are unhappy with Yahoo but for whatever reason continue to use their service in a outsourcers worst nightmare. Effectively they have absolutely no control, but all the responsibility, for hundreds of thousands of users. Worse, the customers are likely to the be the older generation, who don’t understand how to migrate themselves on to free services that are more robust and secure.

And so, Telecom continues to use Yahoo, and charge for it, when it is one of the worst services in the history of online email.

It’s not just email, Yahoo seem hell-bent on sticking to an older business model that reinforces their dinosaur image.

The baby-faced Marissa Mayer bought in the “stack ranking” system that Microsoft had thrown out. That is, ranking your employees on a bell-curve with the ones on the lower end simply being fired. Microsoft threw it out for a reason, in a modern world, it doesn’t work. Worse, as those of you who have to suffer employee reviews, managers are forced to rank some of their employees in the low band regardless of whether they all performed well or not.

Prior to that move that was roundly slammed as an “epic fail”, Marissa got rid of the work from home policy. Again, a move back to the Land of the Lost showing more about her ability (or lack of) to manage a company than a problem with working from home. When just under 50% of Americans regularly work remotely, regardless of whether they are technologists or not.

We know that flexible working increases productivity, reduces overheads, reduces stress, and decreases turnover. This is fact. So to take a step back into the 1950’s working environment means that you can be sure that stress increases along with turnover, productivity decreases and the cost of doing business goes up.

Yahoo may have bought a lemon with Tumblr. For a cool billion the company bought the micro-blogging site though analysts have been less than complimentary about the deal.

For a start, Tumblr has tried to sell itself off to Google, Microsoft, and Facebook to no avail. Clearly, they could see the writing on the wall. Worse, Tumblr is losing money on advertising, with every dollar spent attracting a two dollar charge. Further, the price that Yahoo paid to buy Tumblr, given that it burned a $25 million dollars last year, makes no sense. You’d need Tumblr to be making a touch of $100 million per year to justify the billion dollar sale price. Lastly, the integration of Tumblr, a nimble organisation (that works from home) with the culture of a dinosaur, is likely to be fraught with risk.

Yahoo relies on advertising for its revenue. That revenue may be under threat as a court case hangs over the company in relation to them allegedly scanning user’s personal email in order to serve related advertising content. Bloomberg reports that:

“Yahoo! Inc. (YHOO) was accused in a lawsuit of intercepting e-mails sent to users of its mail service and using personal information to profit from related advertisements.

The plaintiff seeks damages of $5,000 for each person whose privacy was allegedly invaded, according to a complaint filed Nov. 15 in federal court in San Jose, California. Information gleaned by scanning communications between users and non-users is used for tailoring advertisements to them, increasing Yahoo’s revenue, according to the filing, which cites the company’s published policies for its new e-mail service.”

If that legal action is successful, Yahoo would be up for a maximum bill in excess of a trillion dollars and potentially be stopped from scanning email to generate advertising. This would be catastrophic. I should note that Yahoo is not the only large scale provider subject to this kind of action.

Yahoo’s share price has tripled since Marissa took over, but revenue has remained flat. However just this week it took an 8.7% percent battering on the back of disappointing fourth quarter results. Analysts hold hope for the stock, not because the company is a shining example of a modern technology masterpiece, but because it part owns Alibaba, a Chinese e-Commerce company that is worth more than it’s weight in gold.

There is an expectation that Yahoo will sell all or part of that investment raising somewhere around $120 billion USD at some point in the future. Of course, none of that does anything for Yahoo’s flat revenue stream.

Yahoo has announced very recently that it intends on getting back into the search game. This despite taking a pasting from Google in the past. There is nothing new and innovative here at all, it simply shows that Yahoo is an old dog with no new tricks. Trying to dismantle Google’s search stranglehold will be a titanic task that will cost hundreds of millions of dollars with little chance of success.

Here’s another example. Yahoo has no Cloud services currently, but is rumoured to be working on them. It’s too late. The market is captured and unless Yahoo comes up with some incredibly new and innovative service it will fail. You can’t compete with Google, Amazon, Microsoft, DropBox, and Box along with the other multinationals coming late to the party such as HP and IBM. Why try?

Yahoo’s time appears to be over. With flat revenue, an old business model, and an insistence on trying to regurgitate old ideas that the market has already captured, it can only be a matter of time before it starts to disintegrate. It is an example of a monolithic technology company competing in a market full of light weight startups and heavy-hitters that learned long ago to embrace change.

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