When I started at Yahoo! in 2000, the company still had its first CEO and only around 1,200 employees. When I left, the company had approx. 12,000 employees and was on its third chief executive. During that seven years, the company bought forward thinking sites like flickr and delicious, ended up NOT completing high profile deals to either acquire or own parts of eBay / Google / Facebook, yet grew both in reach and employees very quickly. Mail, search, and music were the traffic beasts then, all fed by internal promotion including the home page… something I’ll come back to later.

Because of that time period and the wave of media transformation, I sometimes get asked questions about what it’s like to watch the giant from the other side. The push that committed me to writing this was an update from Chris Harrington of LGA, who I met through networking.

The Question / Intro

• What do you think about YHOO becoming a news company and competing w/ CNN? They need a new model, and can’t compete w/ GOOG.

In many ways, both statements are already true. Yahoo! is and has been a media company. Yahoo! has acknowledged Google search could replace theirs (irony in and of itself, seeing how Google’s big break was doing Yahoo!’s search prior to Yahoo! taking it in house).

Yet these questions show Yahoo! is indeed a diverse company with new challenges. The site is unburdened by the old infrastructures of media companies past, yet the company still carries the burden of being the first true internet media conglomerate in a sea of constantly-changing business rules. And while Yahoo! appears to concede search to Google, they run a no. of diversified businesses that lead me to believe Yahoo! will be around for a long time.

[Side note: I'll link and paraphrase Jeff Jarvis quite a bit. He says a lot of things I agree with but stated in a way that's more eloquent than I can write. His book, "What Would Google Do?," is a must-read for internet business folks.]

The Media Question

To me, the question about Yahoo!’s media business is more about adaptation than being a media company. They’ve been publishing and aggregating for years — just not in the traditional TV, radio and newspapers’ route.

In fact, the aforementioned Jarvis calls Yahoo! the last “old” media company, saying that (among other things) Yahoo! wishes to keep people locked into their sites while showing display advertising. One of his arguments is Google is the new model, providing a platform for content creators to link, make money on text ads, and report without the burden of past physical infrastructures. Computers are the new filters, Jarvis might argue, that independently verify the content’s popularity. Traditional media companies revolve around editorial decisions, a big differentiator.

Yet I believe there’s an abundance of evidence both human and computer editorial can and do work, which Jarvis acknowledges in his arguments about Facebook. Specifically, in addition to trusted outlets, new “editors” can also be your friends or a trusted computer. This thought is an important basis for the rest of this entry.

Here, my experience in both the agency and principle worlds of content creation help. I have data logs showing how well Charlotte Observer content works locally, when pushed to Yahoo!, Twitter and/or Facebook. I also know what happens when Yahoo! helps promote others’ content, having spent so much time there pouring over those data logs.

With its new management, Yahoo! appears to be seeing similar trends. The company is changing its approach to how it extends reach to other parts of the internet. And with this reach, Yahoo! is taking a new path on a traditional media approach: content and advertising.

Both address the business model.

Business Models Changing

The original question asked if Yahoo!’s business model needed to change. The answer is the model is always changing, but the advertising basis remains consistent. Some products are more R&D, like flickr, and some address actual revenue streams that result in profits. Where that revenue comes from has changed and will continue to.

As an example, let’s think about the Yahoo! home page. The site still does a fantastic job of being a start point, to this day still one of the most visited on the internet. But historically it’s promoted mostly internal content. If you wanted to customize, you did that at My Yahoo!. That strategy is changing, however, and the changes are a peek into what the company believes its next big push involves.

Most notably, Yahoo! is: (a) being selective about the content the company creates, then; (b) creating local content/sales partnerships that still make money for Yahoo!. The second is very Google-like but from an more appropriate angle for Yahoo!, in my opinion.

When Yahoo! sees an opportunity to better its own media offerings, the company has increased its product development speed and vigor. Music, once an internally-driven property, now has a large relationship with CBS. That saves the company millions in capital, takes a resource intense property and outsources operations, and actually gives a better user experience. Newer ventures, like omg! and Shine, leverage their aggregated audience and partners but keep the readers there to promote the best reading. This distinction feels much different than the times I spent working for the Yahoo! Media Group.

In this selective nature as it pertains to media, Yahoo! does not receive enough credit. Their data, of which they have a TON, is leading them to better decisions.

In doing its analysis, Yahoo! can aggregate “mass” of old but keep new user behaviors in a more open network (to see an “open network” example beyond media, here’s Yahoo!’s social gaming initiative in mail). To an end user, the Yahoo! aggregated media stories often are NO different than what Google does with aggregation of like blogs or Google News, especially in those cases Yahoo! simply provides summaries and links off their site. What Yahoo! is doing to migrate revenue streams is to partner in places its infrastructure prevents it from going.

The largest gap used to exist between Google and Yahoo! in local advertising. Search ads are generally cheap, and Google racked up sales from small businesses seeking help.

Yahoo! is attacking this directly. The company has made an investment — a large one — in an advanced targeting display advertising platform (called APT) currently being rolled out to a Newspaper Consortium of over 700 papers. Our main news site has this technology, and we share inventory with Yahoo! in both directions. They can sell into our site, and us theirs. We share our content with their systems, which gets us more traffic, and them more ad revenue. Very Google-like, but with display ads.

Because it’s display advertising vs. search, there’s more money and more complexity there… and it shows how Yahoo! still can be a technology player in the media space. Sure Google can have the blogs, but Yahoo! wants a larger audience and right now advertisers want more people seeing rich ads. Yahoo! wants to challenge Google’s first-mover advantage and the search giant is reacting, setting out to copy some of the Yahoo! thinking.

Google is also rumored to be building a publishing system for larger organizations to use their technologies to create websites. In my opinion, this only validates Yahoo!’s model of using their position as a media company to be a service to other media companies.

There’s good money there.

Conclusion

What many people forget is Yahoo! started as a directory. The idea was to help people find things quickly, then help them move along. That’s now Google’s specialty, replacing the human linkers with the algorithms necessary to index the world’s information. Meanwhile, Yahoo! slowly morphed and changed directions — using its first-mover advantage and influx of IPO capital — to become content creators, community makers, and destinations. The decision to not take search/Google as seriously obviously was a mistake, one that may never be corrected… but the diversification won’t close the company.

Yahoo!’s new management is showing real signs of getting the media transformation figured out, and it’s my opinion they’re the first real mass media of the internet space. The continuing customization and extension of APT into TV and radio outlets will only further cement their position, and in this more intense and less profitable space Google may well let that kind of editorial help go.

Time will tell.