Yah(b)oo Sucks? ...or how can it transform itself?

Article on GigaOm today arguing that Yahoo can extricate itself from the brown stuff (Peanut Butter) and transform itself into a Web 3.0 (whatever that is) darling. Sez GigaOm:

The reason I believe that Yahoo can become the jewel of Web 3.0 is that it already has strong or interesting positions in multiple verticals, among them news, sports, finance, jobs and photo sharing. My entire Web 3.0 thesis is based on the web becoming verticalized, and therefore, to do justice to its potential, Yahoo needs to win in the verticals, and monetize them.

Let’s take the example of the online jobs vertical. The market has continued to grow rapidly; online recruitment advertising ($5.9 billion) surpassed newspaper job ads ($5.4 billion) in 2006, according to media research firm Borrell Associates. Newspapers are losing vertical classifieds to online, and Yahoo should be one of the most prominent beneficiaries of this movement.

But it isn’t, at least not yet. Why not?

Why not indeed - take any useful Noo Meedja vertical, and Yahoo has built / bought / bundled its way into it. It has some great assets, but seems unable to drive any synergies out of them. Why?

Now, Umair Haque reckons it all in the DNA, and thus they are doomed already - Kismet quick!

Is he right, or can they mount a transformation - a soup to peanuts re-engineering of the business, to maximise their assets, as GigaOm suggests?

History teaches that companies can and do come back from the brown stuff - in fact there is a strong element of cyclicality in many companies and industries. However, the "coming back from the brink" usually requires some fairly major housekeeping - some throwing out of baggage, bathwater and a few babies as well.

But it is a sad fact that the people who get companies into these states of affairs are too often the ones with the reins in hand when it comes to sorting it out, and if there is one lesson to take about companies in trouble its that senior management will fire legions of innocents before the market finally fires them in turn.

So, instead of laying off 1,400 people at $70k a year, how about cutting to the chase and laying off c 70 people at $1.4m a year first (OK, the number reversal is for effect, but you get my drift) - since there is so little synergy, shoot all those who were supposed to enable it first.

Then make a benefit out of a necessity and let the people in the bowels actually running all those small sub-businesses go and chase their own markets - be their own startups again. Let them decide where collaboration works and where it doesn't, and let the market fire them if they fail.

That said, it is a truism that any company that has only known growth can probably fire about 10% of the staff and performance will improve hugely - just make sure its the drongos that go, not those competent ones who have upset the internal power cabals (Yes Veronica, thats what too often happens).

The other thing is hard headed product rationalisation - 20% of the product range usually loses 80% of the money. These are often ones with political "protection", ie are untouchable (otherwise they would have been killed long ago). Another reason to shoot the top cadre.

In technology at times like this, the other thing is to drive new revenue streams - take more options on a few promising looking new programs as well as driving out / closing down losers.

Is it worth breaking up Yahoo into various smaller units to increase flexibility? It's certainly big enoigh to be Alfred Sloaned - and its not as if there are any great economies of scale in being conglomerated at the moment, apparently. (We are told that Yahoo's back-end infrastructure is all over the place, so clearly its not really a competitive benefit). In fact its probably another thing to go and fix - or forget - Google and Amazon are both trying to build huge, modular grids. If Yahoo is not going down that path (or even if its is) it should get hence with some alacrity.

The benefit of such a root and branch is that all les autres are trundling down the same eventual path o destruction - Google allegedly only makes money from a small number of its products - in fact the history of most sectors is just a continual cycle as each company has a near death experience, a painful catharsis, and regeneration, just in time to emerge as the next one stumbles.