This week, Yahoo announced the greatest single round of layoffs in the 17 year history of the company. 2,000 employees will lose their jobs— that’s about 15% of the entire company. The newest in the line of revolving door CEOs, Scott Thompson, says that the move is intended to vastly reduce costs and help create a more nimble company. While the cuts are expected to save the company close to $375 million annually, it still remains to be seen if the former search engine giant will be nimble enough to keep up with its competitors.
Google and Facebook have out-smarted and out-innovated Yahoo for years, an eternity in the internet industry. Users and revenue have grown almost exponentially for both of these internet giants since 2007. Over that same time period, Yahoo’s revenue has dropped from $8 billion to under $5 billion. Sure, the recession may have something to do with that, but why are Google and Facebook thriving when Yahoo is still one of the most visited web properties?
The answer lies with advertising– relevant advertising, to be specific. No longer the search giant that it was in the 1990’s, Yahoo now hangs its hat on supplying top quality content to its users. This content is some of the most popular on the internet. Users regularly check Yahoo for everything from investment information to fantasy football statistics to the latest Hollywood gossip. But providing popular content has proven to be an extremely difficult service to monetize in the internet age; just ask the New York Times. How do you target relevant advertising to the millions of people who regularly check this content? Can they base it on content theme? Can they track the user’s internet history? Yes, but these tactics have yet to be proven more than moderately successful.
Google and Facebook have a leg up over Yahoo on this front. Google has figured out that they can get their users to tell them exactly which ads to target to them with by providing the most powerful search engine on the internet. Facebook has realized that users will tell them all of their specific interests in the context of social sharing. This combination of sheer number of users and extremely targeted advertising has proven to be a gold mine for Google, Facebook and anyone who advertises with them.
But can Yahoo compete? It’s possible that they can; they have half of the puzzle solved. In the summer of 2011, Yahoo had a similar number of unique monthly users world-wide as Facebook, hovering around the 700 million mark. The users are there, now Yahoo must learn to effectively target users on the individual level. Don’t sleep on Yahoo just yet!