Yahoo Reorganizes in Face of Dropping Market Share

The ax started falling at Yahoo last week – and it wasn’t pretty. About 2,000 employees got pink slips. With the latest report from comScore, though, one might be forgiven for wondering if it was the correct 2,000.

First, let’s take a look at the layoffs. The firing of 2,000 employees more than decimated the company’s payroll of 14,000. Search Engine Land reported Yahoo’s confirmation of the layoffs, and that the beleaguered search engine “expects to realize approximately $375 million of annualized savings upon completion of all employee transitions.”

Kara Swisher, who seems to have both excellent sources and very sensitive antenna for which way the wind blows, expected the layoffs to hit hardest in the product division. But no division was immune. Yahoo’s local businesses, and its marketing and research divisions, would also feel the pain more deeply than other areas. The scariest part of all this, for those still working at Yahoo, is that this round of layoffs “is just the tip of the proverbial iceberg that will hit the storied Silicon Valley Internet giant in the months to come,” according to Swisher.

To add an element of irony to the mix, Swisher noted that “Yahoo will be ‘doubling down’ in some older and new arenas, so there would also be simultaneous hiring in the months ahead.” This week, Yahoo CEO Scott Thompson revealed the company’s new structure, which may give us some idea as to where this growth may come from. The structure will take effect May 1, and features three primary divisions: Consumer, which includes Media, Connections and Commerce units; Regions, which serves Yahoo advertisers and brings in the company’s revenue; and Technology, which handles the infrastructure and platform.

While it’s not obvious from this brief description, Yahoo’s search department actually survived the purge. It falls under the Connections unit. To quote Thompson’s memo, “Connections will be led by Shashi Seth, and include consumer businesses that connect and inform our users including Search, Connections and Social properties such as Mail, Messenger, Flickr, Answers, and more.” Thompson challenges this unit to “think well beyond how users search, communicate and share online today” and to “fundamentally re-imagin[e] how we design and deliver the next generation of these foundational Yahoo experiences.”

So the search department still exists at Yahoo, but one must wonder how much longer that will last. Search is mostly outsourced to Microsoft, thanks to a deal between the two companies a few years ago. And a recently released report by comScore on US search engine rankings is rather less than encouraging.

In this report, comScore revealed its monthly analysis of search engine standings in the US search marketplace. To no one’s surprise, Google led the marketplace, followed by Microsoft in a distant second place, Yahoo third, and Ask and AOL in fourth and fifth place respectively. The part that must have really hurt at Yahoo, however, was that it was the only one of the five search engines to see a drop in search queries in March. As Barry Schwartz noted, “Google, Bing, AOL and ask all saw at least a 5% increase in search queries, whereas Yahoo saw a decline of 5% in the number of search queries.”

It’s worth noting that mobile search queries were not included in this report, but even so, the news can’t have been received with pleasure at Yahoo. Not only was Yahoo the only search engine to see a decline from February to March; it was also the only one to see a year-over-year decline, when comparing March 2011 to March 2012. About the only remotely comforting bit of news in the report was that each engine’s share of the search market really hasn’t changed that much.

Whether the changes just instituted at Yahoo will bring about a better picture in the coming months remains to be seen. Like many people, I’ve been disappointed too often by what I’ve seen happening at Yahoo in recent years to hold out much hope. Then again, I can remember a time over a decade ago when I wrote Apple off. We’ll see if Yahoo can come up with a few good surprises.

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