Analysts greeted news of Yahoo's restructuring with very little surprise; if anything, the reaction has been "It's about time!" But will the new organization be enough to save the search engine? This article takes a look at the changes and what they mean for the future.
In truth, it really is about time that Yahoo did something like this. The company restructured five years ago; Microsoft restructures about every five years as a matter of course. Yahoo isn't Microsoft, of course, but it has some compelling reasons for this move. Its stock price has slipped more than 30 percent in the past year. And of course it has Google to contend with.
If we compare gross income and visitors for both sites, we can see where a big part of the problem lies. Google's revenue so far this year is $7.2 billion, compared to Yahoo's 4.5 billion. Yet Google entertains fewer visitors than Yahoo; in fact, Yahoo has the most visited web site on the Internet. Here's another shocker: Yahoo's third quarter profits fell 38 percent last October -- but how do you reconcile that with a rise in sales of 19 percent leading up to September?
It certainly isn't the fault of Susan Decker, Yahoo's highly respected chief financial officer. The problem is that Yahoo simply isn't monetizing its users as effectively as rival search engine Google. There is also the matter of attitude. Up until recently, Yahoo seemed content to be number two to Google; Decker was even quoted near the end of January 2006 as saying that "We don't think it's reasonable to assume we're going to gain a lot of share from Google...It's not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share."
In addition to ineffective monetization of visitors and perhaps a lack of hunger to be number one, Yahoo has had to deal with a certain amount of duplication of effort. Having purchased a number of companies with social search functions, for instance, Yahoo has yet to fold them together and build bridges between their communities. With these kinds of problems, a restructuring of the company became not only necessary, but inevitable if the search engine is to survive without continuing to lose market share.
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