Most of the financial papers have stories about a big management reorganization at Yahoo!. A number of the top people are already hitting the doors like patrons fleeing a burning theater. According to The Wall Street Journal, "Yahoo executives are discussing a plan to centralize numerous product groups, such as its mail, search and home-page divisions, into a global-product organization."
Yahoo! may not be paying close attention to what is going on over at the internet. Its share of the search market in the US is down to 20%. Google’s (GOOG) is over 60%. Microsoft (MSFT) is not going to give up on the search market, even if it has to dump billions of dollars into the effort like it did with the Xbox. At least the Xbox works.
Yahoo! has decided to put its money down on the display ad market. Most of the evidence this year points to the fact that growth in display advertising is slowing. That is not just because the economy is weak. Like any business that has grown large, it has lost the ability to grow fast. And, display advertising is not very effective. New targeting and ad serving techniques are in the market to solve that, but there is no reason to believe that they will work.
Yahoo! has become a company which cannot be fixed anymore. In that regard, it looks like other losers in industries with dominant firms like Toyota (TM) in cars and Intel (INTC) in PC chips.
For Yahoo!, there is no chance to be in second place, because there is no second place. Last place is all that is left.
Douglas A. McIntyre
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