Yahoo!’s Problem May Be With Its Emphasis in Quality

Posted Jan 30, 2008

Yahoo!, the number one visited portal with the highest number of users is currently facing new challenges. The companyâ??s stock price is sagging and it is imminent that 1,000 employees will be laid off.

According to the Associated Press, the layoff is the â??Sunnyvale-based company’s biggest purge since it was scrambling to survive the dot-com bust seven years ago.â? Who is to blame? Google? Terry Semel? Jerry Yang? I would say none of the above.

Iâ??m not a financial expert or anything, but I would say that Yahoo!â??s biggest issue is their emphasis on quality. Yahoo! gives all of its users too many quality things for free.

Here are a few examples:
Yahoo! Music
Yahoo! Music has two primary features, both of which are free: high-quality music videos and Internet radio. Apple charges $0.99 per video and $0.99 per song. Rhapsody charges a certain fee per month for Internet radio. YouTube is free as well, but the sound and video quality is sacrificed.

Yahoo! Games
Yahoo! allows their millions of users to play games all for free. Many of their games are multiplayer too. Imagine the server costs on this one! Allowing users to play games for free is a quality feature.

Yahoo! Sports
Yahoo! has all sorts of sports fantasy games that it used by millions of users as well. According to Al Pacinoâ??s character in the movie Two For The Money, â??You know, networks donâ??t talk about it. Government canâ??t tax it. But sports betting is a two hundred billion dollar a year business.â?

People all over the world make friendly bets with each other whether its Yahoo! Fantasy Sports or the Final Four NCAA Basketball tournament, why couldnâ??t Yahoo! somehow make money from this? Itâ??s a quality company and being associated with gambling may be taboo for an Internet company. That didnâ??t stop PartyPoker though.

Yahoo! is losing its search market share to Google, but their quality products keeps all of their users coming back. The company needs to leverage that. When AOL, Friendster, and MySpace realized that their search is not their core competency, they took money from Google to power their search.

This gave the aforementioned companies capital and time to focus on other projects. After all, when it comes to producing quality services for its users, Yahoo! is brilliant. Look at how many services they offer (I couldn’t fit all of the services in one screen shot due to resolution limitations):