Yahoo is in big trouble.It has no CEO and it hasn’t had one since August. It doesn’t seem to be looking for one. Members of the board are under pressure from major shareholders to step down. Yahoo’s minority stakes in a pair of Asian Internet companies are now a much bigger part of Yahoo’s market cap than its own, original business. The stock is down to ~$15 from a five-year high of $33.
The board seems to think it can solve these problems with deal-making and financial engineering. The board is wrong.
All of these issues are just symptoms.
Yahoo’s real disease, its core weakness, is that it is dependent on a product that is losing relevance by the day: Web-based email.
Yahoo is an email company. Right now, the rest of its businesses – with the possible exception of Yahoo Finance – are just spokes on a wheel that has email for a hub.
People go to their Yahoo email and then search and see an ad. Or they click on to the Yahoo home page and see an ad. Or they click into a slideshow or video or news story and see an ad. Imagine Yahoo is a champagne pyramid; email is the top flute and everything flows from there.
For a decade and a half, as more people adopted the Internet and email every year, Yahoo’s dependence on email made for a great business.
But now it is not. Web-based email is quickly becoming a thing of the past.
ComScore tells us that Web-based email usage among people aged 12 to 17 is down a stunning 31% year-over-year. It’s down 21% among people aged 18 to 24.
Yahoo needs to find a new way to engage consumers because email won’t do it anymore.
Yahoo executives know this. They even think they’ve found the next great Yahoo product.
The product that Yahoo Chief Product Officer Blake Irving talks about most in public is an app called Livestand: “A personalised living magazine optimised for the iPad.” It aggregates and re-formats third-party publications for the iPad.
There are lots of problems with Livestand, but the most important one is pretty basic. Third-party publications would be stupid to spend any time or resources working with Yahoo to reformat and publish content on tablets. They’d be better off developing for Apple’s App Store or Newsstand or building tablet-friendly versions of their Web sites in HTML5. Livestand is just an unnecessary layer on top of someone else’s platform.
Yahoo needs to cut its losses and quit developing Livestand now. It will never fill the void created by the accelerating decline of email.
The good news is that Yahoo already owns a product that could. It’s called IntoNow, and Yahoo needs to bet the entire company on it.
In its current form, IntoNow is a pretty basic app you can download for Android, iPhone, or iPad. You open it up while you’re watching TV. You tap a button and the app “listens” to the TV to figure out what you’re watching. Once it does, it checks you into that show, just like you’d check into a physical location using Foursquare.
Right now, the app is neat and fun to use in a whizbang kind of way. Remember Shazam? It’s like that.
But it has the promise to be much more.
With it, Yahoo can ditch its many distractions and become one simple, very lucrative thing: the best software to use while watching TV.
There is already huge demand for software to go along with TV watching. One recent study said that 75% of people in the U.K. surf the Web while watching TV. A 2010 study says that kids aged 8 to 18 spend three hours a day consuming multiple forms of media at the same time.
Today people don’t just watch TV. They watch TV and do something else at the same time.
Because Yahoo will be able to know what those consumers are watching, it has a great chance to be the software that helps them find and do that “something else.”
To get there, Yahoo has to make some big changes and improvements to IntoNow.
- First, the app needs to stop being “IntoNow by Yahoo” or “IntoNow” at all. It should just be called “Yahoo.” Yahoo.com should become an HTML5 version of the app when it is accessed via tablet or smartphone.
- The app should load a customised Yahoo front page based on the demographics of the people watching the same show the current user is watching.
- The next time I’m on Yahoo.com, it should remember my TV viewing history and recommend new videos to watch from Hulu, YouTube, and Netflix.
- The app needs a live listings guide.
- Yahoo should ship a free infrared beaming dongle to every user who wants one, so that when a user taps on a TV show in that listings guide the iPad in their hands works like a channel changer. If Square can afford to ship free dongles, so can Yahoo.
- Right now, IntoNow does a basic Web search to find content that could go with the show a user is watching. Yahoo could do much more. Its media group should dial up articles, slideshows, and videos to go along with popular shows. Videos could drop during commercials.
- Right now, IntoNow users can tweet or tell their Facebook friends about what they’re watching. They should also have the option to start a group SMS chat, since that’s how younger people prefer to communicate.
- People want to watch stuff that other people are watching because they want to feel like they’re part of a big, global moment. So Yahoo should be in their face with throbbing charts showing how many people are watching. It should look like Chart Beat or our engage-o-meter.
- The app should integrate with Siri. With the infrared dongle, Yahoo would have a voice-controlled TV out before Apple, even.
- The app should obviously integrate with Yahoo’s already decent fantasy sports games.
- The app should use push notifications to remind you when your favourite shows are coming on.
- You should be able to access Yahoo email and instant messaging directly from the app.
- Yahoo should direct its considerable marketing budget toward commercials explaining to TV viewers how to get this app and how great it is while watching TV. That’s a better spend than on silly slogans like “It’s Y!ou.”
There is obvious commercial appeal in becoming the software that people depend on in their living room. You can tell because so many hugely successful companies want to do it: Apple, Amazon, Google, and Microsoft come to mind.
Yahoo has an advantage over these companies – most of which are trying to build themselves into TVs and set-top boxes – in that it will not need the content-owners’ or cable-providers’ permission to interact with TV.
For Yahoo, the immediate commercial appeal would be in the ability to sell to marketers who already spend billions making commercials for TV. If Coca-Cola sponsors FOX’s X-Factor, it would happily sponsor Yahoo videos or chat rooms for users watching the show.
But the long-term benefit for Yahoo is much bigger than that.
By becoming the company that makes the best software to use while watching TV – and owning the living room with a set-top box in your hands – Yahoo would have an engaging product to sustain and grow the company as Web-based email shrinks to almost zero.
By saying Yahoo should bet the company on the technology behind IntoNow, we are not saying they should dismantle everything else and sell it for scrap. We are saying that Yahoo needs a new engagement engine, and that becoming the best software for watching TV should be it.