With strategy, Yahoo can win, experts say

Yahoo has a large enough following to mount a comeback.

San Francisco Chronicle

Although badly bruised, Yahoo Inc. has the strength to stand alone in the aftermath of Microsoft Corp.’s abandoned takeover bid, provided the firm can execute its strategy of making itself the premier destination for Web surfers and the advertising that follows them, some experts say.

With an impressive amount of traffic, almost 500 million unique users per month globally, Yahoo has a big enough following for a comeback. The challenge for the company is to turn those legions of users into dollars as it tries to capitalize on the long-term growth in Internet advertising and emerge from a financial slump.

If Yahoo’s executives are successful, they will have engineered one of the highest-profile corporate turnarounds in the Internet era. But they must show results quickly or face investor unrest that may push them back into Microsoft’s arms.

“Yahoo has certainly been a formidable presence on the Web in terms of audience,” said Haim Mendelson, professor of electronic business and commerce at Stanford Graduate School of Business. But, he said, “In terms of underlying technology, it has not been able to fully exploit what it has developed.”

Yahoo leads in a vast array of online categories, based on traffic. It has the most popular e-mail service, along with news, financial information, sports and music, according to online data measurement firm Hitwise.

All of that attention has made Yahoo one of the most engaging online destinations as measured by the average time that visitors spend on the site per month. Yahoo visitors averaged a little more than 3 hours and 12 minutes on the site in March, second only to AOL, which averaged nearly four hours, according to Nielsen Online.

Google averaged just 1 hour and 16 minutes of time spent on-site by its average visitor. Of course, Google is tremendously efficient in extracting revenue from its visitors because of its dominant position in search, where it garnered a 68 percent market share in April compared with 20 percent for second-ranked Yahoo, according to Hitwise.

Yahoo’s shortcomings are in part blamed on a lack of focus. Trying to fill the needs of all online users with a vast portfolio of products is both a blessing and a curse.

“When you look at Yahoo, you see a list of 30 or 50 things,” Mendelson said. “At Google, you see as long a list, but it clearly prioritizes them.”

Yahoo hasn’t done a good job of tying its various services together, he said. Indeed, the company has offered a variety of profile pages for users of its various properties, for instance, but is only now getting around to creating a common profile page.

Yahoo’s managers acknowledges shortcomings at the company and are furiously trying to fix them. They are optimistic that they can pull it off and make the company viable as an independent.

A three-year plan calls for it to increase revenue, excluding payments to partner Web sites, from $5.7 billion in 2008 to $8.8 billion in 2010. To do so, the company is counting on a multipronged strategy: become a must-buy for advertisers and the starting point for consumers online.

The projections played an important role in Yahoo arguing that it was worth more than Microsoft offered in its three-month takeover standoff. With the two sides unable to agree on a price, Yahoo’s executives are now feeling the pressure to achieve their optimistic financial goals.