Page last updated at 08:53 GMT, Wednesday, 11 June 2008 09:53 UK

Yahoo goes back to its roots

By Darren Waters
Technology editor, BBC News website

Yahoo sign

For millions of people worldwide Yahoo remains synonymous with the internet itself, but after Microsoft walked away from buying the firm what does the future hold?

The famous exclamation mark at the end of the Yahoo! logo has seemingly become more of a question mark in recent months.

It has been left wounded by Microsoft's failed takeover approach, seemingly embarrassed as it trialled rival Google's advertising technology on its own search and vulnerable after losing its spot as the most visited place on the internet among US users.

Yahoo itself says the company is looking to the future with an ambitious effort to "re-wire" the whole organisation into a giant social hub.

Brad Garlinghouse, Yahoo's head of communities and communications, told BBC News: "Rumours of our demise are greatly exaggerated.

"We are in a very healthy position. We generate a billion and a half dollars in cash flow a year."

Mr Garlinghouse was quick to point out that Yahoo Mail remained the world's leading mail service, used by almost a third of the world's internet users, and services like Yahoo messenger, homepage and news were market leaders in the US.

Yahoo
Yahoo was one of the first internet brand names

He said that Flickr, the firm's popular photo sharing site, had seen registered users rise from 300,000 to 24 million in the last few years.

"The fact people are looking at it and say it is dying or doing poorly seems strange to me," said JupiterResearch analyst Nate Elliott.

"It is a very strong player in almost everything it does. Our industry tends to be blind to anything outside of search.

"For Yahoo, unfortunately, they are dominant in everything outside search."

Mr Elliott added: "It's worth looking at the numbers: It's a massive company, with incredibly large revenues, that makes money and is still growing."

According to the firm's first quarter results, its revenues and gross profit are both up about 10% on the same time last year.

YAHOO FIGURES
$1.8 billion in revenue in first quarter 2008
140,613,000 visitors to Yahoo sites in the US in April*
4.4% of UK search market*
21% of US search*
*Figures from ComScore

After a difficult few months Yahoo is beginning to focus more on returning to its roots.

Mr Garlinghouse is well-known for a leaked internal memo, in which he compared Yahoo's complex and disjointed strategy on many different fronts to spreading peanut butter thinly across many places.

Two years on from that memo and much had changed, he said,

Yahoo was now focused on making the entire organisation more open for consumers, he added.

"We really shouldn't be thinking abut communications as a group as separate from communities.

"We feel like we want all of Yahoo to be more social; how to bring people to the core of the experience."

Yahoo is hoping to combine its success in bringing audiences to content, via the home page or the news page, as well as its mail service, with the social networking features that have become so important to MySpace and Facebook, and others.

As a first step the company will be letting users pull in information to their Yahoo Mail page from other services and content companies, as well as exporting their Yahoo information to other destinations.

Steve Ballmer
Microsoft's Steve Ballmer led the bid for Yahoo

Mr Garlinghouse said: "Social as a silo isn't where we'll be in a couple of years as an industry. Social makes things more relevant.

"I own my social connections - not Facebook, MySpace or Yahoo. Our philosophy inside Yahoo is that this is ultimately your data; we are going to let you take it with you, let you have access to it in a very open way."

Perhaps unsurprisingly, given the importance of e-mail to the company, Mr Garlinghouse said that Yahoo Mail could be a really big catalyst for making all of Yahoo more social.

A smart inbox that orders e-mails from your most relevant contacts, as well as "vitality updates" from friends, and alerts based on friends' activities at other sites, will be combined inside Yahoo Mail.

Longer term, he said Yahoo was looking at making e-mail itself smarter, using a protocol called XMTP, which would allow e-mail to pull in users' social connections into messages.

"There is an opportunity for e-mail to be a richer experience by being more social," he said.

He added: "It's not just social networking for the sake of social networking - it's enabling connections to give richer experiences."

Mr Garlinghouse said the company was committed to pulling down walls users are confronted with across Yahoo sites.

"There are today over two dozen different profiles you can have on Yahoo. Where we are going you will have one profile on Yahoo, one social graph on Yahoo."

Mr Elliott lauded the ambition but said others had tried similar things and failed.

"It's a great idea - but this is just the beginning. I don't know if anyone has successfully proven that giving people their content and information to take with them is a great strategy for building revenues.

Jerry Yang
Yahoo co-founder Jerry Yang is trying to refocus the firm

"It will be interesting to see how it works for Yahoo because it seems easier to me to build things on top of a social graph, than to build a social graph into established content and services.

"We've seen MySpace and Facebook start with a social graph and then building these content and services on top. I've not seen anyone reverse engineer the process."

He added: "If they can make it work then they are in great shape."

Mr Elliott said Yahoo's biggest challenge remained competing with Google in search.

"Search share numbers are frightening. Google is so completely dominant in so many European markets".

Yahoo has been criticised in some quarters for a limited trial of Google's advertising technology on its own search pages.

Mr Garlinghouse said the trial was about transparency.

He said: "We learned a lot from that. It helps us make better decisions. To me it demonstrates an openness and willingness to ask hard questions."




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