Extrapolating Yahoo Opportunity from Market Opportunities

Yahoo surprised investors by backpedaling on returning cash to investors from their exit of their China Alibaba Group position.  Though Mayer hasn’t said what she’d do with the money instead, one obvious possibility is M&A.  There has been talk about having Yahoo develop or acquire platform service capabilities that would exploit social and mobile trends, so that may be where the target of a buy would come from.

On one hand this could be a decent move for Yahoo.  I’m never a fan of tech-company programs to buy back shares or pay out increased cash to shareholders; they tell me the company can’t better use the funds to innovate.  To me, that means they’re not in the real tech space any more, they’re selling appliances with chips in them.  Certainly there’s a potential for an explosive opportunity in the mobile/behavioral symbiosis.  Two questions remain; does Yahoo have any notion of what those opportunities are, and does it have any chance of exploiting them from its current market position.

On the “what do they know” position, it’s encouraging (if true) that mobile/social platforms are an interest because it’s mobile and social that form the leading edge of this whole behavioral trend.  Communications devices imply communication, meaning that it’s logical that if people change behavior to accommodate new mobile broadband options, social behavior would be among the first of the behavioral components to be changed.  However, who these days isn’t saying mobile and social trends are the keys to the kingdom?  We won’t know whether Mayer has any real insight here until something concrete happens.

The “can they do it” question is a harder one.  Yahoo’s position in the market is declining.  Their desire to boost their search and email service to its former luster is logical, but look at Google and Apple with their increasingly “answer-my-question” and “speak with me” bias and you see that you can’t target getting something back in this market, you have to target GETTING AHEAD.  I think that getting ahead today means setting the trend; Apple taught us that.  There is no natural sweep of the consumer market, it’s a vast disorderly Brownian movement of fads and hang-ups and whims and pouts until somebody steps in and makes it otherwise.

This is why I said before that Yahoo needs to partner with the telcos.  They can’t influence mobile/behavioral dynamics on their own simply because it’s nearly impossible for them to start off now and try to overtake giants like Apple and Google who have mobile devices, clouds, and a lot of user hearts and minds.  But while every user surely knows who’s phone they have and whether it’s Android or whatever, they also know what carrier supports them.  There’s no other class of player in the mobile space who has a clear incumbency but who doesn’t have a clear position in exploiting that mobile/behavioral future.  So why not unite?  Think on this carefully, Marissa, or you’ll be sorry.

There is another area where Yahoo might shine, and that’s security.  The Woz comments on the cloud, the highly publicized breaches of cloud security recently, combine to illustrate that we don’t have the cloud under control in terms of security risks.  What’s needed in security is partly what Apple got with AuthenTec and partly a formalized notion of security inheritance that falls into the general topic of “federation”.  When services connect on behalf of their users there has to be strong management of how that’s done.  Right now that’s not the case.

Do we know how any online account manages the linkages to the others?  Those linkages have to be there or we couldn’t link Facebook with Twitter or Gmail with our other email systems.  I think it’s very possible that Apple plans to do something about security, but whatever it does is likely to focus on further sustaining the closed Apple ecosystem, which means Yahoo could look at solving the problem in a more general way.  Is Woz’s comment about the cloud coincidence, or is he as an Apple icon aware of something?  And by the way, there’s no class of player in the market who understands federation better than a carrier.

We should be realizing now that the Internet, or online services, or cloud services, are just too important to be as casually attended as they are.  Nobody wants to rain on the online parade by trotting out all the skeletons, but stories like those that have surfaced will surely taint the growth of both cloud and online services, social and otherwise, if we don’t face the issues more systematically.  Listening, Marissa?


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