Google’s decision to buy restaurant-rating firm Zagat is a validation of a trend I’ve been blogging about; the whole notion of how advertising is monetized online. It’s also an indication of what Yahoo could have, should have perhaps, and didn’t do. Maybe even an indication of why it’s too late for them to do anything at all.
Generally, advertising serves three interdependent goals. One is to build brand recognition, one to build demand, and the final one to influence purchases. If you think about it, only the last of these three is a sure winner. Your brand can be a household word and people not buy you; look at Xerox. You can spend on ads to build demand, but others may get the money. But if you influence the buyer during the purchase, you’ve struck gold. That’s why search ads have been the sweet spot of advertising, and why Google has done so well.
What Google is doing with Zagat is recognizing that mobile broadband can take the “influence purchases” paradigm to a whole new level. Mobile lets you go to the shopping area, even to the store, with the customer. Nobody these days shops or eats without a phone (most, in my personal view, should learn to keep it in their pockets while eating!) and what Google is aiming for with its latest buy is to get the purchaser to check out restaurant (and obviously, over time, other purchase) reviews at the last minute, that critical Golden Minute when the buyer waffles and then commits.
Where Yahoo comes into this is at two levels. First, they have had mobile aspirations all along but they’ve failed to recognize the most fundamental truth about mobile advertising, the truth I opened with here. Mobile is different because it supports point-of-purchase manipulation of the buyer. You don’t do mobile searches for the same reason you do searches at home. You’re out there, ready to buy. Earth to Bartz (yes, a retrospective question at this point); why not focus Yahoo search on MOBILE and forget about all those “relevance” and other issues. What’s relevant to a mobile user is what’s surrounding that user. You make your choice from what’s available. Yahoo COULD have taken a leading role there. And since Zagat has been on the block with no really interested parties looking at it for ages, Yahoo could have had them too.
A major investor group is calling for a new board, citing all of the value that Yahoo should have on paper. The Internet industry doesn’t exist on paper, not really, not in the way that other industries do. Yahoo is a recognized brand, but in Yahoo’s market brand is less important than you’d think. The Internet is an information engine, and getting the right information to people at the right time is the formula for success. Replace Bartz, replace the board, and you still have a thousand Yahooheads in key positions in the company who can’t think outside their own narrow gully of past experiences. Startups are trained by their VCs to cling to a notion until they either win everything or lose everything. Yahoo was trained as a startup, and unless they get that thousand inertial thinkers out of their gullies, they’re toast.