On the wrong man for Yahoo

Silicon Alley Insider reports that David Rosenblatt is their pick as Yahoo CEO. Their reasoning is based on Rosenblatt’s successful tenure at Doubleclick, the argument goes: Doubleclick is good at selling banner ads, Yahoo has a lot of banner inventory, ergo Rosenblatt is perfect for Yahoo. That is my reason why he is exactly the wrong person to run Yahoo.

Yahoo has a lot of banner ad inventory but banner advertising is a dying business. It is old school newspaper advertising transposed to the internet. It does nothing new or innovative other than plop a message adjacent to something they want to read. Banners are dead and so is everyone who relies on them. In the future we will see far less advertising but it will be far more relevant. Google is the first company to crack this, a lot of Google searches don’t show any advertising and the ones that do show something relevant to the user. That’s why it’s a license to print money.

Google’s vulnerability

Yahoo should attack Google where they are most vulnerable: search. Conventional wisdom states Google is invulnerable in search and anyone who competes with them is doomed. The bones of Cuil and others litter the path of the next person foolish enough to venture into that cave. But recently Google has clearly signaled where they think their weakness lies. It was this weakness which let them to toy with the idea of buying Digg. Google search is built around the choices made by people who create webpages. But they know this is only half of the story, the other half is the web’s users.

Recently we started to see little icons appear next to our search results. One was a little up arrow ‘promote’ and the other a little cross ‘remove’. Google SearchWiki is intended to allow users to tailor search results to their own tastes. Google has recognised that the weakness of its search lies in what it once boasted about, the size of its index. There are now billions of pages on the web but what matters is showing me what I find useful. PageRank uses the natural architecture of the web to find relevant results but there is another way, using the bookmarks created by users. And which is the web’s favorite bookmarking site? Delicious.

Yahoo is sitting on a massive alternative index of the web created by its users and their bookmarks. To an extent they already do some analysis by assigning every link I save with the number of other users who have saved it. What nobody at Yahoo appears to see is that this is the beginning of a completely new form of search backed by a user built matrix of links. Yes it may be smaller than Google’s index but that doesn’t matter. It much smaller but much more relevant as it keys off bookmarks I have saved. It would not necessarily ‘beat’ Google but it would be the first viable alternative to PageRank since Google emerged and as such potentially its equal.

So the answer for Yahoo’s new CEO is simple: build Yahoo search around delicious. At this stage anything other than a game changer is no use to Yahoo.

On Yahoo coming apart

We are entering the endgame for Yahoo. The company will start to come apart and I think that is the right thing to happen. In a sense Yang’s leadership has been the best thing, if not for the company than for the broader tech industry. Yahoo always struck me as incoherent. Its Asian business is doing well independently of the US and would probably be much better off set free.

The US business has accumulated a lot of different sites which would perform better as tighter, more focused independent units. Delicious is one obvious example I have written about many times in the past. Flickr was another I initially dismissed as ‘money losing fluff’ but I now admit I was wrong. I saw the light when I started to use it and when the did the Getty deal. At the moment these and others are trapped inside Yahoo’s bureaucracy and being dragged down by it.

People talk about the benefits of size but all these really boil down to is common accounting, payroll and other back office functions. I have been reading a lot about organisation and the one I find most appealing is WL Gore. No unit in the company can exceed 250 people as that is the limit for an effective organisation. When the limit is reached a plant is split in two. It seems to me that this is the only way to run large organisations – as a federation of smaller ones all of which have maximum autonomy. Yahoo’s main problem at the moment is that its best companies are being crushed by its own size. It is the corporate equivalent of the Soviet Union and we all know how that ended.

Pic: Chen Yang

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On social search

Google’s Marissa Meyer has said that social search hasn’t shown much promise but if someone were to prove its worth then Google would be in a good position to incorporate it. I disagree. Social search is the single biggest threat to Google’s dominance and if another company did prove its worth Google would have to start from scratch. Its existing search technology would not avail it at all because PageRank is fundamentally unsocial.

Sure Google could build some social voting features into their results. The easiest way to do this would be to buy struggling pressflip to bring Web 2.0 clown prince Ted Dziuba back into the Goog fold. But that wouldn’t really get them anywhere against sites with built in bases and fundamentally social attributes like Delicious and Digg. Venturebeat also reported Meyer saying that social search may not make sense. This probably explains why she was rumoured to have  nixed the Digg deal and illustrates that Google fundamentally does not understand the social web.

Gary Stein does understand it. Instead of quoting myself again, I’ll quote him because we fundamentally agree:

But this introduced another problem, which is PageRank’s inherent flaw. As soon as word got out that pages were ranked based on votes, links became the currency of the realm. As Google became more successful and more engines followed its lead of treating links as votes, PageRank became the Web’s defining characteristic. Link spam is probably a bigger problem than e-mail spam.

Where will we go from here? The idea of votes on pages being recorded and leveraged is a good one. But maybe it’s time to visit an idea that’s been brewing for several years: social search. Where links aren’t votes. Votes are votes.

The irony is that I didn’t find this article by searching on Google, a friend sent me the link. Doubly ironic is that I found Marissa Meyer dissing social search by putting socialsearch into delicious. Change is a coming.

Pic: Kalieye

On Yahoo’s problems

Nobody currently employed by Yahoo has the answer to Yahoo’s problems. Sue Decker just announced a reorganisation of the few remaining executives she has but with people like Qi Lu and Joshua Schachter gone it boils down to rearranging (rickety) deckchairs on the Titanic. I doubt if they can actually agree what Yahoo’s problems even are, let alone solve them. Brad Garlinghouse came closest with his peanut butter manifesto, but he left too. That document boiled down to the observation that Yahoo is unfocused and bureaucratic.

The result was that in the good times Yahoo went on a totally random spending spree with no idea how all the acquisitions fitted together. As I have said before this approach has meant they lucked out and got hold of delicious and Schachter for an absolute bargain $30m. Unfortunately they then proceeded to do nothing with the only tool which could make any meaningful impact on search with the result that the man who created it subsequently left the company.

Sculley’s ghost

When they hit trouble their first instinct was to kick out Terry Semel and reinstall Jerry Yang as CEO. Presumably the idea was some kind of John Sculley/Steve Jobs mojo but the plan had one minor flaw: Yang is not Jobs. To a large extent companies reflect their leaders’ personality. So Microsoft likes to overcomplicate and have fifty different versions of everything, Apple is ultra secretive and design focused and Yahoo can’t make a decision on anything. After a year of fudging all Jerry’s fudge has caught up with him and it looks like the fudgathon is likely to end with a much deserved boot up his backside.

There is no doubt that Yahoo has a lot of good properties which make decent money. They have almost nothing to do with each other so why not spin them all out as separate companies and set them free from Yahoo’s bureaucracy? Then at least they would be smaller and freer to innovate. It may not be the whole answer but with Yahoo going down they need some radical action not endless reorganisations.

Read more:
On Yahoo
On Microhoo
On Microsoft’s biggest mistake
On Joshua Schachter

Pic: Forbes

On Kevin Rose

Of all the people to come up with a search engine capable of catching Google I would not have bet on Kevin Rose. My money was on Joshua Schachter but he sold to soon and it now looks like delicious is doomed.

Rose gets what most other tech founders don’t: people matter more than machines. I think this comes from the fact that Rose is not a mathematician nor even a coder. Digg came from an insight he had into what people wanted – to see what other people liked and who was like them.

Algorithms are all well and good but all they can do is analyse what people have already done. Google does this by analysing the hierarchies created by website owners when they link to other pages. Digg can take this a step further by analysing the opinions of the people who read websites, not those who create them. In doing so you would create a better search engine than Google because the number of people who tag pages is greater than the number of people who create them.

People power

Here’s what it boils down to: is Digg’s army of users better than Google’s spider? I think the answer is yes. Rose explains:

We’re creating algorithms that take a look at what you’ve dug and compare it to other people, inside the system, in real time. We have this working on our staging servers right now – it’s not something that we’ve launched publicly – but essentially, when you Digg an item you’re agreeing with that item and all those other people who dug it. So let’s say you’re Digg number 4,000 on something: who are those other 3,999 people you agreed with? What we’re doing with the math behind the scenes is we’re saying ‘OK, you agree with all these other people, what else are they finding out there that you might like? That you might also find interesting? So we’re working on ways to surface those stories – to find quality content before it becomes popular – but also introduce you to new people based on what you’ve been Digging.

Yes! Thank you Kevin! This is what I wanted delicious to do, here’s what I said in my first post on this blog:

The beauty of delicious is that it can look into the mind of other people with similar interests to me, see what they have tagged and return more relevant results. Another advantage it has over Google is that delicious can also assess the strength of a link between me and another user by seeing how many times we have tagged the same page with the same tag.

All Yahoo has to do is analyse these links between users in the same way Google analyses links between pages and it will have a search engine which thinks differently and gives people a real reason to use Yahoo search over Google.

It doesn’t actually make much difference whether it is delicious or Digg. I think delicious is better because its easier to submit links but as it is stuck in Yahoo’s belly the chances of anything original happening with it are close to zero. So if Digg cracks it good luck to them. I don’t think they’ll end up with a social network but they might just crack a brilliant new search engine.

Read more:
On Yahoo
On Joshua Schachter

Pic: Laughing Squid

On Joshua Schachter

TechCrunch reports that Delicious 2.0 has been delayed, Joshua Schachter has left the project and may leave the company. This is a disaster for Yahoo.

To me Schachter is as important to search as Larry Page. If anyone ever wonders how Google would have ended up if Yahoo had bought for $1m when it had the chance take one look at delicious. The insight a its heart – that links between users can give you a totally different type of search algorithm – is just as ground breaking as PageRank when it came along.

Don’t get me wrong – I don’t think a reformed Delicious is a Google killer but it has the potential to be a genuine search competitor in a way no other current large competitor does. If Yahoo management had any clue they would make Schachter CTO, put him back on Delicious and build the company around it.

On the great Yahoo mystery

My inaugural post was on the mystery of Yahoo and things have not got any clearer since then. Why, why, why does Microsoft want this company? Why do they think buying an inferior search engine will help them catch Google? I said in the original post that the only way Yahoo will catch them is by actually using delicious properly, something they have never shown the inclination to do and something MS is even less likely to achieve than they are.

It now turns out that the Terry Semel turned down $40 per share which has shareholders reaching for the smelling salts and lawyers. To cap it all the lawsuit had unearthed a memo from Jerry Yang arguing that doing the search deal he subsequently brokered with Google would create an effective monopoly in search.

What will Ballmer actually do if he ever gets Yahoo? All he will end up with is an even bigger, slower company when what he should be doing is making MS smaller and nimbler.

Read more:

On breaking up Microsoft
On Yahoo’s problems
On breaking up Yahoo

On Persai

I’m not one of those people who thinks any new startup in search is bound to be beaten by Google. It can’t be done by playing Google at their own game but it can be done by using a different approach. Search startup Persai falls into that category. What struck me was this description from co-founder Ted Dziuba:

We want to build machine programs that can learn things from information that’s out there on the web. In the first application we’ll come out with, you tell us things that you’re interested in, and we’ll continuously go out and find stuff on the internet that’s related to that. There’s a positive feedback loop where you tell us what you like and don’t, so the machine gets progressively better in learning what you like.

I like the basic idea but there is one problem: I don’t really want to tell yet another site what I’m interested in. I’ve told delicious and Digg what links I like. I’ve told facebook what films and books I like. Why should I tell Persai all over again? If Persai could work out a way to yank all this stuff from the other sites automatically and knit it altogether then serve relevant results that would be a fantastic tool, unfortunately:

Recommendations are based entirely on content, other users’ feedback has no bearing on what Persai recommends to you.

This is a mistake. I’ve said before the key to next generation search is analysing the links between users as well as Google analyses the links between pages. Persai seems to have it half right in that I can tell it what I like but I think they need to rethink their approach on other users’ contributions.

There are a few startups looking to revolutionise search for a second time. I met the founders of another new search engine Piins a few weeks ago, they are still in private beta so I can’t go into specifics but they also have a very interesting concept which has a good chance of success. Both Persai and Piins come into the “companies I would definitely invest in” category, if I were a VC.

On Yahoo

From the outside Yahoo looks like a vessel slowly listing into the sea. Inexplicably, it still makes a lot of money but it is ultimately doomed as nobody really knows what Yahoo is for, Microsoft included. Its shareholders are furious with Jerry Yang for spurning the $33 per share offer and threatening action as Yang backpedals. Commentators are speculating whether Ballmer is playing a game and wondering if he will be back to the table, the answer is yes – after Yang & Co have twisted in the wind for a while.

Unfortunately when Microsoft get their hands on Yahoo all they will be able to do is manage its descent more efficiently. Yahoo’s real problem is search, being number two to Google is an uncomfortable position as Yahoo has spent a lot of time discovering. Why would anyone use Yahoo search when Google is around?

The reason Google succeeded is because Larry Page saw search differently than everything around at the time and the result was a search engine a hundred times better than anything else. Being 5% better than Google won’t cut it (assuming Yahoo could even get there) and being 5% worse, which more accurately describes Yahoo search, certainly won’t. The good news for Yahoo is that they already own the company which could save them.

Page’s great insight was that the links between pages mattered more than what was on them. He noticed that, in effect, website creators were peer reviewing each others’ sites and built a machine which could analyse that peer review to produce radically better search results. To outdo Google you would have to rank the internet in a completely new way. This may be needed anyway, as a recent post on TechCrunch speculated, the Internet is getting too big even for Google. Schonfeld said:

At a certain point, with billions and billions of Web pages to sift through, keyword search just won’t cut it anymore. It’s a needle-in-the-haystack problem, with the haystacks just getting bigger and bigger every second.

I don’t agree with him that keyword search is necessarily doomed but I think that more human interaction is required to sort the wheat from the chaff. This is the basic reason why even terrible ideas like Mahalo and ChaCha continue to attract funds. They should give up because the best human powered search engine in existence was invented by Joshua Schachter in 2003 and Yahoo already owns delicious.

Michael Arrington has already described delicious as his favourite search engine after Google and I think with some tweaking it could go one better. I am interested in the music business so I have tagged a number of stories on EMI. When I search for EMI on delicious I see all my own stories plus other users’ stories. Search results for the second group are not particularly great but delicious has all the raw information to make them much better. Through tagging I have already told delicious what stories I am interested in and it knows who else has tagged the same stories.

The beauty of delicious is that it can look into the mind of other people with similar interests to me, see what they have tagged and return more relevant results. Another advantage it has over Google is that delicious can also assess the strength of a link between me and another user by seeing how many times we have tagged the same page with the same tag.

All Yahoo has to do is analyse these links between users in the same way Google analyses links between pages and it will have a search engine which thinks differently and gives people a real reason to use Yahoo search over Google. If they crack it Yahoo will be worth far more than the $37 per share Yang wanted and they won’t need Microsoft.