Yahoo’s Smorgasbord is the Problem

It’s Monday, the sun is shining and it’s the first day of the New Yahoo now that the evil empire – Microsoft – has been repelled after a two-month siege.

Now what, Mr. Jerry Yang? Surely, you’ve got something up your strategic sleeve that somehow convinced the Yahoo board to walk away from a $40-billion offer. Maybe as Dan Farber suggests, Yahoo is betting its future of Y!Open that will make Yahoo an open and social platform.

Yahoo and Yang are getting all kinds of suggestions about what to do now: Henry Blodget encourages Yahoo to do the outsourcing deal with Google while Howard Lindzon suggests Yang stop blogging and focus on increasing shareholder value.

Perhaps another strategic issue Yahoo should seriously explore is whether is needs to be all things to all people. As Monster co-founder Jeff Taylor put it last week during a conversation the Communitech conference, Yahoo has an extensive service portfolio. He describes it as having “100 children”. As any parent with more than one child would appreciate, trying to manage multiple children is challenging let alone 100.

For a sense of what Yahoo is bringing to the table, check out a directory ironically called Yahoo! Everything. It features pretty much everything within the Yahoo empire that has been launched organically over the past 14 years or been acquired. The list is impressive but also daunting given Yahoo is everywhere and anywhere.

The question is whether trying to be all-things-to-all-people makes sense or works. Is it possible to effectively manage a business with so many tentacles? How do you nurture the ones with more growth potential while still keeping your other children happy?

If you want to illustrate Yahoo’s strategic challenges, let’s take a look at del.icio.us, the popular bookmarking that Yahoo acquired in 2005 for $20-million. Since then, del.icio.us hasn’t changed that much, although a major upgrade has apparently been in the works for months, and it hasn’t been extensively integrated that much within the Yahoo empire.

So, why did Yahoo buy del.icio.us other than wanting access to its millions of users? What was the strategic fit? This is just one example but I’m sure you could go through Yahoo Everything, and ask the same question for dozens of organically-created services and acquisitions.

As Yang scrambles to create YAM (Yahoo After Microsoft) maybe he needs to look at the company’s service smorgasbord to determine what Yahoo really needs to be successful. Maybe kicking a few children out of the house (e.g. closing, selling or spinning off business units) would be a good move to give everyone else more room to grow.

More: ReadWriteWeb’s Marshall Kirkpatrick has a good post looking at how your favorite Yahoo services are safe for now.

Technorati Tags: Jerry Yang, Microsoft, Yahoo