Yahoo’s troubling dilemmas

If desperation is the mother of innovation, Yahoo may just be the future of mobile.
A pioneer in the Internet’s youngest days, Yahoo may now be seriously wounded. Shares of the venerable company are sliding toward the $20 threshold – losing more than 20% in the past month – and Yahoo is expected to announce the results of a major staff reorganization in an effort to calm nervous investors. Worse, the Sunnyvale, Calif.-based outfit is suffering a severe case of brain drain as an increasing number of high-ranking executives jump ship.
There’s no shortage of advice for the ailing company – some believe Yahoo needs to renew talks with former suitor Microsoft, while others think the company should go private – and pundits are lining up to take swipes at CEO Jerry Yang. But all the tumult may force Yahoo to focus even more intently on mobile.
Yahoo has made some notable progress in wireless, of course. T-Mobile International earlier this year tapped the firm to power its web’n’walk service in 11 European markets – dumping Google in the process – and a recent Nielsen Mobile study found that Yahoo is the leading mobile Internet brand for U.S. consumers, drawing 53% more traffic than second-place Google.
And Yahoo’s oneSearch with Voice, which it unveiled at CTIA Wireless 2008, seems likely to help it build on that success: The application smoothly integrates voice into mobile search, allowing users to find what they’re looking for without having to triple-tap their way around the wireless Web.
Nonetheless, Yahoo faces stiff competition in mobile. Another Nielsen Mobile poll found that Google accounted for an astounding 61% of all wireless Web searches during the first quarter of 2008; Yahoo finished a distant second with 18%.
That same poll highlighted what appears to be a drastic shortcoming in mobile search. Only 44% of Google users rated their satisfaction with the offering at eight or higher on a 10-point scale, while 40% of Yahoo searchers were similarly impressed.
And Yahoo has the reach to combine the mobile Internet with the fixed-like Web. The company boasts 29 operator partners for oneSearch, with a potential reach of 600 million mobile users, and Yahoo’s Web sites consistently rival Google’s destinations in overall traffic.
Revenue on the wireless Web is still dwarfed by the money being made on the traditional Internet, and just how lucrative mobile can be is still far from clear. But Yahoo has demonstrated an impressive ability to turn fixed-line users into mobile data consumers – just ask anybody who’s used a phone to check Yahoo fantasy football team info, or gotten turn-by-turn directions via text.
Yahoo is well-positioned to continue to drive uptake and draw traffic in these early days of the mobile Web. The question – if it survives the current turmoil – is whether the company can demonstrate as much innovation in producing revenue from mobile as it has in developing useful applications.