ON YAHOO!'S "PEANUT BUTTER MANIFESTO"

YAHOO! 2.0?

At the discussion on Techmeme focuses today on which Web 2.0 company Yahoo! may buy next, there's a bigger, more important discussion brewing within the venerable internet company.

The Wall Street Journal has a page one story about an internal memo by a senior Yahoo! executive calling for a major overhaul at Yahoo!, with news-baiting phrases like "Heads must roll" and "Execute a radical reorganization".

The memo is being referred to as the "Peanut Butter" memo or manifesto, because as the article explains:

"Last month Brad Garlinghouse, a Yahoo senior vice president, wrote the memo, titled "The Peanut Butter Manifesto," for top executives. His contention: "Change is needed and it is needed soon."

Mr. Garlinghouse, who once shaved a "Y" in the back of his head, argued in his manifesto that Yahoo is spreading its resources like peanut butter on bread, thinly and evenly across all its activities. "Thus we focus on nothing in particular," he wrote, saying the Sunnyvale, Calif., company needs to pick specific areas to focus on and make bigger bets on them while dropping nonessential activities."

The full memo is worth reading.  It's well-crafted, with the author smoothly blending his love and dedication for Yahoo! with a "tough love" message that all but calls for firing many of his bosses and peers.

The fact that it's leaked to the Wall Street Journal as a page one story, has the hallmarks of some complicated corporate intrigue  at the company, with the possibility of more internal strife.

For Brad Garlinghouse, who officially heads up Yahoo! Mail and My Yahoo!, is calling for eliminating many duplicative products and services within the company:

"We lack decisiveness. Combine a lack of focus with unclear ownership, and the result is that decisions are either not made or are made when it is already too late. Without a clear and focused vision, and without complete clarity of ownership, we lack a macro perspective to guide our decisions and visibility into who should make those decisions. We are repeatedly stymied by challenging and hairy decisions. We are held hostage by our analysis paralysis.

We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company.

• YME vs. Musicmatch

• Flickr vs. Photos

• YMG video vs. Search video

• Deli.cio.us vs. myweb

• Messenger and plug-ins vs. Sidebar and widgets

• Social media vs. 360 and Groups

• Front page vs. YMG

• Global strategy from BU'vs. Global strategy from Int'l"

As an outside observer, I'd point out that Yahoo! isn't the only company with multiple overlapping services.  Microsoft's had both Hotmail and MSN mail for over a decade as an example, while Google's had overlapping services like Orkut and Blogger.

It's one of the inevitable byproducts of a strategy by the big internet companies to continually buy new companies large and small, and then try to integrate, assimilate and/or leverage them on the fly.

At one point Brad extends on his peanut butter analogy with the statement:

"I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

I hate peanut butter. We all should."

This outside observer, who loves peanut butter, humbly disagrees.

But if we must use a peanut butter analogy, I'd say the first choice for Yahoo! is whether to choose Smooth or Chunky. 

One could argue that the company currently pursues the "smooth" peanut butter strategy where no single Yahoo! product or services defines the company, as Search defines Google or operating systems and productivity apps define Microsoft.  Or as internet access, chat and IM defined AOL in the past.

Instead may be a "Chunky Peanut Butter" strategy may be called for, where the company seeks to define a handful of it's services as it's hard-core mission, while CONTINUING to provide the other services, as long as they contribute directly or indirectly to enhancing the core services.

Google in many ways is following this strategy, where many of the current efforts like GMail, Google Desktop, etc., are about adding to the content store that Google then serves up targeted ads against.

But Google also has the Jelly to go with it's Chunky Peanut Butter strategy, in the mother lode of business paid-search models that matches perfectly against it's core Search strategy, i.e., AdSense and AdWords.

Yahoo! needs to  add more Jelly to it's Peanut Butter in the form of a really competitive paid-search ad business.  This is what Yahoo!'s new ad-serving platform Panama is all about, as discussed in a previous post.  Making it a contender against Google has got to be  among the top priorities.

And then we'll have a sandwich to talk about.

DISCLOSURE:  I used to cover Yahoo! for a number of years as an equity research analyst since it's IPO in 1996.  I currently am a Yahoo! stockholder.

Comments

[Andrew Parker]

The leak is the big story here IMHO. The manifesto itself sounds it is written by someone who has to rely on metaphors because he has no actual remedy. He's describing the water that all of Yahoo is drowning in, instead of throwing out a life preserver. But, whoever leaked with to WSJ made a very interesting decision that reflects poorly on Yahoo upper-management.

[Eric Jackson]

Yes, it demonstrates a lack of cohesion on the management team. Into a vacuum steps these kinds of comments.

A change at the top is necessary.

I think Jerry Yang and David Filo need to demonstrate some strong leadership here:

http://breakoutperformance.blogspot.com/2006/11/open-letter-to-jerry-yang-and-david.html

Thanks,

Eric

[Yaser Anwar]

Yahoo is trying to be all things to everyone, a one stop solution. This leads them to specialize and make every aspect perfect- from search to entertainment to personal needs (such as mail, photo sharing etc) of consumers.

In recent months the company has suffered some embarrassing setbacks in its sales of both display and Web search advertising. Many advertising industry executives say Yahoo's lead in working with big marketers has eroded as other companies have built up popular Web sites, sales operations and advertising technology.

Google, in the meantime, is taking advantage of Yahoo's problems to cement crucial deals that could make its rival's recovery even more difficult. Before Google agreed to buy YouTube for $1.65 billion in stock, it paid $1 billion for 5 percent of AOL, locking in the right to sell text ads that appear next to its search results. And it agreed to pay $900 million over three and a half years to sell ads on MySpace.com, giving it a huge number of pages where it can place banner ads. (Yahoo flirted with AOL and bid actively for MySpace.)

With these and other deals, Google has neutralized Yahoo's big competitive advantage on Madison Avenue: its ability to sell the full range of advertising, from splashy video campaigns to text ads on search results.

I would strongly suggest reading JJ's comments at this Henry Blodget post, some really good points.

http://www.internetoutsider.com/2006/10/yahoo_time_for_.html