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article imageYahoo and PayPal teaming up? New CEO, new mix and better options

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By Paul Wallis     Jan 4, 2012 in Internet
Sydney - If you’ve been wondering what’s happening with Yahoo lately, you’re not alone. So have investors and customers. The new CEO Scott Thompson comes from Paypal where he was the company's president and he's already had some flak fired at him.
The New York Times defines the issues:
Mr. Thompson, analysts say, has a background mainly in technology rather than digital media or corporate turnarounds. While PayPal is a consumer service, analysts said that was very different from a media company.
But in a conference call on Wednesday morning, Roy J. Bostock, the chairman of Yahoo’s board, said Mr. Thompson had proved at PayPal that he could take a company with solid assets and build a business. That is the central challenge at Yahoo, Mr. Bostock said, noting that the company has a wealth of strong media and advertising assets and an online audience of more than 700 million visitors a month.
Both sides have missed a core issue- The real problem for Yahoo is commerce in a demanding, highly competitive market. Having outlets doesn’t mean a damn thing if you’ve got nothing to sell. Yahoo products aren’t particularly high profile, and there have been no world-beater type products for quite a while.
Yahoo was the search giant before Google, and that history doesn’t need to be regurgitated. Yahoo lost a lot of market share against a type of marketing dynamic which simply blew it out of the water. It didn’t have any answer to Google’s operational style, or its multifaceted products. Internal scuffles and lack of direction didn’t exactly help in this environment, either.
The commercial problems are considerable- Unlike Google, Yahoo doesn’t have that level of market reach and certainly doesn’t have that market position. It certainly doesn’t have that level of participation. 700 million a month doesn’t compare with a few billion a day.
Yahoo needs to reinvent itself as a working commercial operation with unique selling points and products. There’s no point in Yahoo trying to be Google. The world doesn’t need another Google, and competing with the world’s default search engine could be an extremely expensive/utterly useless waste of time, as many other previous efforts in that direction have shown. Yahoo’s search function needs to go somewhere positive with market potential, as Google’s did.
Talking about market positioning, Thompson is perhaps the person on the planet best positioned to look at Yahoo’s ability to deliver services and revenue generating business for ecommerce, etc. PayPal is also developing a very wide range of new ecommerce options across a very broad band of outlets and services and has a gigantic customer base.
Yahoo does have a reliable core customer base, perfect for distribution of any new product it creates. A working partnership with PayPal couldn’t be a bad move for Yahoo. PayPal is a selling point in itself, very popular with internet consumers and a few clicks by Yahoo customers could go a long way to help Yahoo’s bottom line.
There’s no great conflict of interest for Thompson or Yahoo here-
1. Yahoo obviously needs commercial outlets for itself, and Thompson has plenty of them.
2. It’s very much in Yahoo’s interests to start developing new markets and new commercial options.
3. Although this may not be the most appropriate analogy- Apple reinvented itself by creating new operations well outside its original model, and resuscitated the company with new technology and hard dollar earning products. Yahoo could and should look at similar options, provided there’s a proven market and distribution for them.
Yahoo went to sleep for years. The world literally passed it by. Yahoo isn’t actually a lost cause- It got itself lost and stayed lost. A tech expert at the head, able to evaluate new products and new commercial possibilities and with exactly the right connections can only help, and may very well be the way out of the woods.
Clarifications:
There have been some reports that Thompson is "former" president of PayPal. He's still on their site as president as at the time of writing, and NYT refers to him as president, so I have some doubts about the "former" tag.
The idea of the two companies "teaming up" is my opinion, with a question mark. I'm a customer of both companies, so from my point of view, it's a good match, particularly if Thompson can get Yahoo into a good market position, which has been the missing link for the company for a decade.
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