Thursday, July 19, 2012

Yahoo’s next?

The Californian municipality of Sunnyvale might sound like it should be a bucolic, Norman Rockwell ideal of rural America, but in fact the closest thing it gets to daisy-strewn meadows are the perfectly manicured lawns of the technology giants headquartered in the community, which sits at the heart of Silicon Valley.

Covering 24 square miles of the south-west corner of the San Francisco Bay, it is the second largest city in the Valley, with more than 141,000 residents, with another 100,000 on top coming in each day to work there.

According to CNN Money, Sunnyvale is America's seventh best city to find affluent single people with 30% of its mariable population unmarried and an average annual household income of $110,276. It boasts two golf courses, 20 parks, 26 schools, 51 tennis courts and 315 restaurants, with 10 major hotels to put up visitors.

Terri Hatcher - onetime Lois Lane, former Bond girl and, most recently, kook single mother of Wisteria Lane – was born there, Apple co-founder Steve ‘Woz’ Wozniak grew up there, and the fictional Cyberdine Systems of the Terminator films was based there.

For the most part, Sunnyvale resembles much of the Valley landscape: corporate campuses stretched out over land that, not so very long ago, were cherry orchards or farmed other produce, until the semiconductor came along. On its Bay shore, is the part military airbase Moffett Field. You can’t miss it as you storm (or crawl, depending on the time of day) past on the 101 freeway, as it contains a giant dirigible hangar, built in 1931 to house the US Navy’s new airship. Next door is a large Lockheed plant which makes missiles and God-knows-what. Somewhere within Moffett's perimeter NASA still develops rocket fuel, or something like that.

Early in 2001 I was apartment hunting in Sunnyvale. Driving around, I passed the shiny edifices of digital behemoths like Palm and AMD.

I was a technology tourist, gawping in much the way regular tourists 400 miles to the south in Los Angeles were passing the gates of the Hollywood dream factories. Eventually I came across the headquarters of Yahoo Inc.

11 years ago Yahoo were, arguably, as big in terms of the web and technology reputation, as anyone else in the Bay Area – Apple just down the Sunnyvale-Saratoga Road in Cupertino, Cisco in Milpitas, Intel in Santa Clara and Oracle up near San Francisco. In more ‘global’ terms, Yahoo held reputational parity with Microsoft or AOL, which had merged with Time Warner the year before to create a media powerhouse at the outset of the online boom. But it was the sight of the Yahoo offices which, more than any other nameplate I saw that Sunday morning which brought home to me the significance of moving to America to live in Silicon Valley.

Roll forward to 2012 and the technology landscape has changed dramatically. Apple is no longer just the cool company it was in 2001 but the world’s most profitable company. Yahoo, in 2001 and at the tail end of the Silicon Valley boom of the 1990s, was still regarded as a major online “destination”. It still is - with 700 million users worldwide and remains the fourth most popular website in America.

However, it has lost its lustre to other places on the web: 18 years after Jerry Yang and David Filo founded Yahoo, Facebook commands more than three times the amount of ‘eyeball’ time. A progressive decline in visitors to Yahoo has been reflected by a $5 billion decline in advertising revenue and a $15 stock price that is a far cry from the $118 it once reached during the digital boom time. As destinations go, Yahoo has been more Margate than Malibu.

Another major reason is Yahoo’s noisy neighbour, Google, based in the adjacent ‘city’ of Mountain View. In 2001, Google was just an emerging rival in the Internet search market, having been founded three years before by Stanford University graduates Sergey Brin and Larry Page.

Today there is very little, it would seem, that Google doesn’t do, which is why 37-year-old Marissa Mayer is a prized acquisition, being poached from Google to become Yahoo’s new CEO.

Though she has just become the company’s third CEO in the space of a year (Scott Thompson left in May amid accusations of ‘creativity’ with his CV, while F-bomb dropping Carol Bartz departed noisily in September 2011), Mayer’s appointment has been seen as a good thing for Yahoo.

"A lot of people did not believe that Yahoo could get someone of the caliber of a Marissa Mayer," Standard and Poor's analyst Scott Kessler told Reuters, remarking on her pedigree. Eric Schmidt, Google's CEO, said, perhaps through gritted teeth: "Yahoo has made a good choice and I am personally very excited to see another woman become CEO of a technology company. Best wishes to Marissa and Yahoo!”

Much, already, has been made of the fact that Mayer is female (and pregnant), and that she joins an "elite" club of the likes of Meg Whitman at Hewlett-Packard, Facebook COO Sheryl Sandberg, and IBM's Virginia Rometty. But the more interesting detail is in her background.

Mayer is a product developer and was Google’s ‘employee #20’, a credit that gives her considerable bragging rights, having been in at the ground floor of Google when it was still just a good idea, rather than the diverse leviathan it is today. Her engineering expertise - not to mention her public skills at being Google's 'Steve Jobs' - has also led to speculation that her focus will be on developing new online products, rather than just extending content services. Content has never been Yahoo’s weakness – it is still a very valuable web property, with a news service that continues to generate plenty of traffic.

Yahoo, today, lacks the more dynamic applications of Google and Facebook, appearing to be somewhat two-dimensional in comparison to the thought-through integration of Google’s Street View (which Mayer was responsible for), for example.

It is something that has not been lost on Mayer, who started work in her new job on Tuesday: “My first order of business is to meet with the senior leadership team and get a product road map," she said, on Monday evening, aiming to make Yahoo "even more innovative and inspiring in the future.”

Beyond that, she will have to reverse the company’s financial trend, especially in attracting advertisers currently spreading their money around the “multi-platform” players that have grown up around Yahoo. That means making Yahoo not only an interesting, passive destination, but one that is rich and compelling, and relevant to social media - and that means developing mobile applications.

Even in the current economy, innovation is still the name of the game in Silicon Valley. There is no shortage of venture capital money sloshing around to invest in start-ups that, like Instagram, can be sold for a fortune to a Facebook to add even more value to the “end-user experience”.

Yahoo’s engineers have – if they have been around long enough – witnessed a decade of their local neighbours going past them on the Internet’s financial freeway. Mayer needs to generate the belief, internally, that Yahoo can be an equal player again, and one of the brands that puts – not that just historically put – Sunnyvale on the map.

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