Yahoo!'s Still Asleep

In contemplating Yahoo!'s (YHOO - commentary - Cramer's Take) turnaround strategy, I've made no bones about the fact that I believe this company is in the most promising position to leverage Web 3.0.

And yet, Yahoo!'s recent second-quarter earnings call wasn't encouraging, and it didn't give me the sense that the company has its act together. In fact, in so many strategic dimensions, I find that it's placing bets that just aren't the right ones.

I believe Yahoo! can become the jewel of the Web 3.0 era because it already has strong or interesting positions in multiple verticals, such as online jobs (HotJobs) and photo sharing (Flickr). My entire Web 3.0 thesis is based on the Web becoming verticalized; therefore, to do justice to its potential, Yahoo! needs to win in the verticals.

Let's take the example of the online jobs vertical. Yahoo! bought HotJobs, thwarting Monster's (MNST - commentary - Cramer's Take) effort to consolidate the space. Today, jobs are one of the top online segments in the U.S., with $5.9 billion in online advertising revenue, which constitutes around 25% of Internet ad revenue in the US.

The top players in the online jobs market are CareerBuilder, Monster, Yahoo! HotJobs and vertical search engines such as Indeed, Jobster and SimplyHired. According to Hitwise, CareerBuilder is the leading job site in terms of Web visits with 13.73% visits, followed by Monster with 11.51% and Yahoo! Hot Jobs with 5.33%.

I'd like Yahoo! to report vertical revenue separately and to articulate strategies on how it will dominate each vertical. For instance, what kind of revenue does HotJobs pull in, and what can be done to move the business up to the No. 1 slot for the segment? Perhaps acquire Monster. Perhaps acquire professional-networking service LinkedIn. Perhaps acquire vertical job search engines Indeed or SimplyHired.

I'd like to see Yahoo! dominate not only online jobs but also online photo-sharing, with its wonderful Flickr property. In the U.S., the top 10 photo-sharing sites draw around 50 million visitors each month. Monetization happens primarily through hosting fees and printing/merchandising services. Flickr has figured out the hosting bit, but its monetization strategy does not include an in-house printing/photo-merchandising service. It could acquire Shutterfly (SFLY - commentary - Cramer's Take) to close this gap.

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At the time of publication, Mitra had no position in the stocks mentioned, although positions may change at any time. Sramana Mitra is an entrepreneur and a strategy consultant and authors a popular blog on those topics and more, Sramana Mitra on Strategy. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mitra appreciates your feedback; click here to send her an email.