Yahoo! Is Switzerland, and That's a Good Thing

NEW YORK (TheStreet) -- On Tuesday the Wall Street Journal's Amir Efrati and Jessica Lessin reported that Yahoo! (YHOO) was in talks with Apple's (AAPL) Eddy Cue to increase their partnership around providing key content to iOS users via Siri and possibly other ways.

Such a partnership makes a whole lot of sense for both sides, which I'll discuss in a second. However, it's also worth pointing out that Yahoo! has officially become Switzerland in the Valley.

At the moment, Yahoo! is currently partnered with Microsoft ( MSFT) for Web search, Google ( GOOG) for mobile search, Facebook ( FB) for social bar and tentpole events, and Apple for Siri, Stocks, and Weather. No other company in the Valley could pull that off if it tried.

Oh, and don't forget, Yahoo! Mail announced last week that it is partnering with Dropbox for increased user storage.

The fact that Yahoo! is partnering like this shouldn't come as a surprise to anyone. Marissa Mayer spelled out as much during an hour long interview she did in Davos with Erik Schatzker of Bloomberg. She said then that only Yahoo! is in the position to be able to do this and so would leverage it for all it's worth.

Lately, some have criticized Mayer for not articulating her turnaround strategy, pointing out that it's going to be her one-year anniversary of her hiring in July and she's yet to spell things out.

Yet, did Tim Armstrong preface the quadrupling in AOL's ( AOL) stock price with an explicit public discussion of a new strategy? Not really. He just started doing stuff: cutting headcount, increasing stock buybacks, negotiating a patent buy from Microsoft and using that to buy back more shares.

To my eyes, Mayer is simply executing as well. And if she does a deal with Apple, will anyone care about the criticism that she didn't articulate her strategy first? Certainly the Yahoo! shareholders won't care one iota.

As to a potential deal between Apple and Yahoo!, both need the other.

It seems like they're focusing on Siri to start. That makes most sense for now. There's so much content that Yahoo! can help deliver to Siri. It began last year when Siri integrated sports scores and standings from Yahoo! into Siri results. That was helpful for users, but there's so much more potential for future content to which Yahoo! has access to tap.

Yesterday's report by Nicholas Carlson in Business Insider that part of Yahoo!'s $30 million deal for Summly included rights to Summly's IP from SRI International is also interesting here. SRI was the birthplace of Siri and Nuance ( NUAN). It seems like Yahoo! will be able to use this if it can work more closely with Apple on Siri.

The report said that Yahoo! also wants to work more closely with Apple on search in Safari. That's hard to figure out at first blush though, as Yahoo! -- incorrectly now in hindsight -- chose to outsource search to Bing in 2009. Yahoo! controls the front-end of search in the Bing partnership, but what good would that do Apple? Perhaps the discussions are more around promoting the Yahoo! content that Siri would be getting access to anyway on Apple's Safari browser.

I've always though Apple has lagged Google, Facebook and Twitter when it comes to deploying web services. Think Apple Maps but it also goes back to the days of MobileMe. Web Services are just not what Apple lives and breathes every day.

I said last year that Apple should really buy Yahoo! and Twitter and make them the core of their new Web Services group. I believe web services will be an increasingly important battleground in phones going forward.

Google is already strong in Maps, Earth, and now into Plus and other areas. Facebook will try and push its own services in its Android-based phone. Even Samsung will be out to demonstrate it is better in Web Services than Apple, in order to differentiate its brand from other phones out there.

What's going to be Apple's response? The company can stay agnostic and let the other phone makers differentiate, it can build it or it can buy.

For those who think Apple should stay agnostic, I'd say that's like saying Apple shouldn't make a camera but just let third parties build their own photo apps to leverage the Apple hardware in the camera. There are some services that Apple should just provide. Photos is one thing. Flickr (the new mobile version) would be a great addition to iOS. Weather and stocks is another "must have" and Yahoo! does a great job there -- although it could do more.

Twitter would be another great addition.

I think Apple would do better to start thinking of promoting best-of-breed services even when they allow others from outside the "walled garden."

Steve Jobs pursued buying Dropbox but would have made it Apple-only. It shouldn't insist on this. Same goes with something like WhatsApp in the messaging space. There was yet another iMessage failure yesterday. This can't happen and it would be more powerful to have an open Messaging platform like WhatsApp than insisting on keeping iMessage as a closed system. Twitter would also have to remain "open" to non-iOS users.

The bottom line is that Yahoo! can be extremely helpful to Apple in charting out these kinds of new services. For those who like to put down Yahoo! as a non-factor in web services, I'd say:

(A) You're still bashing Yahoo! as though it was a $14 stock instead of a $24 one.

(B) You're bashing flies in the face of raw user numbers to Yahoo!.

(C) Finance, Sports and News are monsters for Yahoo!.

(D) Marissa Mayer is overseeing a rehaul of all Yahoo! properties for mobile and Apple can benefit from this rehaul.

(E) If not Yahoo!, who else is Apple going to partner with to help with this new web services area? Google? Facebook? Microsoft? Exactly.

Forget Blue Ocean or whatever else is the strategy fad of the day in Silicon Valley: Yahoo!'s strategy will be a mobile Switzerland one for the foreseeable future.

At the time of publication the author was long YHOO.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at or @ericjackson.

You can contact Eric by emailing him at

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