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Yahoo! & AOL get compared to Google, but should probably fear Facebook

by drm on May 3, 2010

Yahoo! chief Carol Bartz made an interesting point about Google in an interview with the BBC today:

“Google is going to have a problem because Google is only known for search,” said Ms Bartz. “It is only half our business; it’s 99.9% of their business. They’ve got to find other things to do.  Google has to grow a company the size of Yahoo every year to be interesting.”

yahoo_logo.jpgPeople are going to focus on the bravado and positioning — after all Bartz needs to clearly define Yahoo’s value proposition in a market where the company is unfavorably compared with Google on an ongoing basis.

Search isn’t an infinitely expanding business opportunity. In fact, several dynamics at work suggest that the growth of search revenue will slow, limiting Google’s overall opportunity for growth. First, penetration of potential advertisers is higher today than it was two years ago for Google. And second, the shift of internet usage into social networks has incrementally changed the search behavior of web users.

Google’s media proposition is built on the back of search. That means that the audience that Google aggregates to the benefit of marketers — a basic definition of ad-supported media — relies to an outsized degree on search traffic.

Yahoo! has a more diverse media proposition. That’s the “half of our business” that Bart is referring to.

In this regard, Yahoo! is more like AOL than Google. Not surprisingly, AOL is facing its own challenges in terms of definition, value and opportunity.

The big issue here is that the largest diversified web media brands aren’t demonstrating the ability to grow revenues and hold on to consumers that suggest the franchises deserve premium growth valuations.

Yahoo! and AOL are predominantly content-driven media platforms that have created applications in order to enhance user engagement. That business model is an interactive evolution of the traditional media business model. new AOL logoIn this regard, the companies are very different, and have very different challenges, from Google.

The primary challenge remains how to effectively keep content and applications fresh while managing a huge consumer audience, and how to make that base of content accessible and valuable to advertisers. The problem solving is discrete, because one approach doesn’t necessarily fit to every different content platform and user experience. (In this respect, the companies suffer in comparison to Google, which is incredibly simple to explain.)  An underlying question is whether focused media brands are more viable than diversified media brands.

When thinking about the strategic challenge of Yahoo! and AOL, I’d suggest that the most salient question is how these two platforms retain consumer interest and loyalty in an environment where Facebook is becoming a de facto operating internet operating system.

One of the Google searches that drives traffic to this site regularly is “Is Facebook the new AOL.”

The query could just as easily be, Is Facebook the new interactive media model? As an interactive media platform, Facebook is organizing and directing shared content, providing content publishing tools, generating scale audience with a high definition of individual interests and producing content within its own operating system seamlessly.

Facebook allows users to dictate what content is important and interesting.  That model is fundamentally different from the Yahoo!/AOL model.

Facebook can be an incredibly valuable tool for anyone trying to generate a business from content, and it could ultimately be a profound disintermediator for Yahoo! and AOL, which today look like legacy media brands on the web.

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Three guidelines for business clarity

by drm on April 13, 2010

Google marketing principles
Image by niallkennedy via Flickr

A few weeks ago I read an article in the McKinsey Quarterly that used observations from behavioral economics to recommend simple guidelines for marketers. The conclusions were striking in how strongly they resonated with our thinking about how we approach our products and markets.

  • Make a product’s cost less painful
  • Don’t overwhelm your customer with choice
  • Position your preferred option carefully

The first is a basic rule of getting your product accepted. The ultimate cost of the product or service isn’t the amount that is paid; it’s the financial cost plus the time and energy that your customer has to commit to use or integrate your product. And, your customer always has the choice of doing nothing.

In many cases, the easiest way to get a customer to chose or switch a complex product is to do the work required to get the product up and going. We forget this sometimes as we use technology to put tools in the hand of the customer. If working with those tools simply accomplishes the transfer of work from the seller to the buyer, then the tools are ultimately of no value to the customer.

A good, counter-intuitive example is Google‘s customer experience for AdWords. Think of AdWords and you think of a self-serve model that reduces Google’s sales and service costs.

When you use AdWords, however, you discover that the tools enrich your understanding of your market…that, in fact, the automation of the AdWords system reduces that amount of time that a customer needs to spend to create and implement an advertising program on the search engine.

The second guideline speaks to the importance of keeping your product or service as simple as possible. When you adhere to simplicity, you create the opportunity to build strong and lasting relationships with your customers. Think of simplicity as a simple definition of what you do that makes complete sense to your customer. “I create qualified business leads for you.” “I provide easy-to-access business intelligence for you.” “I create great marketing experiences for you.”

The simplicity should be a filter that lets you take away unnecessary choices from your your customer. It’s too easy to keep adding new features, or to build functionality into a service that is unrelated to the core promise.

The final rule admonishes to know what we want to sell. In our business, we should always have a preferred option, a product or service that we offer that we know we can delivery effectively and profitably.

Businesses too often fall into the trap of believing that having a broad menu of options, or a wide array of choices, creates more activity from customers. The McKinsey monograph argues that this complexity runs counter to our ultimate goals.

You can find the article here; the full article is behind a subscription wall.

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Another step in the shift around Search

January 4, 2010

In his 2010 projections, John Battelle touches on search:
7. Traditional search results will deteriorate to the point that folks begin to question search’s validity as a service. This does not mean people will stop using search – habits do not die that quickly and search will continue to have significant utility. But we are in [...]

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A look into leads: Where they come from and what happens when they get here

May 18, 2009

The science of leads turns out to be just a part of the art of marketing

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