Opinion: Yahoo's Mega mistake

Yahoo is the current darling of Wall Street. Yet the company may be in the midst of a Mega Mistake.

Yahoo flaunts itself as the new media master and lavishes scorn on old media. In reality, Yahoo is just using the new media to build an old-fashioned, mass-market brand. One that may have trouble surviving as mass marketing gives way to one-to-one marketing.

To survive in the coming one-to-one world, a company must:

Have an interactive, two-way relationship with its customers. Know those customers' names, addresses and areas of interest. Have permission from those customers to communicate with them regularly.

Yahoo is doing a poor job of collecting user names and demographics. Although its My Yahoo efforts represent an important first step, the company still lags behind in this all-important arena.

It's doing an even worse job reaching out to those users with regular communications. In its arrogance and old-market mentality, Yahoo believes customers will always come to it. It scorns email reminders, push channels and other methods more forward-thinking companies use to reach out to customers.

Yoyodyne's Seth Godin said it succinctly in a Fast Company interview: "Every month 25 million unknown users show up at this site and Yahoo flushes these people down the toilet. Yahoo doesn't know who they are, where they live, what they like -- it's all anonymous. That strikes me as foolish."

Foolish. And possibly fatal. The only thing that's saving Yahoo right now is that its competitors aren't that far in front. But that's changing fast. Book seller Amazon.com is doing a great job of building relationships with its customers. Rival Netcenter is beginning to do a decent job of tracking user demographics.

Soon every site will be clamoring to become your best friend. But hello! -- consumers won't have the time or mindspace to get 200 "personalized" emails per day from vendors hawking bargains. Buyers will pick and choose carefully. And the companies who establish a relationship early -- who get permission to show up in consumers' email inboxes -- will be the winners.

Investors are focusing on what Yahoo is doing today, on its successful use of old-fashioned branding on the Web. Maybe they should be looking to the future, to what comes next after portals. In that new world Yahoo stops looking quite so smart. And more like a company that made a Mega Mistake.