Yahoo now at 'crossroads'

Co-founder David Filo discusses plans to reinvent the company; notes the importance of social networking in Yahoo's future growth.
Written by Swati Prasad, Contributor
newsmaker BANGALORE, INDIA--In 1994, David Filo and a friend were pondering over an acronym for an experiment, then dubbed "Jerry and David's Guide to the World Wide Web", they were running at the Stanford University Lab.

Filo browsed through the dictionary and chanced upon the word Yahoo, defined as rude, unsophisticated and uncouth. His discovery spawned a phenomenon now popularly known as Yahoo, which is an acronym for "Yet Another Hierarchical Officious Oracle".

Today, this offspring touches the lives of 500 million people across the world, and made its founders Jerry Yang and Filo household names.

But the going, lately, has not been particularly easy for Yahoo. With archrival Google gaining market share in search, e-mail and social networking, Yahoo has been working to reinvent itself.

The Sunnyvale, U.S.-based portal went through significant restructuring earlier this year, including one which saw the company in June 2007 lose its long-time CEO Terry Semel, who was replaced by Yang.

Yahoo is seeking a stronger presence in social networking, but the company failed in its reported US$1 billion bid last year to acquire Facebook.

Filo was recently in Bangalore, India, to attend the company's first Asia-based Open Hack Day. In an exclusive interview with ZDNet Asia, he discussed Yahoo's plans to transform itself and explained the role of social networking in the company's growth.

The virtual world is changing very fast. How does Yahoo plan to transform itself in order to remain relevant?
Open Hack Days are one way of remaining relevant to our users. On Open Hack Days, we invite developers from outside of Yahoo to work on our APIs (application programming interfaces) and prepare hacks.

There are three constituents to our business: consumers, advertisers and publishers. We are working toward building a strong ecosystem around these three constituents. On the consumer side, we have events like the hack days that bring third-party developers into our fold. Such an exercise also tells us some of the utilities consumers may be looking for on Yahoo. On the advertising side, we have made some acquisitions, such as BlueLithium and Right Media. Yahoo also has an advertising arrangement with eBay.

Over the years, Yahoo has gradually evolved into a technology platform company. Yahoo today is at crossroads. We live in an ecosystem. It's not all about yahoo.com, but about Yahoo's participation in the Internet.

Open platforms are powering a lot of services today. Going forward, we would be creating more open platforms.

You mentioned that the next half a billion users for Yahoo will come from this part of the world. How will you determine what kind of utilities these users will want online?
Yes, we will find our next 500 million users in emerging markets like India, Southeast Asia, Middle East and Latin America. We are very focused on the emerging markets. We are treating India as a hub for emerging markets.

As I understand it, the primary utility for a user here is not entertainment, as is the case in the West. The user looks for utilities that can enhance his efficiencies at work.

Open Hack Days are one way of figuring out what consumers in emerging markets are looking for. In addition, we have people in local markets who understand the consumers.

These young developers in Bangalore may not know exactly what a rural Indian wants, but this is the closest we can get to the rural user. It is better than leaving the task on a developer in the United States.

But a large proportion of Indians live in small towns and villages, where literacy levels and the purchasing power are low. What's your strategy for these areas?
So far, we don't have much of a base in rural India. But we do want to focus on that group. That's why we are focusing on mobile phone applications. We have also launched Yahoo in regional languages in India.

Are you still hoping the Facebook acquisition will work out? How is Yahoo addressing the social networking market?
We are certainly on the look out for companies out there. I also believe that not every smart person works at Yahoo. We are always looking for good people and good companies.

While I can't get into the specifics of the companies Yahoo is targeting, I understand that while we have created communities such as Yahoo Answers, Flickr, Yahoo Groups, Yahoo Messenger, Yahoo 360 and Yahoo Email, most of these communities are fragmented.

Therefore, we do need to tap into the social networking space. And we are committed to doing that.

One of your key rivals, Google, is continuing to grow very fast through Orkut, Gmail and Google Search...
We will always have competition. And it's good to have competition. Our competitors drive us to create an even better product. We are ahead of competition in areas like e-mail and some other utilities. There are some countries like Taiwan, where Yahoo is number one even amongst search engines.

We plan to continue to push our products further in emerging markets.

Where do you see Yahoo five years from now?
Over the next few years, things will change quite dramatically. You will see a lot of advancements in areas such as search, communications, e-mail, mobile and social networking.

We want to be a brand that is fundamental to all users of the Internet. We want to evolve Yahoo technologies, and build them on open platforms.

Swati Prasad is a freelance IT writer based in India.

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