Radical Restructuring At Yahoo! But Will It Save The Internet Dinosaur?

Yahoo! have announced that they are going to cut 14% of its workforce, about 2,000 people, in what will be the biggest restructuring in the company’s history – but the question remains as to what direction the newly slimlined company should take. It still has a huge number of pageviews across its various properties – but it is going to need to adapt if it is going to survive in the increasingly competitive web-content marketplace.

This big reorganisation comes just a few months after Scott Thompson took over the position of CEO, and is a move to try and counteract Yahoo!’s continued slide in marketshare to competitors such as Google, Facebook, and AOL/Huffington Post. Yahoo!!’s share of the web advertising market has slipped from a high of 15.7% in 2009 to just 9.5% last year, and the company needs to take drastic measures to try and prevent further decline and save money whilst doing so.

Thompson looks like a good man for the job after doubling the revenues of eBay’s PayPal unit when it was under his control – but the content industry is fickle in comparison to that of finance, so it will be interesting to see where Thompson takes the company. We have already seen plans for Yahoo! to start producing and premièring TV shows like Cybergeddon, but it will need to do much more to halt its slide against the low-expense and low quality competitors for eyeballs like the Huffington Post. Yahoo will also have to stop looking at companies like Facebok and Twitter as competitors and instead to start embracing their social tools within its content properties and make sure its content is being shared as widely as possible.

Yahoo! should also start looking inward to see why startups do not want to be bought by the company. Flickr has been basically left out in the cold against new rivals like Instagram where they should have immediately competed and dominated the space, and Delicious effectively died whilst under Yahoo!’s control – despite it being a very popular tool pre-acquisition and now growing again after it was set free. The internet is forcing companies to adapt and evolve faster than any technology that has previously existed, and to maintain a powerful position within this sector, Yahoo! will need to work out why new businesses and ideas do not flourish within itself like they do at Google and Facebook.

Cutting down a bloated workforce and making everything more efficient is a good start, but they need to give their engineers more freedom to make new services, and make themselves more attractive to outside start-ups if they are going to reverse their continued decline.

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