Yahoo CEO Jerry Yang may have managed to stop the bleeding at Yahoo.
Yahoo's third-quarter results beat analyst estimates, and Yahoo executives seemed upbeat about the company's future in a conference call Tuesday afternoon.
Shares of Yahoo rose more than 10 percent in after-hours trade after the company reported that revenue rose 12 percent year over year to $1.77 billion, while net profit was slightly lower than a year ago.
So, now what?
First, they need to make more money off of online advertising. They stumbled years ago and let Google run with the ball. And the gap has only been getting bigger. They need to make sure their new advertising platform is at least as good as or better than Google's, and then sign up more advertisers and Web site publishers.
And they need to get back to innovation. There was a time Yahoo was busting out with terrific new products. What happened to that? Yang, himself a technologist, needs to remember that first and foremost Yahoo is a technology company, not a media company.
Yahoo also needs to decide whether it wants to be a media company that does original programming or not. They've been dabbling in original content for years with mixed results. If they are not going to really go for it and do it right, they should scrap it and not be distracted.
Yang said the company has three core objectives it plans to accomplish over the next few years:
The first one is to "become the starting point for most consumers on the Internet." Yes, Yahoo Mail, Yahoo Finance, Sports and News are popular and good sites. But are they enough?
Yang says that since Terry Semel stepped down this summer as part of the latest re-org, the company has dropped its subscription-based music service in favor of an ad-supported model, folded Yahoo Photos into Flickr, and is integrating Yahoo 360 into more of its services. That's great. Yang says the company will shut down other "one-off" services in coming months and is looking at Kelkoo, its European shopping comparison service. Sounds good.
His second objective is to establish Yahoo as the "must-buy" for advertisers and increase the amount of ads the company sells on its own network as well as on other sites. Bravo. This should be the first objective, since it's the one that will bring in the money. Toward that end, the company announced advertising deals with WebMD, Cars.com, Forbes.com and Ziff-Davis Media on Tuesday.
Meanwhile, the company's new advertising platform, dubbed "Panama," continued to add "financial gains" in the third quarter, says Yahoo President Sue Decker. Yahoo is acquiring online ad company Blue Lithium (as well as e-mail company Zimbra and college and high school sports site Rivals.com) and it has combined its search and display ad sales teams. All good moves that should help it compete against Google and up-and-comer Microsoft.
Yang's third objective is to create a platform that will attract developers by building services on open APIs. That sounds nice and it seems to be working for Facebook.
Granted, Yahoo has a huge presence on the Web and some of its services are the most popular with consumers. The company has 477 million users, up 14 percent from a year ago, making it the largest "user base on the Web," Decker says. Yahoo's number of page views rose about 20 percent.
But in Web search, where Google has parlayed its dominance into revenue of $10 billion a year, Yahoo trails. Hitwise says Yahoo has 22.5 percent search share in the U.S., compared with Google's 63.5 percent.
Decker says the company wants to "change the game" and "provide an integrated experience that goes beyond search to complete tasks." But what does that mean?
Executives also say they plan to de-emphasize original entertainment programming and do more with social media and user-generated content. All right then. Let's see it happen.
These are all good broad plans, but we need to hear more specifics. Exactly which services will be axed? Can Yahoo close the advertising gap with Google? How exactly will Yahoo change the search game?
These objectives sound more like a wish list than a real game plan. Yahoo should pop the corks tonight but have more concrete action items to get back on track soon.