Google vs. Yahoo: Clash of cultures

news analysis They're after the same advertisers, but the Internet giants are taking different paths to get them.

A correction was made to this story. Read below for details.
news analysis On the walls of Yahoo's modest Silicon Valley offices there are posters with sketches of oddball inventions that have landed patents, such as a portable bird cage. The point: If a bird cage can get a patent, Yahoo's employees can come up with something big if they put their minds to it.

The posters are promoting a program called the "Idea Factory" that is supposed to goose inventive thinking at the 10-year-old Internet-giant-turned-media-powerhouse. Through Idea Factory, staffers are urged to submit notions for improving everything from the company's products to its campus.

Five miles down the road at offices of archrival Google, inventive thinking is assumed. At Google, engineers are expected to spend one day a week on a project of personal interest. It's a mandate that's spawned new services such as Google News, which now attracts 7.1 million visitors per month, according to Nielsen NetRatings, and the social networking site Orkut, which has yet to be integrated into the search site.


What's new:
Yahoo and Google are taking different paths in the quest to be king of the hill in the search sector.

Bottom line:
The tug-of-war between the two companies is really a test of what kind of corporate culture an Internet company needs.

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As the two giants tussle for domination of online advertising dollars, it's increasingly clear that this tug-of-war is really a test of what kind of corporate culture an Internet company needs: Is it a by-the-numbers and increasingly Hollywood-savvy environment like Yahoo's? Or can an intellectual playground like Google continue to grow and thrive even as it approaches $4 billion in annual revenue?

The answers to those questions could have a lasting impact on how Internet companies are formed in years to come. If Yahoo comes out on top, investors could insist on a chief executive like Yahoo's Terry Semel, a longtime Warner Bros. executive known for his media savvy and no-nonsense directives. If Google continues its rocket ride, they could look to an Eric Schmidt, a passionate technologist by training and education who is happy to let his engineers steal the limelight.

"Google is...all about individuals fulfilling or exceeding their potential, and employees are given significant license to foster this," said Geoffrey Moore, high-tech guru and author of the popular management tome "Crossing the Chasm." Yahoo used to be like that, Moore says. But under Semel, who took over Yahoo's corner office four years ago, it has morphed into a more mature company with tough management discipline, but perhaps lacking the creative giddiness it had in its early years.

The two companies share a common DNA but are taking divergent paths. Yahoo's co-founders David Filo and Jerry Yang were doctoral candidates in electrical engineering at Stanford University in 1994 when they started work on their first search engine. Two years later, Google's founders Larry Page and Sergey Brin also collaborated as Stanford doctoral candidates on a search engine called BackRub, a predecessor to Google. Page's dorm room was the company's first data center, and the two entrepreneurs even called on their friend Filo for advice before starting Google in 1998.

"The biggest difference right now is Larry and Sergey still run Google, and Terry Semel has a much bigger say at Yahoo," while its co-founders aren't typically involved in day-to-day operations, said Danny Sullivan, editor of Search Engine "Google is still infused with the whole Larry and Sergey spirit, if you will."

It's not just the cultures that clash. The two companies' businesses also are on a collision course, competing for the same Web visitors and advertising dollars. In the last three years, Yahoo has reshaped one of its core businesses around Web search and related advertising, making itself second only to Google in search ad dollars, with technology that many believe is keeping pace with that of its younger rival.

Google--in roughly the same time span--has broadened its business to do something its executives said they didn't want to do: Become a


Correction: This story reported a misleading figure for Yahoo's revenue for the first three months of 2005. For that period, the company's revenue was $1.17 billion.
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