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How Yahoo can turn itself around

Don Reisinger thinks social networking is the key to Yahoo's future. Is it?

Everyone has been down on Yahoo lately. And while most have good reason to feel that way, there is still some hope for the company. Let's face it -- this is a firm that still enjoys huge profits and has a user base that exceeds 500 million people. With that kind of leverage, there's no reason to suggest it can't turn the tide and create a better business model.

And although I'm not the most keen on social networks and think it's a very fickle business to be in, Yahoo can significantly change everything by leveraging its users and creating a social networking element that will dwarf MySpace and Facebook.

A few weeks ago, Yahoo fired its opening salvo in its desire for social networking. According to the company, it plans on streamlining its social networking element and creating an environment where users can interact with each other and its services across its entire set of offerings.

"We are going to rewire the entire experience at Yahoo to make it social in every dimension," Ari Balogh, Yahoo's chief technology officer said.

And if you ask me, Yahoo couldn't have made a better decision.

According to Yahoo, it plans on creating an environment across all its services that will allow its users to pick and create widgets that can be added to any of its offerings and expand their usefulness. Most importantly, it's going to make its user experience much better and allow its users to work together and interact in ways that have yet to be announced.

All in all, social networking is the only way Yahoo can readily capitalize on its huge user base. Let's face it -- out of those 500 million registered users, I'd venture to say that a fraction are still using Yahoo services on a daily basis and the chances of that many people actually remembering they had Yahoo accounts is probably quite slim. But if Yahoo can create an environment that would coax more people to its side, why wouldn't it help the business?

As it stands, Yahoo is getting beaten quite handily on the search front in the US. To make matters worse, its stock price is floundering in the mid-$20s and there is currently little chance that it can gain any ground on Google in advertising. Realizing all that, why wouldn't it try to capitalize on one of the most important elements of the entire industry and do what it can to turn an even greater profit?

Let's be honest -- Yahoo's biggest strength is not its services per se, but rather its huge user base and its ability to bring boatloads of people on to its varied sites each day. And it doesn't capitalize on those people, it has nothing to show for it.

The future may be brighter for Yahoo than some are willing to admit, but if the company doesn't realize what's good for it and it doesn't follow through with social networking, it could have a major problem on its hands. But if it does, look for Yahoo to make a serious comeback riding the coattails of MySpace and Facebook.

Trust me -- it can happen.