Tuesday, March 20, 2007

Web 1.0 Thinking Vs Web 2.0 Thinking

As per my last post, I recently read an excellent article on Wired's February 2007 article titled How Yahoo! Blew It where it documents how Yahoo!'s Terry Semel missed the greatest opportunity in Net History to date - Not purchasing Google.

In summary - I strongly recommend that you read the article - Yahoo! made several mistakes as the Search War's were waged.

Mistake 1 - Low balling.
In 2002 Yahoo! attempted to buy Google for US$3 Billion dollars, even though Terry Semel's Lieutenants recommended a US$5 Billion offer. Terry Semel thought that this offer was excessive considering that initially Yahoo! had invested in Google.

Mistake 2 - Ego.
Due to the high price; Google had revenues of US$240 million a year while Yahoo!'s was about $837 million, the purchase would have been more of a merger than a purchase; the company would have in effect become Yahoogle. Terry Semel decided against it.

Mistake 3 - Poor execution.
Terry Semel's back-up plan was poorly executed. The plan consisted of buying Inktomi, considered to have an excellent search engine algorithm. As well as Bill Gross' Overture, known at that stage as GoTo.com.

Albeit a brilliant plan, Yahoo! vacillated in integrating the two into Yahoo! as well as investing in beefing up the key work relevance as well as automating the technology to allow advertisers to self administer their campaigns.

Mistake 4 - No Sense of Urgency
Due to the fact that Yahoo! derived revenue from multiple streams, such as banners and co-promotions, it was not as focused on Pay per Click as was Google - for Google it was the sole revenue stream.

Mistake 5 - Web 1.0 Thinking
When the talks with Google commenced, Yahoo! had just hired its new CEO, Terry Semel in April 2001 and Tim Koogle had resigned the month before due to the Tech Wreck of March 2000-October 2000. Therefore the shares where trading at US$7 and the overall Internet company CEO and investors thinking was to be cautious and not to spend money unwisely.

In conclusion, multiple mistakes where made, however the common denominator was that Yahoo! had Web 1.0 thinking and Google had Web 2.0 thinking.

Which begs you to think - is your current CEO Web 1.0 or CEO Web 2.0?

One way to gauge is; was if your firm started in before 2002?

If so, more then likely the executive team has Web 1.0 baggage - if you are part of the executive team, you need to start thinking fresh as every current Web firm will have a Web 2.0 threat delivering a much richer web experience to your customer base.

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