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When one looks at the landscape of the social networking market, it's apparent that most of the major internet companies (Google, Yahoo, Microsoft, etc.) have been left behind in one way or another.

Despite the fact that they have a presence in the market, all have played catch-up more than they've led and none has been able to fully cash in on one of the most hyped internet trends ever.

I've questioned the true long-term business potential of the social networking market, but when one looks at the $15bn valuation Facebook has received from investors and the recent $850m purchase of Bebo by AOL, it's clear that major internet companies could have benefited, at least in the short-term, had they made bigger moves in the market early on.

Out of all of them, one might argue that Yahoo has been most hurt by its delay in jumping on the social networking bandwagon.

While Yahoo has been "hip" to social media (it acquired Flickr and Del.icio.us way back in 2005 and has also acquired social media startups such as Bix.com and MyBlogLog) with more than 500 million users and "10 billion latent connections across its properties," it had the potential to leverage its vast audience and userbase to build a massive social network that would put even Rupert Murdoch's MySpace with its more than 100 million registered users to shame.

It never did.

In 2006 and 2007, it was rumored that Yahoo was courting Facebook and offering serious cash - perhaps up to $1bn.

Some commented that such an offer signified that Yahoo had all but squandered its ability to succeed organically in the social networking market and was hoping a big acquisition could make up for it.

When the deal didn't happen, some suggested that Yahoo had all but lost any hope of becoming a leader in the space.

Flash forward to April 2008. With its future looking uncertain, co-founder Jerry Yang back at the helm and Microsoft pressing to acquire it, Yahoo announced last week an ambitious plan that essentially entails "rewiring" itself "from the inside out" to, in the words of Ars Technica's David Chartier, obtain "world social network domination."

YOS, or Yahoo Open Strategy, however, goes well beyond turning Yahoo into a social network in the mold of Facebook or MySpace.

At the Web 2.0 Expo last Thursday, Yahoo's CTO Ari Balogh explained:

"We are rewiring Yahoo from the inside out with a developer platform that will open up the assets of Yahoo in a way never done before, making the consumer experience social throughout and provide hooks to developers.

"We are not creating another social network. We will rewire the entire experience to make it social. We don't think of social as a destination but as a dimension."

The first step in this process is unifying Yahoo user profiles and to defragment the Yahoo user experience.

As YOS chief technical architect Neal Sample admits:

"Right now you manage different bits of personal information in different places and to some extent it is a fragmented user experience."

The unifying of profiles and defragmentation of the user experience will make it easier for Yahoo to enable friends to use all of its services to share information and to interact with each other like they do on social networks.

While this is certainly an ambitious undertaking for a company with as much data and as many services as Yahoo, it's only the beginning of Yahoo's grand vision.

Much like Facebook has turned its service into a platform for developers, Yahoo plans to do the same.

Third-parties will be given access to Yahoo's "social graph" and will have the ability to create applications that Yahoo users can "add" to their experience.

The first steps in this "rewiring" process are expected to be visible to Yahoo users sometime in 2009.

On a purely theoretical level, Yahoo's plans make sense.

I've suggested in the past that social networking functionality will eventually be interwoven into popular online properties and Yahoo, with its massive audience, is the perfect candidate to add a seamless "social dimension" to all of the services it offers.

That said, I would observe the following:

  • The technical challenges are significant. From user experience to privacy to security, there are a lot of issues that will need to be addressed and developing a wonderful-looking plan for dealing with these is not the same as implementing them in a commercially-viable manner.

    I think nearly flawless execution on the technology side will be absolutely crucial for Yahoo. With all of the turmoil at the company, it will be interesting to see if Yahoo still has the capacity to execute something of this magnitude or whether YOS will turn out to be a shoddy implementation of a pie-in-the-sky strategy.

  • Not all users are looking to add a " social dimension " to their online experiences. As I recently argued, there's a good reason why certain social media services haven't gained mainstream traction and I'm not entirely convinced that the experience created by YOS is going to change the way the vast majority of mainstream users interact with Yahoo's services.

    I personally suspect many will never enter Yahoo's new "social dimension." After all, as Miguel Helft at the New York Times asks, "Who Needs Another Social Network?"

    A lot of Yahoo's users probably don't and it will be important for the company to ensure that users aren't automatically transported to the "social dimension" if they don't want to be.

  • YOS may result in the " rewiring " of Yahoo but the value of this to Yahoo as a business isn't exactly clear. For all the hype about social networks as powerful marketing platforms, only one profitable social networking business model has been proven - build a popular social network and sell it to somebody for a lot of money.

    As such, even if Yahoo succeeds with YOS, just how much real value it will create for Yahoo and its shareholders remains to be seen.

Despite the challenges, Yahoo may very well find some success with YOS and it could be just the kind of of thing that rekindles excitement within the company.

But Yahoo also needs be realistic - it's not 2005. Upstarts like MySpace and Facebook established themselves as the dominant hubs for pure "social networking."

Legions of others have followed them, trying to fill every niche possible. Much of the market is fragmented and every one of Yahoo's major competitors, including Google, has its own strategy for staking out a bigger position in it.

The irony is that Yahoo may have more flexibility than its competitors since its situation means that it probably has little to lose with YOS.

Unfortunately, the party is in the 11th hour and Yahoo's biggest problem may be that it therefore has significantly less to gain with YOS than it thinks.

If that turns out to be the case, Yahoo and its shareholders will find its "rewiring" to be yet another less-than-fruitful exercise that distracted the company from solving its real problems.

Drama 2.0

Published 28 April, 2008 by Drama 2.0

237 more posts from this author

Comments (1)

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Ben Edwards Jamorama

I agree with yahoo, it is better to be more social in my opinion.

about 7 years ago

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