Yahoo would seem to have a strong hand. It is the world's most popular Web site, with more than 400 million monthly users ... But in recent months the company has suffered some embarrassing setbacks.Of all the problems at Yahoo, I think the lengthy delays in competing against Google AdWords and AdSense are the worst.
From video programming to social networking -- areas of interest to users and advertisers alike -- the company is losing its initiative. And each time a product fails in the market or is late, Yahoo loses some ability to do more deals and hire more talented employees.
Yahoo has been stymied because its text advertising business has been largely frozen until it completes a new software system. The upgrade is more than a year late ... Yahoo's [old] system produces much less money from every page than Google ... Google has $11 billion in cash and a market value of $131 billion, while Yahoo has $4 billion in cash and is worth $34 billion.
Current and former Yahoo employees say the company has been bogged down by bureaucracy and internal squabbling .... Companies that try to do deals with Yahoo also say they find it to be slow, demanding and inconsistent in negotiations.
Yahoo's faltering image and plunging stock price may also be hurting its ability to recruit talented people ... Yahoo's existing employees are grumbling that with the stock price so low, many of their options have become worthless. Some Yahoo veterans have bolted for trendier start-ups.
The business is advertising. It is not tagging, sharing, chatting, or socializing. Ads drive everything. To fail to compete on advertising is to fail.
For more on what Microsoft and Yahoo should do to compete with Google, see my previous post, "Kill Google, Vol. 3".
For more on the failure of Microsoft and Yahoo to compete with Google, see my previous posts, "Yahoo and MSN cannot compete?" and "Yahoo gives up?"
Update: John Battelle says, "The main issue dogging [Yahoo]: its lack of a monetization engine as efficient as Google's ... If Yahoo is going to compete against Google ... it has to get search monetization up to snuff."