Yahoo starts to slide into the abyss

Yahoo is destined to be acquired. I predict Microsoft will buy it, perhaps by the end of this year.

AT&T has now decided that it doesn't get much by merging its ISP services with Yahoo's content. Sounds good on paper to an old and clueless company like AT&T. They must have thought of it like a cable TV service producing its own content, creating a new revenue stream and (if the content is good) inspiring people to use their cable service, the only place where the new content is available.

But anybody can get access to Yahoo's content, so where's the advantage?

The joint press release from the companies goes on about all the future ways they will work together and assures us that they love each other. But it does not deny that the ISP relationship is dying, which means it is.

Associated Press says "AT&T is believed to pay Yahoo $200 to $250 million annually, accounting for more than 25 percent of the $798 million in total fees that the Internet powerhouse collected last year." That's gotta hurt.

Yahoo needs a major reorganization to find its business model, but I'm not sure what it is. Paid content is going to be tough. If Yahoo creates great free content, perhaps it can create relevant advertising that goes with it, and maybe even license the content and the ads to others.

But I think Microsoft will decide that a combination of Yahoo and Microsoft content will be an advantage. It won't. The only thing that keeps them afloat is lack of inertia from customers. Some people have been using Yahoo so long they find it hard to switch, especially things like email, and Microsoft software automatically sends people to MSN by default. Younger people will not settle for Yahoo unless its products improve vastly (such as ceasing to charge for a decent email system) and they will not settle for MSN because they know how to reset the default home page.

I hope Yahoo becomes a great content provider and survives. But I wouldn't bet on it.

Comments

[/d]

Wow. thats a very bold predication !!

"Yahoo is destined to be acquired. I predict Microsoft will buy it, perhaps by the end of this year."

[Richard Brandt]

It is. Now let's see if it comes true. The place where I'm most likely to be wrong is the time frame. But we'll see.