In September, for the first time, the company hosted a Hack Day, where it invited outside developers to mingle with its engineers and write ad hoc mashup web applications using Yahoos online services. The goal behind Hack Dayand a broader developer outreach effortis to create a diverse network, or ecosystem, of partners, Yahoo executives said.
Making it easy for third-party companies to build applications that use Yahoos myriad services, from photo-sharing to search, helps drive traffic to Yahoo sites. Mashups could also drive awareness of Yahoos lineup, such as its instant-messaging service, executives said.
We dont think of ourselves as a portal company anymore. We think of ourselves as a communications application platform, said Bradley Horowitz, Yahoos vice president of product strategy.
The internet giants shift in attention toward developers, particularly those at web start-ups, highlights the strategic importance of web development partners as more applications move online. web heavyweights Amazon.com, eBay, Google and Microsoft have made developer loyalty a high priority. Yahoo, which launched its Developer Network last March, has taken that tack as well.
Many practices used by development tool companies are starting to become part of the culture at Yahoo, Horowitz said. These practices include holding developer conferences and publishing application programming interfaces (APIs) when new Yahoo services are launched, he noted.
Its what you have to do to thrive and survive in todays environment, Horowitz said. Were not doing this for the revenue per se. A lot of what were doing is for the ecosystem effect.
Being in close touch with cutting-edge web developers has also helped Yahoo snare some of the most popular web 2.0 companies. For example, it acquired photo-sharing site Flickr and bookmark-sharing site Delicious, which both give outsiders ways to access data.
But that steady stream of acquisitions has created overlap with other Yahoo properties, a problem highlighted by Flickr co-founder and now Yahoo senior vice president Brad Garlinghouse in a leaked memo called the Peanut Butter Manifesto.
In the memo, Garlinghouse calls on Yahoos top management to kill the redundancies (and) align a set of new BUs (business units) so that they are not competing against each other.
Even as Yahoo reaches out to a techie audience, it faces the challenge of changing the culture internally, as well as adjusting external perceptions.
In September 2005, Microsoft chairman Bill Gates said Yahoo would never compete against tools powerhouse Microsoft in the developer realm. Yahoo doesnt think of themselves as a platform company, Gates said at the companys Professional
Developers Conference (PDC) in Los Angeles. I dont think you will ever have the Yahoo PDC. Chad Dickerson, the senior director of the Yahoo Developer Network, doesnt see it that way at all. Dickerson, who started at the web company last year, has even used that Bill Gates quote in presentations to demonstrate how Yahoo is changing.
We are already a platform company, Dickerson said. There is (cultural change) going on in Yahoo and every company on the internet.
The companys services are already being used by outsiders to build new applications, he pointed out. For example, Menuism uses Yahoos recently introduced authentication service, which lets a person log on to to the restaurant-rating site using a Yahoo name and password.
These types of applications benefit small companies because they dont have to build their own authentication service. It also increases the value of Yahoo IDs, which already used by millions of people, Dickerson said.
Under fire from internal memo
Is Yahoo suffering from a lack of focus, entrenched bureaucracy and redundancy Its a theory thats been aired for some time by investors and internet industry executives to explain the Sunnyvale web portals dimming fortunes against rival Google Inc., among others.
Now Yahoo executive Brad Garlinghouse has acknowledged the problems in a scathing internal memo published by the Wall Street Journal, dubbed the Peanut Butter Manifesto. In it, he says his company has spread itself too thin and must undergo a major reorganisation, including cutting up to 20% of its workforce. Garlinghouse, a senior vice president who oversees Yahoos e-mail, home page and instant messenger service, circulated the memo to colleagues in October after a disappointing year.
Yahoo shares are down 37% since January amid slow growth and a delay in a key project to boost online advertising revenue. At the same time, Yahoo faces stiff competition from Google. In fact, by one important measureonline advertising revenueMountain Views Google has a commanding lead, according to eMarketer, a research firm, based on estimates for 2006.
Yahoo is expected to generate $3.37 billion in online advertising this year, excluding commissions it pays to partner web sites. Google will take in $5.5 billion. Then theres the rise of social networking, where Yahoo has trailed. Internet users have an increasing appetite for sites such as MySpace, which was acquired last year by News Corp. and has since catapulted in popularity.
Yahoo did not address the memo directly, but issued a statement emphasising progress in a variety of areas, including recent acquisitions and partnerships as well as the positive feedback its received from customers regarding the introduction of a search engine advertising system, dubbed Project Panama. The system is supposed to make search ads more relevant, an area that Google excels at.