Post-Shakeup, Yahoo Needs To Focus On ProductsPost-Shakeup, Yahoo Needs To Focus On Products

Now that Yahoo has announced a management shakeup and reorganization, the Web portal needs to improve lackluster services to regain customer loyalty and draw advertisers, analysts say.

The Internet company late Tuesday launched its first overhaul in five years with the announcement that chief operating officer Dan Rosensweig and media group head Lloyd Braun are leaving the company. Chief financial officer Susan Decker is leaving her post to take on more operational duties, including the company's ad sales division.

In addition, CEO Terry Semel said he would divide the company into three business groups to make it more agile against rivals such as Google, MySpace.com, and YouTube that have moved faster into emerging and profitable markets.

In general, industry analysts on Wednesday supported the dramatic changes, which they say are necessary to help jumpstart the company's lagging performance in such hot markets as online advertising, social networking, and online video.

"They needed to demonstrate that they took the problems seriously, and they've done that by making the necessary broad changes," says Rob Enderle, analyst for the Enderle Group "They're taking the problems seriously, and that seriousness makes it a positive move."

Other analysts, however, say the company has to begin consolidating and improving services as soon as possible, which could be hampered by the absence of a leader in the new business group that would focus on customer-centric products. Yahoo has started an immediate search for an executive to head its "audience group."

"They need to regain the loyalty of users who have left them over the years for better products" from competitors, Charlene Li, analyst for Forrester Research, says. "You can't sell ads if you have no audience."

Among the services Yahoo needs to improve is its Web mail, which Li says doesn't work as well as Google Mail. In addition, many of Yahoo's media services are flat, such as its recently launched food portal. "They don't have the dynamism of the old Yahoo."

Forrester's Li and Dustin Rector, an analyst for Tier1 Research, both listed Yahoo Photos and Flickr as problems, since they could think of no logical reason to have two photo-sharing sites owned by the same company compete against each other. "I've always asked myself why these aren't bundled into the same offering," Rector says. Adds Li, "It's kind of crazy that way."

Other product offerings that need fixing are Yahoo's Del.icio.us social-bookmarking service and its Upcoming.org social events calendar. "They're just out there floating around and haven't been integrated into the Yahoo network, which to me is an issue," Rector says.

Analysts also agree that in expanding Decker's role in the company's operations, Semel, 63, appears to be preparing her as his replacement. But the CEO isn't expected to leave until Decker is ready to take over and the company is on a stronger footing. "You certainly don't want to leave when the company is in trouble," Enderle says.