Yahoo Launches Consulting BusinessYahoo Launches Consulting Business

Continuing its quest to find new ways to generate profits, Yahoo Inc. is launching a consulting unit designed to push its communications products and services to the largest companies.

The unit will be part of Yahoo's Enterprise Solutions division and will be led by newly hired Joseph Cha, who ran strategy practices at PricewaterhouseCoopers and Andersen Consulting. By providing consulting services on its broadcast, portal, and small-business services, Yahoo expects to build longer-term client relationships with CIOs and other senior-level execs involved in developing corporate portal strategies. "Having a formal practice where we consult with clients on their methodology for a fee will lead to larger projects after the consulting is done," says James Fanella, Yahoo's VP of enterprise solutions.

Sands Brothers analyst David Zale says starting a consulting business is a step toward diversifying Yahoo's revenue stream, but it's just a baby step. "At this rate, it will take forever until they are materially less dependent on advertising," he says. Building a consulting business might work, but Zale says Yahoo would be better off buying a consulting business and revenue stream. "If they bought a consulting business, they would buy customers and they would have synergy like AOL and Time Warner," he says. "There's so much trial and error involved in building a business, and who's to say they will have customers?"

Yahoo's consulting services will be priced between $50,000 and $150,000.