Jerry Yang and David Filo couldn't have realized their branding genius when they dubbed their pip-squeak Web site "Yahoo!" a decade ago. The offbeat moniker helped build the company's image as an approachable place for a fun Internet experience. And it has become a rock-solid brand that has helped Yahoo Inc. (YHOO) keep growing, amid industry turmoil and competition from rivals as disparate as upstart Google (GOOG) and behemoth Microsoft (MSFT). "The brand has never been more important than it is today," says Cammie Dunaway, Yahoo's chief marketing officer.
Now, with more than two-thirds of U.S. adults plugged into the Net, the challenge for Sunnyvale (Calif.)-based Yahoo is to build its brand overseas, becoming a truly global player just as markets such as China and India begin to make good on their staggering growth potential. Already, Yahoo's business from international markets rocketed 241% in 2004, triple the rate in 2003. That helped sales rise 120%, to $3.6 billion, while net profits spiked 253%, to $840 million -- good enough to bump Yahoo to No. 8 on the BusinessWeek 50, from No. 27 last year.
The clout of Yahoo's brand has grown almost as quickly as its stock price. Consulting firm Interbrand Corp. (OMC) last year figured that the value of Yahoo's brand had grown 17% from the prior year, to $4.6 billion, the third-highest climb among the top 100 companies that Interbrand tracks. "Part of Yahoo's success is that they've stuck to their knitting," says Hayes Roth, vice-president for marketing at branding consultants Landor Associates. "The brand itself is very approachable."
It's still unclear how well the brands of U.S. Net giants will fare in developing countries. Sure, Yahoo and its U.S. competitors have become top destinations from Hong Kong to France. But in countries where Internet growth is expected to explode, the U.S. behemoths are still establishing themselves. In China, for one, where Net penetration rates are still well below 10%, Yahoo and Google promote their own sites while also acquiring or investing in regional Internet operations. In 2003, Yahoo acquired Hong Kong search firm 3721 Network Software, while Google invested in Chinese search company Baidu last year.
What's clear, though, is that Yahoo's efforts will revolve around extending its own core brand. To achieve this, Yahoo hopes to emanate the same wacky vibe that pervades its yodel-filled domestic ads. The key, says Dunaway, is to do things nobody has done before, often with an edgy approach. In Taiwan, Yahoo launched an ad campaign where users gleaned clues off the Web and billboards to discover who got a fictional supermodel pregnant. And in France, Yahoo hosted late night evenings at supermarkets where singles could pick up a Yahoo purple basket to demonstrate their willingness to meet someone. "You have to work hard...to engage [customers] in your marketing," Dunaway says.
Yahoo's tack differs from many of its Net competitors. The company attaches its moniker to virtually everything it does, be it Yahoo! Mail, Yahoo! Shopping, or Yahoo! Autos. And it intertwines its various services with links throughout its sites. By contrast, Google tends to hatch stand-alone brands, such as its e-mail service (Gmail), online shopping service (Froogle), or social-networking site (orkut). And the amount of so-called cross-linking it does between services is minimal.
The ?ber-brand approach creates a veritable Internet theme park. The longer users stay on the site, the closer the relationship they develop with Yahoo -- and the more likely they are to subscribe to a service or make a purchase. Take, for instance, online shopping. Yahoo! Shopping has been around several years longer than Google's. Just as important, Yahoo prominently features its shopping engine throughout its site, from search results to links on its home page. Froogle, only recently woven into Google's other pages, has struggled to gain traction. Yahoo! Shopping boasted 10 times more visitors than Froogle in January, says researcher comScore Media Metrix.
In the end, though, the quality of Internet products -- whether search engine or e-mail service -- will make or break the company's efforts to stay on the crest of the Web wave. Every new would-be offering must survive a grueling gauntlet, requiring sign-offs from marketers and technologists -- and often CEO Terry S. Semel himself. Says Dunaway: "What hasn't changed is that great products still equal a great brand." So far Yahoo has largely adhered to that verity.
By Ben Elgin in San Mateo, Calif.