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The first of Jerry Yang's turnaround projects is little more than another version of Digg.com, and fails to demonstrate Yahoo's ability to innovate
Yahoo! (YHOO) is unveiling the first major initiative of Chief Executive Jerry Yang's turnaround bid—and the first since Microsoft's surprise takeover bid—with a news-oriented site, similar to Digg.com, that lets users vote on articles from top Web publications, guiding which ones get prominent billing on Yahoo's massively trafficked front page. The new Yahoo Buzz, launched Feb. 25, "embodies the strategy that Jerry has talked about," says Tapan Bhat, Yahoo's vice-president for Front Doors.
What that strategy means for Yahoo—and whether it justifies the company's rejection of Microsoft's (MSFT) takeover bid—has been an open question since Yang took back the reins eight months ago. As the first product constructed from the ground up with Yang's vision in mind, Yahoo Buzz has the burden of concretely demonstrating how his leadership can change the company's declining fortunes in arenas increasingly dominated by Google.
Adding Buzz to Ad Revenues
In particular, the new service epitomizes Yang's focus on boosting ad revenue by making Yahoo a key destination for more than just content from the company's own sites (BusinessWeek.com, 9/11/07). Buzz may certainly help make Yahoo a more engaging site for both users and advertisers. But it fails to prove Yahoo can generate the kind of game-changing ideas necessary for the company to forgo Microsoft's offer, now valued at roughly $41 billion, or demand a significantly higher bid.
More than 100 major news sites have agreed to place Yahoo "Buzz Up" buttons next to their articles and other content. The partners include Gannett's (GCI) USA Today, News Corp.'s (NWS) Wall Street Journal, and Time Warner's (TWX) Entertainment Weekly. A click on the button is tallied as a user endorsement and sent to Yahoo's Buzz page. Those with the highest scores are considered for placement on Yahoo's front page. But Yahoo is retaining some editorial control: An internal team will have final say over the stories featured on the main home page. Yahoo says this is to guard against articles deemed lewd, violent, or capable of exposing the company to legal liability—like the stories voted to the top of Digg last year explaining how to hack past the copy protection on digital media (BusinessWeek.com, 5/3/07).
The initial launch also includes "widget" applications that can be embedded on any site to display the most popular stories on Buzz, helping Yahoo brand itself as a leading destination for news. Yahoo plans to expand the Buzz program to other publishers not involved in this test phase. Bhat also sees a future where Yahoo will be able to personalize the home page for users based on the articles they have "buzzed" over time.
A Copycat with Scale
But investors and analysts may be underwhelmed by Yahoo Buzz, as far as Yang's vision goes, in that it's not a new idea. The concept is strikingly similar to Digg.com, a social news site with more than 25 million unique visitors a month, according to that company's statistics. Even the "Buzz Up" buttons are reminiscent of the "Digg it" buttons already featured on many of the same leading sites. "It is great to see more and more companies embracing the power of communities," says Digg Chief Executive Jay Adelson, insisting he's not concerned about competition from Yahoo. "We've seen literally hundreds of clones appear, and those include ones from multibillion [dollar] corporations like Time Warner."
There are a few key differences between Yahoo and rivals that could help Buzz stand apart. Chief among these is scale. Yahoo is already one of the leading destinations on the Web. The opportunity for publishers to see their stories featured on Yahoo's front page, where it could be seen by tens of millions in a day, is a strong incentive to install "Buzz Up" buttons on their sites. "The scale and scope of this is unparalleled," says Bhat. "The number of people who come to [Yahoo's home page] is bigger than any page on the Web."
Despite these advantages, Buzz is still Yahoo's version of a social Web site that already exists. What Yahoo may need most right now, as it tries to prove it deserves its independence, isn't Buzz. It's fresh ideas.