Yahoo Taps Its Inner Startup

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Thinking Outside the Brand

In January, Yahoo purchased a company named MyBlogLog for an undisclosed amount. The acquisition does basically the same thing except it has extra features such as privacy functions that allow users to turn off tracking. If Brickhouse had existed last year, Yahoo potentially could have developed such capabilities on its own. "It is generally cheaper to incubate these things than to buy them," says Horowitz (see BusinessWeek.com, 10/02/06, "Yahoo's Strategy: Growth by Acquisition").

Yahoo's brand is another challenge. People associate the company and its trademark yodel with one of the Web's prime destinations for mail, news, entertainment, and search. But Yahoo's status as an established, family-oriented, commercial brand can turn away some cutting-edge users. "Anyone with adolescent children will know how difficult they are to bring into a family atmosphere," says Graham Hales, chief communications officer for Interbrand, a global brand consultancy.

That's why Horowitz says that, with Brickhouse, Yahoo is going to launch many more products off-brand than it has done in the past. That he says will let the company float new, edgier ideas without having an adverse impact on the Yahoo brand, and it may attract users who have negative associations with Yahoo's brand. "It gives us another identity where we can be more playful," he says. "Not your father's Internet." Yahoo has let acquired companies, such as Flickr, continue to operate under their own brand names, but now even its own initiatives may not be labeled Yahoo, or at least not prominently.

Outlet for Creative Employees

Yahoo knows the struggles of brand and identity all too well. When Yahoo began asking Flickr users to sign up for a Yahoo ID, some users started posts announcing plans to leave. "I am leaving flickr," wrote one user in a Feb. 3 post. "I have watched with dismay for many many months as the 'face' of flickr has slowly started to change in a direction I am not comfortable with."

Horowitz is realistic about the challenges ahead. He expects that, as with startups, many of the ideas to emerge from Brickhouse won't take off. Yahoo is treating the site as an outlet of sorts for entrepreneurial and creative employees. It wants them to have the ability, as they would if they started their own company, to give things their best shot and then, if they don't really work, walk away.

In this way, Horowitz and others hope Brickhouse serves to help retain employees who otherwise would go off on their own in search of funding. It's a difficult task in today's tech climate where top startups can sell for sums that make a six-figure salary appear paltry by comparison. YouTube co-founders Chad Hurley and Steve Chen received more than $300 million each in Google stock when their company was acquired in October.

Bonus Incentive

Yahoo also faces a challenge in keeping its top programmers and engineers from rivals with their own innovation incubators. Google, Yahoo's chief competitor in search and many other areas, has its Google Labs division, which works on products that, according to the site, "aren't quite ready for prime time." Google has garnered a reputation for innovation, in part because of its one-day-a-week-for-experimentation policy, although critics point out the company hasn't come up with any substantial money-making ventures beyond its search business (see BusinessWeek.com, 7/10/06, "So Much Fanfare, So Few Hits").

Horowitz says that Brickhouse developers whose ideas succeed would receive additional financial compensation for their work. He said the figure would be somewhere between a pat on the back and an acquisition-size bonus. "The idea is they would enjoy some upside," he says.

Whether Brickhouse will succeed remains to be seen. But the scope of Yahoo's ambition is clear. Sometimes to think big, you have to act small.

Holahan is a writer for BusinessWeek.com in New York.