Yahoo's Open Invitation

Like counterparts at Facebook, CEO Jerry Yang plans to give developers more leeway in building tools designed to keep users on its pages longer

by Catherine Holahan

Last year it was the so-called Peanut Butter Manifesto, a sharply worded internal memo from a Yahoo! (YHOO) senior vice-president who criticized the company for its lack of focus and tendency to spread its resources too thin. The document became a testament to much of what had gone wrong at the Web portal.

This year, openness is the buzzword ringing through Yahoo's Sunnyvale (Calif.) campus, and executives hope it translates into a strategy that helps set fortunes right. In the months since Yahoo co-founder Jerry Yang replaced Terry Semel as chief executive officer, company leaders say they're newly focused on opening Yahoo's real estate to outside developers, who in turn can create tools that make Yahoo's pages more attractive to users.

More Risks

Already the company has released the source codes for Yahoo's e-mail in hopes of letting third parties create small programs, known as widgets, that mesh with users' address books and other mail services. The company is also working with partners to create applications that let users embed non-Yahoo sites and services onto their personalized Yahoo homepage. Yahoo says such steps are only the beginning.

Under Yang, Yahoo is increasingly open to new ways of incorporating third-party content and social tools that keep users hanging out on the site, says Brad Garlinghouse, author of the Peanut Butter Manifesto and senior vice-president of communications, communities, and Front Doors.

Garlinghouse sees a future where Yahoo Mail could include a widget from Web invitation site Evite, a subsidiary of Yahoo competitor IAC/InterActive (IACI), that could let users share events with their Yahoo contact list. Garlinghouse also sees potential for Yahoo users to include links to profiles on social networks such as News Corp.'s (NWS) MySpace within new Yahoo profiles. "We are going to experiment, we are going to take more risks," Garlinghouse says.

Welcome Mat

Yahoo's focus on openness is partly a proactive embracing of the consumer Web ethos, where users play a key role in creating content. And in part it's a defensive measure to keep from losing user attention to innovative up-and-comers. The early years of the Web were dominated by large portals like Yahoo and Microsoft's (MSFT) MSN that lured users by creating microcosms of the Internet within their own walls. New Web darlings such as Facebook and Bebo have risen to prominence by acknowledging they cannot build the best of everything. Instead these new sites let users bring fragments of their favorite destinations onto personalized pages within their sites.

It's not that Yahoo completely walled off its site. Yahoo began in 1995 as a directory of links to other sites. And even as Yahoo developed more of its own editorial content over the years, it has partnered with third-party creators for much of the information available on its pages.

But Yahoo brass say they are now taking openness to the next level. For example, the test version of the new My Yahoo lets users link to Google's (GOOG) e-mail service, Gmail. It also includes widgets—known in Yahoo-speak as "modules"—from partners such as Netflix (NFLX) and The New York Times (NYT) that let users choose to see movies and read stories from their customized homepages.