The Future of Yahoo?

I'm worried about Yahoo. Not in the way that keeps me awake at night. More like seeing a friend making some bad decisions and wondering how best to confront her about it.

I feel like Yahoo is starting to give up at a time when we need them more than ever. Why, you may ask, do we need the #2 Search giant to survive? Well, as marketers (both client and agency side), we need Yahoo around to keep Google in check. Otherwise Cost per Click rates continue to increase and customer service continues to disintegrate as Search turns into one large 21st-century monopoly. Or should I say monoooooooopoly?

One one hand, they posted a profit in 4Q09, even as sales slid. They also brought in a new CEO in January 2010 to usher in change. So perhaps things are looking up for Yahoo in 2010.

On the other hand, they now act like a slow behemoth with very little in the product pipeline, while competitors like Google are entering new areas such as the Android Operating system. According to Barrons.com, Yahoo is planning some acquisitions this year and a major repositioning. Well, bring it on. Here are a few suggestions for them to follow along the way:

1. Don't forget about internal new product development. It's how you grew in the first place, and there is something to be said for an internal culture of innovation. Yes, acquisitions are a quick way to get new technology, but they are also very expensive. Tap your internal resources for valuable new ideas. Think like a start up and never stop innovating. After layoffs, budget cutbacks and a holiday furlough, many Yahoo employees seem to be fearful for their jobs. Instead they should be refocused on developing new technologies and processes that improve the company.

2. Don't fall too in love with your own technology. Realize that Social Media is changing the Search landscape, and find technology that will improve--and maybe someday replace--your own.

3. Take advantage of being the underdog. As Yahoo Search fell to 17% of the market versus Google's 65%, you did what any number two company would do--form an alliance with number three, in this case Microsoft. However, that isn't going to help you win the hearts and minds of American consumers. Do you know what will? Being the underdog and taking on the big guy. As part of the re-branding campaign, go back to your roots. Bring back the quirky, oddball image that helped you to grow in the first place. And hang in there; 2010 is shaping up to be a very interesting year for search, and it is only January.