Should Yahoo Join Google, Amazon.com, Salesforce.com in the Cloud?

With Yahoo CEO Jerry Yang stepping down, announced Nov. 17, industry experts disagree on the course of action the new CEO will have to take to put Yahoo back on the path of a productive, innovative Internet company.

Some analysts believe Yahoo should take pages from the playbooks of Google, Amazon.com and Salesforce.com to raise its Internet portal from the murky depths to which it has sunk. Others feel Yahoo should remain rooted in its consumer and media Web ways.

One thing seems certain: After 18 months of trying to restore Yahoo to glory, Yang has left the new CEO an almost untenable position. Yahoo's stock price is mired around $12, down from over $30 a year ago. Yahoo has laid off over a thousand workers and lost hundreds more executives and engineers to a broad lack of confidence in Yang's leadership.  

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One promising action Yang did oversee was the rewiring—some would call the modernization—of Yahoo to be a friendlier, more open portal that lets programmers have a hand in improving search results and communications for Yahoo's millions of users.

Yet this Yahoo Open Strategy, at least in the near term, was clearly not enough of a statement to warrant Yang's remaining in his spot at the top.

Burton Group analyst Drue Reeves told eWEEK that Internet search and socializing the inbox are no longer enough at a time when Google has won the search war and communications applications such as e-mail and instant messaging are moving into social networks like Facebook, or becoming the hubs of larger unified communications suites, such as Gmail in Google Apps.

This will mean Yahoo's Web mail and IM user base could erode and get sucked into Facebook, Google or some other Web services network.

Reeves said Yahoo's failed strategy shows not only an inability to compete in the search advertising business, but a lack of vision when it comes to potential new revenue streams, such as cloud computing services.

In that area, Reeves said he believes Yahoo should look at the Google App Engine PAAS (platform as a service) offering, Amazon.com's Amazon Web Services cloud infrastructure wares, or Salesforce.com's SAAS (software as a service) applications as models to offer some sort of cloud services that will add value for businesses and consumers. Reeves said:

It's certainly something they could and probably should do, or they won't compete against Google, Amazon or Salesforce.com. They need to offer more than search, e-mail or social networking, and offer something like Salesforce.com's CRM, or the ability for people to create PAAS like Force.com or Google App Engine, and really tap into that community because their customer base will dwindle over time.

Of course, one of the problems is, quite simply, money or the lack thereof. Yahoo's free cash flow for the third quarter of 2008 was $215 million, a 31 percent decrease compared with $310 million for the same period of 2007. With that money, Yahoo could fund half a data center needed to serve up SAAS or PAAS.