Yahoo's recent revenue momentum is closely tied to their asymmetric business model relative to their competitors. It's not that Google and Microsoft are not extremely powerful in their core competancies. That's obvious. It's that Yahoo has been working on its asymmetric business model for about a decade now and the evolution of it's model over a long period has provided it with most of it's asymmetric advantage. Yahoo's business model contains the following key elements of asymmetric advantage:
It's Hybrid
Yahoo is growing paid services, advertising services, commerce services and affiliate services and this mix makes the company very rugged and much more resistant to market interruptions in what I call the 'sandstorm economy', i.e. the post-bubble, post-9.11 market environment. It's also seeing synergies emerging (remember that famous Bob Pittman term at the AOL/Time Warner merger press conference) from this hybrid mix of services and models.
It's M&A Advantaged
Yahoo's strategy to pre-empt Google by acquiring paid listings leader Overture and search technology provider Inktomi is paying off. Yahoo has achieved parity in search capability and is rapidly growing it's paid listings business. And it weakened Google in the process by dropping them as it's search provider. No doubt Google will use it's upcoming IPO war chest to counter-attack.
It's Highly Adaptive
Carly Fiorina talks about the Adaptive Enterprise. Yahoo is an adaptive enterprise. It's gone through numerous market changes (the downturn in banner advertising, the loss of giant sponsorship fees from the dead bubble dotcoms) and has emerged stronger than before.
I suspect this recent quarterly report from Yahoo is being closely studied at Google, MSN and AOL and that the competition in the search/portal space is going to get more brutal than ever. One thing is certain. Yahoo's competitors will do well to go to school on it's asymmetric business model and begin looking for other vulnerabilities to take them down a few notches.
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