Yahoo's Big Win

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CrunchGear this Week

We could tell that there was some real excitement over at Yahoo HQ yesterday – four separate Yahoo PR folks emailed to make sure we knew that Google had announced the closing of their Answers product.

While the announcement was the final nail in the Google Answers coffin, in reality, the “Answers” war has been over for months now.

Google Answers launched in 2002, at a time when the desire for cheap user generated content wasn’t valued much because the advertising market was in a slump – monetizing page views was much harder than it is today. They adopted a for-pay model, where experts received a fee for answering questions, and Google took a 25% cut. By Google’s own admission, just 800 people participated in Google Answers over the last 4+ years (note: see the first few comments here regarding the 800 users number – it’s unclear exactly what Google is referring to).

In contrast, Yahoo Answers launched less than a year ago and with a much different model. Asking a question is free, and user responses are rated by the community and ranked. Users clearly like the model. By August 2006, people had written over 30 million answers to questions, and it had become one of Yahoo’s bigger properties. Yesterday, Yahoo said that Yahoo Answers had over 60 million unique worldwide monthly visitors, who have written 160 million answers to questions.

This wasn’t a war, it was a massacre, and a case study in why all this “Web 2.0 stuff” actually has legs when applied properly. Google went for a direct revenue stream, a business model that made sense in 2002. Yahoo, launching much later, launched a free product and used the ideals of community participation to remove friction from the process and get out of the way of users. This incentivized use and has created a massive number of page views that Yahoo is now monetizing. The network effect kicked in big time.

This was a much needed win and morale boost for Yahoo, which is in the midst of executive turmoil and is struggling to remain an independent entity. Their excitement, which I’ve witnessed only indirectly over the last 24 hours, is palpable. The challenge now is whether Yahoo CEO Terry Semel, who seems to have one foot out the door, or some other Yahoo executive, can leverage this win to help turn Yahoo’s business around more generally.

And it is also a great development for Google, which has now signaled a willingness to kill off failed product experiments and deploy resources in a more efficient manner. It seems that the mantra of “features, not products” discussed by CEO Eric Schmidt and Sergey Brin in their most recent public earnings call is being put into practice. This willingness to admit that a project has failed, and kill it off, will allow Google to experiment on a grander scale in the future.

Late yesterday, Yahoo!’s Tomi Poutanen posted an “open invitation” for Google Answers researchers to join Yahoo! Answers.

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