Three Minutes with a Chief Yahoo

Yahoo intends to focus on emerging markets such as India, China, Vietnam, Indonesia, and Brazil to attract more users, said company cofounder David Filo during a visit this week to India. In a wide-ranging interview last week with IDG News Service, Filo said Yahoo will continue to expand in various countries, even those that do not have democratic governments, as the company believes that the Internet and some of Yahoo's products could be agents of change. An edited transcript of the interview follows.

IDGNS: How significant are emerging markets for Yahoo in terms of revenue?

Filo: Today our reach is 500 million users around the globe, and as we think about where the next 500 million users are going to come from, that is all going to come from the new markets. We are not going to get them from the U.S., U.K., or Japan. I think that the revenue is obviously going to lag behind the usage, but in our view eventually the revenue will follow. It may take many years. I don't know how many years it is going to be, whether it will be 5, 10, 15, or 20 years. But we know that eventually it is going to be very significant. Places like India are starting to show interesting revenue growth. Advertising is starting to come online in a fairly big way. We don't know when, but we know [India] is going to be a billion-dollar market and beyond, and we want to be well-positioned when it happens.

IDGNS: As you move to emerging markets, you also encounter different government rules. In China, for example, Yahoo is accused of supplying information on dissidents to the government. In hindsight do you think this could have been handled differently?

Filo: A lot about what our products and services have been, a lot about what Yahoo has been as a company -- our employees, our mission, the ideals that we have as a company -- have been around openness, inclusiveness, and comprehensiveness to show all points of view. When we go into other places where unfortunately not all governments have that same point of view, we don't feel like we are going to change governments overnight. We are not going to be able to do that as one company.

As we look around the globe there are plenty of places where those governments don't necessarily have the same ideals that we do, and that is not just China. If someone asks us not to do business in countries that don't necessarily meet those ideals, I think we would be pointing to a lot of countries today. In our mind, that is not useful to anybody long term. It is not useful for us. We don't believe it is useful for the consumer. Actually, we believe that the Internet, in terms of these types of issues, is the one thing that will change the governments to eventually open up, and come to the realization that they need to support freedom of expression and things like that.

The more ubiquitous the Internet is, the more power the individual has, the more information they have in their hands, and the more they can express themselves. These are powerful things that are going to change these governments, and for that reason we want to be in these markets. We don't want to be out of these markets, because we think our products and services, things like Yahoo Answers, are going to be positive to social change.

IDGNS: Does it worry you that Google's revenue in the last quarter was about double that of Yahoo's revenue?

Filo: We continue to be leaders in the graphical ads part of our business, and the future there is very bright. On the search advertising side, we obviously have a gap today with Google. That is something that we have been investing heavily in, and we are going to start seeing a lot of positive changes coming out of that with our Panama effort and redesigning the entire advertising backend that we have. So that is, of course, something we need to play catch-up there, and we have a lot of people working on it, and we think there is a lot of future potential there for us.

In terms of the audience, everything there continues to go very well for us. If you look at services like Yahoo Mail or Answers, or Messenger, those are all things that are doing very well, audiences are growing very quickly, and we continue to be leaders in many of those areas. We realize that on the monetization front, there are some places, namely on the search advertising side, where there is work for us to do.

IDGNS: Did Yahoo perhaps miscalculate on search as a killer application?

Filo: If you look back ten years ago we were in search, and the reality is that at that point we had lots of competitors in search. At that time we had folks like Excite, Lycos, and Infoseek that had their own search technologies. They all ended up going away, while the one company that survived through all that was Yahoo, and we didn't own our search technology. If you look at who survived in the business, from hindsight it was still the right choice.

Of course what happened was that those companies all were doing search but none of us really hit upon the model that Overture ended up inventing and really taking to market. Of course, Google ended up using that same model and being successful with it, but it really wasn't until Overture came along, and said, "Hey, here is a way that you can really monetize search." It wasn't just us, but everybody that was in search at that point, didn't see that.

Of course, if Overture had come along five years earlier, it would have been good for all of us, because we would have seen it earlier, and we would have been more focused on it earlier. So including hindsight, should we have been focused on search earlier? Of course! You can say that about any successful company. But given the environment, I think we still made reasonable decisions at the time.

IDGNS: Looking ahead, do you think hosted productivity applications, of the kind Google is offering, help in creating user stickiness? Would Yahoo also look at offering that ?

Filo: We have surely been looking at those types of things for a long time. Today we don't have any offerings in that space, and there are no immediate plans to have anything like that. Of course as people adopt them, they are very sticky, but the question for us is of focus, how many things can we really do well. I am not saying no to it. We will continue to look at it and evaluate whether it really makes sense for us. Today we have decided that this isn't our core competency, and there are plenty of other things that we should be focused on, and again we want to be focused on a small number of things that can we do really well.

IDGNS: Yahoo also has a number of overlapping concepts and products like Flickr and Yahoo Photos. Are you likely to rationalize these product lines ?

Filo: Of course that happened because we had Yahoo Photos, and then we acquired Flickr that appealed to a totally different audience. But over time, you can start to see those things merge. So for things like that we continue to look at and say "Is this the right time to merge these things or do they still serve very different communities?" Once we decide that something is kind of serving the same market, you will see us combining those things. For example, we had Del.icio.us, My Web, and BookMarks, with some level of overlap between them. So we are taking all three of those and combining them into one service. Of course, it is underway and it will take a little while for that to be completely merged. There is nothing wrong with having duplication as you try out something, but long-term you want to make sure you are putting your resources behind the thing that really matters.

IDGNS: You've mentioned that the market is not ready yet for mobile TV, because networks do not offer the fast bandwidth required and handsets are not powerful enough. What are the immediate opportunities for Yahoo in the mobile space?

Filo: The immediate opportunities for me are the stuff that we are concentrating on in Yahoo Go, which is obviously things like search. We have launched recently oneSearch. In a mobile environment, we don't want to give people 20 million Web results, and have them sift through that. The idea is how do you get stuff that people really care about, and put it right there in front.

So search is important as are e-mail and messaging. Location-based services are important to the maps, and then there are other things like informational services, like news, sports, that are important. Those are all the things today that we know there is immediate need, immediate demand for.

We have been in the mobile space for the last three years or so, and we have kind of seen what people are doing. We have covered all different things over the years, but today we are holding on to what people are really wanting to use, and really find valuable. In the future, that changes when handsets become more powerful, and networks faster, and we will make sure we are ready for that. But in the meantime, most of our focus is going into these things that really make a difference in today's market.

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