Yahoo! Brand Hits Its Toughest Week

Article excerpt

After last week's profits warning from Yahoo Louise Banbury asks how it can turn around

Yahoo! sent the dotcom gloom to new depths last week, when it became the latest company to issue an earnings warning.

Some industry watchers believe that Yahoo!, perhaps the biggest brand on the web, and a bellwether of the new economy, may have no choice but to merge with another company to survive.

It all began the morning of March 7, when officials at New York's Nasdaq stock exchange, where Yahoo! is listed, briefly suspended Yahoo!'s share trading. They knew something was up, because Yahoo! chief financial officer Susan Decker had scheduled a conference call for the afternoon.

The announcement, when it came, was a double blow. Earnings for the first quarter of 2001 would now come in at $170m to $18m ([pound]117m to [pound]127m) -- far short of the $220m to $240m ([pound]151m to [pound]165m) previously forecast.

And Tim Koogle, one of the founding fathers of the web economy, was to step down as chief executive. His resignation was the latest in a string of high-profile departures, that included Fabiola Arrendondo, managing director of Yahoo! Europe, who dramatically quit last month.

In itself, last week's news wasn't unusual. Dotcom profits warnings happen every day, another round of lay-offs, another start-up kicks the bucket. But for it to happen to Yahoo!, one of the strongest brands to emerge in the dotcom age, with a user base of 180 million, was the significant proof that a dotcom cannot live on reputation alone.

Yahoo! had always been seen as the one sure internet investment. To some, Yahoo! was, and still is, synonymous with the net, and that it is one of the only profitable dotcoms is testament to its brand strength.

Robert Bean, chairman of advertising agency Banc, believes Yahoo!'s name has played a huge part in its success: "It's a brilliantly silly name, and very memorable. In all the confusion and madness surrounding the internet two years ago, it was a comforting place to go to," he said.

The problem for Yahoo! is that other dotcoms were not so careful about branding, and crashed and burned. As most business advertising on Yahoo! have been dotcoms, and advertising accounts for 90% of revenue, this has been disastrous,.

But industry observers say all is not lost -- as long as Yahoo! can work quickly. Rebecca Ulph, analyst with Forrester Research, said: "It's a problem that is hitting almost every internet company, because they have been relying on the traditional ad by impression-based model. …