How Yahoo! is keeping up with the bloggers

Yahoo!’s response to online challengers in Taiwan will give UK internet users a good odea of what to expect from large portals in the future. Dominic Dudley reports.

What is the future for large online portals? As companies such as MySpace make the case for individuals to have their own site with their own content rather than relying on a large media company to provide it, portals such as Yahoo! and MSN are having to reaffirm their place in the online world.

A rumoured $1bn (£525m) takeover by Yahoo! of social networking site Facebook is one way to deal with the threat. But the portals will also have to develop their own services.

For an extreme example of the challenges Yahoo! faces, one of the best places to look is south-east Asia, particularly Taiwan, the home country of founder Jerry Yang. Yahoo! dominates the local internet scene there, 93% of all users choosing it as their home page, according to AC Nielsen NetWatch. Some 97% of the online population visits its websites every month.

But Yahoo! is under intense pressure from rivals, although online competition isn’t from traditional areas. Google is relatively weak there and eBay announced in July it was pulling out of Taiwan in the face of Yahoo!’s 90% share of the online auction market.

It is blogging and social networking sites that are proving alluring to the young online audience there. One local company, Wretch, launched a blogging service in late 2004 and 80% of Taiwanese now regularly visit blogs.

Two years ago, Yahoo! was responsible for more than 50% of all Web page views in Taiwan, but that is down to a modest 40% share. Joann Chen, marketing director for Yahoo! Taiwan, attributes most of that fall to Wretch.

Media Push
In many ways, Taiwan is Yahoo!’s canary in the coalmine. It is Yahoo!’s third biggest market in the world in terms of revenue, after the US and the UK. It also serves a very young and tech-savvy market, and provides an insight into what consumers in London and San Francisco might be doing in the future.

While Microsoft and Google are technology companies at heart, Yahoo! is a media company. Last year, global chief operating officer Dan Rosensweig told the company’s local managers in Taipei that they should strive to become the number one media company on the island, overtaking newspaper groups and broadcasters.

"It is audacious, but probably not impossible," says Chen. "Our vision for Yahoo!, not just in Taiwan but globally, is that we are a media company."

Last year it was the seventh biggest media company in Taiwan and it hopes to be in the top five this year. But this means ramping up its share of display and classified advertising. It also means improving its search offering, the fastest growing service it offers.

Its most successful element in this sector is social search. Its main service is Knowledge , which is known as Yahoo! Answers in the UK and was launched across Europe this month. It lets people ask and answer each other’s questions on a vast range of topics and has proven extremely popular. A second service, Yahoo! Lifestyle, helps people find restaurants and bars and is similar to Yahoo! Local in the UK.

Second Best
Elsewhere in south-east Asia, Yahoo! has run into trouble in this area. In Korea, it lagged well behind a local company, Naver, in launching a social search offering. As Tricia Kang, search and community product director at Yahoo! Taiwan, points out, the company learned you should never be second to market.

Chen says the company has failed to do enough on community services. Although it is the leader for search, e-mail, news and shopping, it has fallen behind in instant messaging, blogging and games, trailing behind MSN, Wretch and others.

In an effort to make up for lost time, Yahoo! has started investing in blogging and entertainment content. "In the past we didn’t invest much, so we’re in catch-up mode," says Chen. This is being mirrored in the UK, where Yahoo! has recently begun to step up its commissioning of television-style content on the Web, funded by advertising. Simon Gunning, director of entertainment for Yahoo! Europe, says the company wants to evolve into the Tesco of online entertainment.

"We’re changing the way we approach media," says Gunning. "TV is not a product that’s really right for Yahoo! now, but we are developing it in conjunction with video. We’re moving into developing these things for advertisers."

The company has also been developing its own content in the US for several years, through daily programmes such as The Nine, sponsored by Pepsi. It has also signed large deals in other territories, including with the Seven network in Australia. Similar developments are also on the cards in the UK, using both newly commissioned content and existing programming from the US. They will sit alongside licensed and user-generated content.

"An amalgamation of content from all possible sources ends up being the clear winner," predicts Gunning, who is leading Yahoo!’s development of content around TV, games, video-on-demand and film across Europe.

"Having the footfall turns us into a Tesco equivalent. We can see Tesco picking up on DVD and CD sales and taking them away from traditional retailers. We’re positioned in a similar way to the retailer. Right now we’ve got the biggest localised movie product in Europe. At some point, we will look at how we convert that audience into other areas, such as video-on-demand."

Developing more enticing content is a long-term challenge. In the meantime, there are tactical measures Yahoo! can adopt to improve its revenues. With the exit of eBay from Taiwan, Yahoo! has recently taken the opportunity to introduce new charges on its online auction service, including a 5% levy on the final transaction fee. Local Taiwanese users have been unimpressed but without a viable competitor they find themselves with few alternatives if they want to buy or sell online.

Yahoo!’s south-east Asian operation has also been experimenting with desktop applications known as widgets, which bring share prices, news, shopping and dating direct to the user’s screen, whether or not the Web browser is open. And there are plans to extend Knowledge to include community and blogging elements.

The company is also keen to find ways to structure all its information in an easier-to-use way. It has experimented with a Wikipedia-style structure in Korea, Wikiknowledge, but this proved a failure. A replacement service, called Openknowledge, was launched two weeks ago.

Parallels to the UK
All these services may well appear in Europe. Taiwan is in a similar position to the UK in terms of internet penetration/ in the UK 60% of households have an internet connection, while in Taiwan the figure is 65%. There is 80% broadband penetration among the Taiwanese online population and most of its capital, Taipei, has wi-fi availability, although its relatively high cost dissuades most people from using it.

While blogs and social networks are increasingly popular in the UK, they have yet to make the same impact on the large portals as they have in Asia. But that could change fast, and Yahoo!’s ways of meeting the challenge from these new rivals in Taiwan are more than likely to find their way to the UK before long.

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