For its part, Yahoo's grab for users has most recently involved the acquisition of family-focused photo sharing site Flickr.com. As with Google Talk, it's a way to capture users and figure out how to make money out of them later. "Come for our Flickr, stay for our shopping," says Brad Horowitz, Yahoo's director of media search.
But unlike the 90's, if you build it, they will come, says Horowitz's protégé PhD student Dana Boyd. "The first round of the Internet was about getting e-mail ... and it was a very small population engaged with it," she says. "Now that we have everybody online, they're still using e-mail."
Yahoo's grab for revenue should worry Google more. Its publishing network is a service nearly identical to Google's AdSense DIY online ad kits. AdSense is behind those "Ads by Google" boxes you see on every second Web site you visit. Considering around half of Google's revenue comes from AdSense, it's obvious contextual advertising is a large and growing market; one that Yahoo's keen to get in on.
Beyond immediate revenue grabs, the next phase for Yahoo is to capture more of the increasing amount of hours users spend online, doing everything from uploading pictures and blogging to chatting and reading news.
The last part has media executives the world over very nervous indeed, and tech execs licking their lips. Given the convenience and cost effectiveness of peer-to-peer video distribution -- a headache for TV networks and movie studios -- and the success of online advertising finally being realised -- a headache for newspaper advertising sales staffers -- the Big Players in media are getting jumpy.
"I'm a great believer in new technology, and I think new technology is a very scary space for newspapers," James Packer told a press conference recently. It was a not-so-subtle indication that PBL has little interest in acquiring newspaper publisher Fairfax if cross-media ownership laws are loosened by the Howard Government.
While Yahoo insists it's interested solely in partnering with media outlets, it and others like it may well branch out into content generation in the future. Even the opinion of the company's own executives seems split.
As for the old staple of search engines, you know it's old hat when even Microsoft can do it right. Basic Web searches are no longer a differentiator. Google's approach is to keep tweaking its searching algorithms, while Yahoo is enlisting the help of a Hollywood friend.
The company's new, personalised search technology will allow users to search their friends' indexes of recommended pages and their friends, and their friends, etc. Called MyWeb2, it's like the Six Degrees of Kevin Bacon game, but for the Internet.
"The joke that I [make] is that Jerry and David (Yahoo's founders) started by personally using their expertise to index the Web, now we're going to get a couple hundred million people to help them," Horowitz explained.
The MyWeb2 concept will help to eliminate what Horowitz describes as "Oprah's Book Club syndrome", where the most popular Web-sites stay at the top because they're the most visible in search engine lookups. Manual indexing should help to break the cycle, Horowitz hopes.
If Yahoo gets traction with alternative search technologies like MyWeb2, investors may start to question Google's hefty market capitalisation. And if Yahoo's new publisher network manages to gradually shave away market share from AdSense, Google's rapid growth could slow. Either way, we have a battle on our hands.
Patrick Gray travelled to California as a guest of Yahoo.
4%
2%
