Yahoo! Inc.(YHOO): Can They Keep Their Users Happy?

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October 21, 2013 10:47am NASDAQ:PNQI NASDAQ:QTEC

yahoo apple: Somebody needs to tell Yahoo! Inc.(NASDAQ:YHOO) that change isn’t always good. It’s a lesson most tech companies, including Facebook Inc(NASDAQ:FB) and Apple Inc.(NASDAQ:AAPL) – not to mention

many politicians – never quite seem to learn. They’re constantly looking to make their products new and improved, retouching one major feature, eliminating another, and adding a handful more… often to the irritation and downright outrage of their consumer base.

To some degree, those mistakes are understandable considering how fast the technological times are changing.

It used to be that a trend could easily last for decades, if not longer. While tiny traits might be altered and usability would increase, the actual device stayed largely the same. The record player, for instance, can trace its origin to Thomas Edison in 1877 and didn’t change much for the next century.

But things sped up after 1965 with the public debut of the cassette player. That nifty advance took some time to catch on, but it ultimately managed to hang around for a while. Until compact discs (CDs) became the new craze in the 1990s, anyway. And the 2000s have largely been about MP3s. So far.

In other words, companies that deal heavily in technological products can never rest on their laurels for very long. Not anymore. Not when new, powerful advances are being made every single year by established competitors and upstart companies alike.

Understandably, that kind of pressure can lead to some serious levels of paranoia. And that can lead to even worse mistakes like the one Yahoo seems determined to implement with the newest formatting change to its mail service.

Even The New York Times Knows How Bad Yahoo Mail Is

There was a time when Yahoo used to be the end-all and be-all when it came to email services. But as with Apple and its iPhone, Google stepped in and cut into that market share with disturbing ease. And Hotmail, run by Microsoft Corporation(NASDAQ:MSFT), is a significant competitor as well.

Considering how low other Yahoo offerings – such as its search feature – rank, it doubly makes sense that the company is constantly trying to prove itself relevant and cutting-edge. At the same time, there’s a lot to the saying, “If it ain’t broke, don’t fix it.”

And Yahoo Mail wasn’t broken… until recently.

The Internet powerhouse has been pushing its latest email formatting down customers’ online throats, giving them no choice on whether to stay with the old or switch to the new. Since “the new” automatically sorts email threads by conversation instead of letting each individual entry stand alone, it’s essentially turned a previously user-friendly service into an aggravating mess.

This has caused some serious backlash among previously pleased users, and customers aren’t holding their opinions back.

On Wednesday, The New York Times reported: “Tens of thousands of Yahoo users have taken to online Web forums to complain about the look and functionality of the new Yahoo mail, one of several new Yahoo product updates introduced over the last 15 months at the behest of Yahoo’s new chief executive and former Googler, Marissa Mayer.”

Therein may lie the problem, since Google has long-since used this formatting trick. Successfully. But Yahoo! users are having none of it so far.

Yahoo vs. Its Customers: Who Will Blink First?

As noted before, Yahoo is hardly the first tech company to tick off its customers.

When Apple released its iPhone 5, users were quick to lambast it for its conspicuous exclusion of a Google Maps app. And whenever Facebook changes its look – which it did a lot before its IPO – statuses across its vast network usually reflected far more criticism than praise.

Yet Facebook never once tried to pacify its detractors, and it’s still the leading social networking site by far. And Apple usually reacts with the same kind of stoicism, though it did eventually cave on the Maps issue.

Yahoo can’t afford to lose customers. Its fiscal foundation is already showing cracks.

On Tuesday, Yahoo reported a 20% increase in overall monthly users over the last 15 months. Yet somehow its actual profitability tanked. Third quarter GAAP revenue dropped by 5%, income from operations fell by 39% and net earnings per diluted share tumbled 89%.

This may very well indicate that Yahoo is paying way too much attention to renovations and not nearly enough attention to highlighting its already successful aspects. It also could show that it needs to be especially careful about keeping its customers happy these days.

Its email users certainly seem to be sending that message.

by Jeannette Di Louie, Investment U Research

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.

The following Funds hold Yahoo! Inc. and have the exposures noted. You can sort any column of data by clicking on the heading. 


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