Jakob Nielsen's Alertbox for November 1, 1998:

Why Yahoo is Good (But May Get Worse)

Yahoo does many things right:

Some design critics say that Yahoo is boring, but the simplicity has its own elegance, even if it doesn't win design awards. In fact, design awards are rarely given to those designs that work best in real use.

The real reason Yahoo is so successful is that it embraces the new medium and designs for its strengths rather than fighting its weaknesses. So, since Internet bandwidth is very limited, Yahoo emphasizes a slim design and forgets about emulating television or glossy magazines. Instead, they base their primary service on giving people good links: the fundamental innovation of the Web (and earlier hypertext systems) relative to other media. Web managers often discuss whether to allow links to other websites, with some claiming that outbound links involve a risk of losing users who move to other sites instead of dutifully staying where they are. One counter-argument is that users are going to leave anyway, but that they will return if they are given good service in the form of valuable links. Another counter-argument is that the most popular site on the Web built its service on nothing but outbound links.

Problems Ahead for Yahoo

What You Can Learn From Yahoo

People from many companies are attempting to build their own "mini-Yahoo" as an entry-point to their intranet or other large collection of Web information. This is a good idea, and improved intranet navigation can save millions of dollars in most large companies.

In building a "mini-Yahoo", remember the strengths I listed above. Emphasize speed, structure, clean navigation, and an integration between search and the topic hierarchy. Also make sure to build a classification hierarchy that matches your users' view of the information space rather than your own internal model.

Avoid Yahoo's mistakes: allocate editorial resources to maintain the site and keep it meticulously up-to-date, buy the best search you can find, and make sure to emphasize high-quality or recommended information. Finally, do the research to discover users' goals and design the service to support these goals and not the things you think users ought to want.

You can also use Yahoo's statistics to calculate the ranking of your own site relative to the rest of the Internet.

Advertising Doesn't Work on the Web

For years, I have argued that advertising doesn't work on the Web and that it cannot serve as a business model for anybody except the very largest sites. Since Yahoo is the number-one site, it is among the few that can survive on advertising, and Yahoo does indeed turn a profit. But Yahoo's financial reports show that Web advertising is a very poor revenue generator:

I predict that clickthrough rates will be cut in half every year. Across the Web, the average clickthrough rate was about one percent last year and about half a percent this year. My prediction is that clickthroughs will drop to 0.25 percent in 1999 and approximate 0.1 percent by 2001. Even so, Yahoo's traffic will grow faster than CPM drops, so they will probably remain in the black. It's the smaller sites I worry about: they desperately need micropayments and other revenue streams.


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See Also: List of other Alertbox columns