Google’s most important rival is Yahoo!, the incumbent in the search and advertising space when Google first launched. Yahoo! has been unable to duplicate Google’s success due to two factors: an initial lack of understanding of the value of search, and later, a cultural ability to match Google’s efforts in search. Yahoo! initially started advertising with the objective of getting more attention for their ads, without focusing as much on relevancy. Larger flashier ads would get more attention. Allowing customers to pay for search result rankings would put their results in a location that users would see more often. Google on the other hand strived to make their ad results more relevant. This served to make Google’s search better as well as their hit rate on advertisements.
When Yahoo! did realize that they had missed the boat, they did not have the culture or organizational design to match Google’s focus. While Google embraced a technocratic culture, Yahoo! adopted one centered on media, which prevented them from being as innovative. As the problem grew, bad morale started to reinforce their cultural problems, leading finally to the “Peanut Butter Manifesto” from an internal Yahoo! employee asking for massive organizational change. Yahoo! has since been unable to make the drastic changes organization-wide necessary to right the ship. They have always have pockets of excellence but they were never able to leverage that as an organization. While it is possible that Yahoo! may have been successful had it adopted a strategy congruent to its culture and media assets, it nonetheless continued to measure itself versus Google, and has repeatedly been unable to compete.
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