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| At Yahoo!, we find new partners faster than at a square dance. There is a simple reason: Forming partnerships is our business. Yahoo creates almost no content. We don't tout stocks. We don't make maps. We aren't experts in e-mail. We don't tell people what cars to buy. Yet all that expertise, and more all the time, is available from Greater Yahoo, the 1,000-company coalition of advertisers, merchants, technology subcontractors, and information distributors that work with us. Yahoo tries to be the best by relying on others who are the best. Building such a coalition requires the ability to form partnerships—widely, digitally, quickly, and honestly—with many companies. Fortunately, it's easy in the digital world. And it has worked well for us. Since 1994, Yahoo has grown from a "search engine" to a complex, functional service for more than 50 million registered users. Yet we still have only 1,000 employees—one per partner. Along the way, Yahoo has settled on some key principles about partnerships: KEEP PLUGGING: Yahoo's strategy is to dance lightly, continually testing the digital ground just ahead. Therefore, we keep our contracts flexible so we can adjust and readjust in moments. Simple partnerships can be "turned on" in literally minutes—if someone wants to link from our site to theirs or wants to start advertising on our site, we can sign a contract and be ready to go in less than an hour. Even a more complicated electronic integration can usually be accomplished in a matter of days. "Turning off" a partnership is just as important. As a rule, no partnership with Yahoo lasts more than one year before it comes up for renewal. There are several reasons: The first is that something is bound to change before then, and we want the option to rewrite conditions or terminate the agreement. Also, short-term contracts keep everyone honest. There's no room for acting inequitably at the outset, then reconciling right before the contract ends. TRUST YOUR GUT: We can't spend a month on grand scenarios and detailed contracts. To compensate, we start small. We regard the contract as a living document. We say, "Hey, you send me some content that I can use on my site, and I'll send you some links" that will let people get from my site to yours. Then we take it one step at a time. We say, "Let's grow this; people like it. Let's kill that; nobody is using it." Some of my best contracts are the ones that have evolved into something very different from what we originally intended. YOURS VS. OURS: Our typical partnership is separate but equal. We manage our thing. You manage yours. Hard experience has taught us that partnership works only when responsibilities are cleanly divided up front. Two years ago, it cost us $21 million in stock to eject from a 50/50 venture with Visa that we managed jointly, without a clear-enough division of duties. Subsequently, we formed a better relationship with Visa to market the Visa Shopping Guide by Yahoo. Yahoo owns the interface, controls the design, and usually chooses the merchants. Visa gets its brand displayed, and its card is the default credit option. Equal partners, separate roles. KEEP THE FAITH: The challenge is to stay focused when the Web is so vast. If you get caught up in all the flexibility that the Internet gives you to do deals, you won't have a stable, long-term product vision. And you'll be lost. Focus has been a real issue for Yahoo because, over the years, our ability to plug and unplug partners has made us a highly reconfigurable enterprise. Every year since I joined in 1996, Yahoo has changed its business definition. In our latest incarnation, we've moved beyond "sticky services," such as e-mail, personal calendars, and on-line financial information, which are good at gluing people to their screens for long periods and keeping them coming back. This year we're moving toward the truly personal. We're making it our business to know our users based on what they search for, what they buy, what communities they join. We also want to continue to make the Web faster and more convenient to use. Basically, we want to prompt users with helpful information and easy links to providers of services and products. Long term, our goal is that someone who sees a picture of a soccer player in a sports article should be able to decide he likes the shoes and then buy them with just a couple of clicks. Personalizing our services and making them more convenient create all sorts of benefits for our members, and thus for us as a business. But personalization and convenience wouldn't have happened if they hadn't been core parts of our corporate vision for a long time. Without a focus, we easily could have been distracted into thinking we were in the news business, or one of the many other types of on-line businesses, and could have formed a series of partnerships that weren't core to who we were. DON'T BUY: At least, unless you must. We only buy a company if its service is clearly within our vision, and if members would be greatly inconvenienced if we relied on a partner for that service and the partner went out of business. Those criteria are part of the reason why we bought calendar and e-mail products. They're core services, and who wants to have to re-enter calendar information or transfer an address book from one e-mail service to another? We also knew that buying the e-mail and calendar products would let us move faster than if we developed our own. ONE LAST PRINCIPLE: Partnering takes a kind of enthusiastic openness to what's happening outside the company. That attitude pervades Yahoo. But most companies have the reverse orientation. Their drive is directed inward at things they feel only they can accomplish. This contrast was brought home to me recently when I spoke at a program along with a high official from Microsoft, who made a case for growing from within. If Microsoft needs a new capability faster than the company can make it, Microsoft buys what it needs and engulfs the acquisition to "make those people Microsoft." Partnering, he said, is its last, worst option. That may work for them. Microsoft is doing just fine. As for me, I see doing business these days as like running a marathon in an earthquake, so I'll take all the outside help I can get.
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