Yahoo!'s big reorganization will do nothing

The lead news in most financial papers and at most money websites this morning is that Yahoo! (NASDAQ: YHOO) will put itself through a major reorganization. It means nothing.

According to The Wall Street Journal, "Yahoo executives are discussing a plan to centralize numerous product groups, such as its mail, search and home-page divisions, into a global-product organization." Several very senior executives have left the company recently.

Putting the pieces of Yahoo! into new buckets is not going to mean much. The company still faces two significant problems that cannot be changed. The first is widely known. Yahoo!'s share of the U.S. search market is down to about 20% against Google (NASDAQ: GOOG)'s figure of over 60%. That trend will not get better. Google has the superior product.

Perhaps worse is that the online display advertising market is not growing as fast as it was a year or two ago. Part of this has to do with the economy, but the law of large numbers is hitting the industry. It has become big enough that posting 20% plus year-over-year increases is becoming harder.

Yahoo!'s one strength is display marketing. It has built and bought larger systems to serve and target ads in an environment where those strengths may not be terribly helpful.

Yahoo! can reorganize until the cows come home.

Douglas A. McIntyre is an editor at 247wallst.com.