"We have grown here much faster than most other places and it has been a good success"

Three years after he first visited India (and gave his first interview to BT), Yahoo's co-founder and key technologist David Filo, 40, returned early August to assess the progress at Yahoo's India R&D centre in Bangalore. Evidently pleased with the developments here, Filo, who co-created the portal with Jerry Yang in 1994, spoke to BT's
Venkatesha Babu on a variety of subjects, including Yahoo's tussle with Google, the future of the internet, the technologies that excite him, and the importance of India, both as a market and a resource base. Excerpts from an exclusive interview:

Welcome back to India. I believe you have been going around your R&D centre. Are you happy with the progress here in India?

Oh, definitely (smiles). We talked three years ago and at that time we didn't expect the kind of progress made here in terms of people hired. Things have gone better than expected. Three years later I can tell you we have grown here much faster than most other places and it has been a good success.

Twelve years after you started this incredible journey called Yahoo, where do you see the net evolving? What are the things that excite you today?

Yahoo is obviously doing a number of different things across the globe in many different markets...a lot of exciting things are going on. One area the company is clearly focussed on is the community and the social aspects of a lot of these products and services. The first 10 years we tended to build a lot of these products around mass media, as people took ideas from television and print. That is creating something and giving out to the world and everybody seeing the same thing. We only then started personalising stuff. I think we did not completely tap into the community.

Over the last couple of years that has changed. Good example, Flickr. Photo sites have been around for ever. Even Yahoo had its own photo thing. Then Flickr came along and really added the community aspect to it. People could come in, share photos, tag it, talk about it. (Editor's note: Yahoo bought Flickr in March 2005.) We are trying to take these ideas and its power. Instead of a few publishers publishing out into the world, how can we tap into our consumer base that is close to half-a-billion people around the world? The challenge is how do we tap into that? Instead of pushing out things to them, how do we get them to add value to what is being created? Whether it is Flickr or Yahoo Answers, they are great examples of how things will evolve. User-generated communities will be the next big thing. There are other areas like mobile, for instance. The first 12 years was more about the pc. Increasingly, it will be more about the mobile.

The launch of your new search engine platform (codenamed Panama) has been postponed to the first quarter of next year. The markets reacted by wiping off a fifth of Yahoo's market value last month. Is Yahoo settling for second best in the search race behind Google?

Search is very important to us. We continue to invest a lot in today's products and in R&D. I think when we look back from where we were 12 years ago, where we were and where the industry was, obviously there is night and day difference. What we know for sure is that five to 10 years from now, search will be very different from what it is today. We are trying very hard, putting a lot of resources behind it, here in Bangalore, in the US, and elsewhere to figure out the evolution in search, which is going to change the game. There is so much room for improvement and that we see as an opportunity. We can do this for photos, videos. The game is just beginning. Yahoo is well placed to lead this (innovation). We have to keep checking that we are doing things differently, and why we are doing it. Question (ourselves) if there is a game changing thing we can do. We have to go where market and technology goes, fund innovation and if we do that, we will succeed.

"We are not averse to partnering with anyone just because we compete with them elsewhere"

Is the Yahoo-vs-Google battle one of a super directory vs a super search engine?

I don't think so. I wouldn't position Yahoo as only a super directory. Clearly, we are much more diverse than that. Yes, 12 years ago we were a navigational guide, we were a directory, we had search. But today we are well beyond that. Communication tools like e-mail, messenger; media like news content, sports content or finance and photo sharing; and community aspects like Answers and Yahoo groups. These are well beyond the idea of a directory. We see ourselves as a web services company providing essential products and services to people's lives-that is, consumers and small business. That's where we continue to focus.

Recently you enabled Yahoo instant messenger (IM) to talk with Microsoft's IM Windows Live Messenger. Does this presage a larger alliance against your common enemy Google? A recent Merrill Lynch report says that Microsoft must look at buying Yahoo to take on Google. Has there been any thinking along these lines?

We always have discussions with all the companies out there. With eBay, we recently announced a big partnership (Editor's note: In May 2006, the companies agreed to co-operate in the e-commerce, advertising and search space). In the IM space, you are right, we have announced this inter-op deal with Microsoft. We have worked with Microsoft in the past. We will compete with companies in some cases, partner where it makes sense. There might be cases where we compete and cooperate with the same company in different spaces. So, we are not averse to partnering with anyone just because we compete with them elsewhere.

Yahoo recently picked up a minority stake in Gmarket of South Korea (10 per cent for $60 million or Rs 282 crore). You had earlier bought minority stakes in Yahoo Japan and Alibaba.com in China. Is your strategy too diffused?

If you look across the world, we have taken a number of strategies to grow. Obviously, we have been a global company from day one, internet being a global medium. Yahoo Japan is a good example. It was our first place where we set up shop outside the US, and it was a joint venture with Softbank. That has been extremely successful for us. In other places where we went in on our own-for instance, in China-we took it to a level. We worked with Alibaba and we realised that it would be great for us to merge as that would make us that much bigger. Alibaba was stronger in b2b stuff, auction space. We were strong in search, mail, etc. We realised that it was a natural fit. It is not that we have to have the same model everywhere. We are the majority owners in Europe and India. Every market is different.

You have made more than 20 major acquisitions, including Flickr. Is Yahoo trying to buy innovation rather than innovate as some analysts accuse?

No, I don't agree at all. We continue to invest heavily in innovation at Yahoo. We have a lot of research going on, which looks out five, 10 years from now. Last couple of years, Yahoo research labs have grown to around 50 people and that is a fast growing number, mostly PhDs who do far-thinking research. They are looking at different parts of the business and even things that Yahoo is not doing currently. It is not just them. We challenge everybody in the company to question the way things are done-is there a better way of doing things? When I walked around here, I saw innovation all around. Some of it will become very visible and press may say it is very innovative. Others might be back office stuff that you will never see, but helps us become more efficient and productive.

That said, we are not going to corner the global market in ideas. That is why when a Flickr comes along, we at Yahoo see how can we make it more successful. A lot of times we see that in small companies. They have great ideas and passion, but when they take off, they might not have the base infrastructure and technology required to scale. That is where the scale of Yahoo, our technical expertise, the platforms we build, our half-a-billion audience can really come in, take them into fold and make them more successful.

Your local R&D centre employs around 700 people now. What has come out of it over the last three years?

I will let Venkat (Panchapakesan, CEO, Yahoo Software Development, India) answer things in detail... Three years back we were doing operational things, trying to take advantage of the time zone. Now we are doing all of these things, but much more development. Taking over products and even doing research looking out for the future. We are tapping into engineering talent to build products and services.

Venkat Panchapakesan: Over the last three years, we have built capabilities in four areas: research, product engineering and product development and user interface design. Yahoo podcasting product, for instance, was entirely designed, developed and built here. The entire Yahoo Hotjobs space, which is a significant revenue stream, is built and managed here. Even the recent India desktop search ability has been built here. India is a great test market since it is growing so fast...

Filo: (interrupts) We build with a global mindset, and it may be eventually rolled out globally.

"We challenge everybody in the company to question the way things are done: Is there a better way of doing them?"

Will India revenues at some point become substantial enough or is India just a resource base?

Both revenues and resource are extremely important. We are building on a great talent base here, we continue to invest. Obviously revenues here started small, but we see a great opportunity over the next 10 years. We are absolutely committed to the Indian market. We are putting more money into marketing, product development, hiring more people here. Asia is key for Yahoo's growth. Seventy per cent or so of our users are already outside of the US. Revenues aren't in that ratio, but that is quickly changing, and India is a key market.

Yahoo announced a $8.6 million (Rs 40.42 crore) investment in Bharatmatrimony.com just yesterday. What are the other verticals where Yahoo India thinks it is better to buy than build in the Indian market?

In general across the world, we are constantly looking at different areas. We examine, build, buy, partner. So, it runs the whole gamut. We never say no to a model or an opportunity. Based on market requirements, we will pursue one or the other option.

You ever regret having encouraged your fellow Stanford mates, Larry and Sergey (founders of Google, whom Filo helped in the initial days)?

(Smiles) Ah! The internet is a great place. We are always seeing new ideas and companies coming up. In next five years, we will have some very successful companies that have not even been thought about yet. That is the beauty of the net. Some of these companies will compete with us, others we will partner, some we will acquire. We are just happy to be a part of this entire thing. Happy to be leaders and we hope to continue to invest and lead.