Martin Remy

Peanut butter and chocolate

In October 2006, Yahoo SVP Brad Garlinghouse wrote an internal memo that became known as the Peanut Butter Manifesto (PBM).

… I’ve heard our strategy described as spreading peanut butter across the myriad
opportunities that continue to evolve in the online world. The result: a thin layer of
investment spread across everything we do and thus we focus on nothing in
particular. I hate peanut butter. We all should. …

Rise and stall

Yahoo had been a winner of the early non-interactive, pre-social, pre-Google web. By the mid-2000s, a decade after its founding, Yahoo had amassed a sprawling set of products and services under its still-portal-shaped umbrella. You can see a snapshot of the Yahoo homepage as it was in the summer of 2006 on the Internet Archive. The company was generating ~$6B in annual revenue, but growth was stalling and Google was already in take-off, passing $10B that year. Yahoo’s revenue growth peaked in 2008 at ~$8B. Today, the site is still a high traffic destination, but never regained its earlier importance or revenue.

Peanut butter everywhere

A common diagnostic takeaway from the PBM is: “We’re doing too much stuff and we need to focus on our core business. More accountability and less silo-ing would also be great. And maybe we should re-org.”

Compare product launches and acquisitions for Google and Yahoo in the mid 2000s. Google is doing a lot of stuff and is arguably as peanut-buttered as Yahoo:

How do Gmail, Maps, Docs, and YouTube contribute to a laser focus on Google’s core search business? We’ll get back to that later, but for now they seem like distractions. A big surface on which to spread peanut butter.

Google search launched in 1998 into a crowded market. A tough starting position, but it was superior to its competitors along all dimensions (quality, speed, user experience) and has dominated search market share since 2002. With the launch of AdWords in 2000, Google became a classic aggregator, intermediating end users, content creators, and advertisers. What’s more, they owned the aggregation engine and monetization stack and could optimize them together. Distribution growth + monetization leads to Google take-off:

Take-off allows Google to hire and continue investing in product development:

The flywheel leads to higher revenue per employee:

Both companies seem to have a peanut butter portfolio, but Google doesn’t get mired in it.

Here’s another excerpt from the PBM:

  1. Focus the vision
    a) We need to boldly and definitively declare what we are and what we are not.
    b) We need to exit (sell?) non core businesses and eliminate duplicative projects
    and businesses.
    My belief is that the smoothly spread peanut butter needs to turn into a
    deliberately sculpted strategy — that is narrowly focused.

Most large software and internet services companies are multi-product companies. Even Salesforce and Oracle, for example, are multi-product companies, even though they’re 10-15% of Google’s size by annual revenue. Almost by definition, a company that focuses only on the “core” business has a growth ceiling.

Better with chocolate

I have the same thing for breakfast every day when I’m at home. Peanut butter on a slice of bread with some Theo chocolate on top. The peanut butter is collateral. Yahoo and Google both had peanut butter, but Google also had chocolate:

  • A product that web users wanted and that was superior to the competition in all dimensions.
  • A monetization engine (AdWords) that it completely controlled. So completely that both the search ranking algorithms and the ad auctions were considered black boxes and drew antitrust scrutiny.

Google also had a growing audience, with more people coming online every day. In theory, every internet company could capture this audience, but Google and Yahoo competed for the same segment and Google was better at it. I’m not going to talk about Facebook in this post, the company that ate Yahoo’s other lunch.

Let’s go back to the question of how Gmail, Maps, Docs, and YouTube contributed or distracted from Google’s “core” business. They were probably staffed with tiny teams compared to search and ads. Google could afford to nurture and optimize them over years. They didn’t distract from the juggernaut and would grow into chocolate chunks of their own in time. Alphabet doesn’t publish revenues by product, but there are estimates. YouTube alone brought in $60B in revenue in 2025. Maps is estimated to generate upwards of $11B per year from ads and API usage. Some back-of-napkin modeling of Workspace (Docs plus Gmail and more) usage and pricing data leads to an estimate of $14-20B per year.

PBM: Good conversation starter, bad oracle

So what is the diagnostic value of the PBM? It’s a great conversation starter: The organizational pain is palpable, and peanut butter is a visceral metaphor for a stuck company that has lost clarity and speed. But attributing slowness and lack of clarity to taking on “myriad” business opportunities feels like a red herring.

Another blind spot of the PBM is that it doesn’t ask any questions about the environment that Yahoo is competing in. Every mention of “competition” in the memo is about internal competition. It also shows no curiosity or analytical inclination. The word “must” occurs 14 times, “how” and “why” occur twice and once respectively. Some people might say that analysis has no place in a manifesto, but I think it’s indispensable and gives it credibility.

No easy recipe for chocolate

It’s one of the simplest foods, but making chocolate takes a lot of work. Shipping great products and relentlessly improving them — individually and together — also takes a lot of work. A manifesto alone is unlikely to produce chocolate.

I’m not advocating for unquestioningly accepting the peanut butter feeling. I’m advocating for figuring out what the chocolate recipe is for your business.

I’m a big fan of focus. I recently heard Clay Beaver say that all meaningful things in life are the result of clear goals and good habits. That rings true for me. But we can have clear goals at multiple scales.

The PBM reads as if it’s calling for a singular, central, monolithic vision. A company should have clear goals for each business and a clear understanding of how those businesses and their products are complementary. Unnecessary centralization seems like a recipe for rigidity, slowness, and the peanut butter feeling. Gmail, Maps, and Docs probably each had clear goals, before clarity emerged for what they could be together.

Questions >> manifestos

While I don’t have an easy recipe for chocolate, I’ll leave you with a question from Roger Martin’s strategy choice cascade:

How will we win where we have chosen to play?

I love this question because it provokes several decisions that lead to clarity and focus:

  • “Where we have chosen to play” is our market. “Have chosen” implies that we made a thoughtful and deliberate choice and committed to it.
  • “How” is our plan for applying the unique product, engineering, design, marketing, and organizational capabilities that we have.
  • I also like “win” because it brings more clarity of purpose than, say, “compete”.

Would Yahoo have won if they’d answered this question? Who knows? Path dependence is real and past choices limit future ones.

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