Ronnie05's Blog

Hey Scott! Here’s the challenge. (Yahoo!’s future)

Posted in Internet and Search by Manas Ganguly on January 6, 2012

In 5 years, Yahoo! had 4 CEOs leading it starting from Terry Semel, Jerry Yang, Carol Bartz and Scott Thompson (the latest recruit). The appointment raised questions among analysts, since Mr Thompson, 54, has no experience in online content and advertising, Yahoo’s chief sources of revenue. The timing of Mr Thompson’s hiring also came as a surprise, given that Yahoo’s board has been considering a sale of all or part of the company since firing Ms Bartz four months ago. Yahoo’s stock hasn’t traded above US$20 in more than three years. Microsoft Corp offered to buy Yahoo in its entirety for US$33 per share, or US$47.5 billion, in May 2008. Yahoo trades at $15.58 now which is less than half of what Microsoft wanted to buy it for.Analysts estimate Yahoo’s revenue last year totalled about US$5 billion, down from nearly US$7 billion in 2007. During the same span, Google’s revenue soared from US$17 billion to an estimated US$38 billion. Thanks largely to cost-cutting measures imposed by Ms Bartz, Yahoo has become more profitable. Last year, it earned an estimated US$1.1 billion, up from US$660 million in 2007. Still, investors are disappointed with the downturn in revenue at a time when advertisers are spending more money on the Internet. Yahoo! is a waning off fast and thick and it now is Mr Thompson’s gamble to bring back some respectability to the beleaguered Internet giant.

It will take a miracle to revive Yahoo. For long,Yahoo! has rested on its banner ads and scale based business models to make money and has skipped taking stakes in two generations of Internet based services: Mobility and Social Web. The question that Yahoo! needs to answer itself is “What is their business competency and how do they intend to deliver value to their consumers?”.

Even now Yahoo! bets on its scale to do something around a very mediocore competency area- online advertising,media and content. There are many others in the same business and there is nothing really differentiated that Yahoo! currently seems to be planning to take it to its future.

To my limited understanding, Scott Thompson has to provide answers/action to the following questions fast

1. What is Yahoo!’s future business? Yahoo! will need to really search deep into the future to figure out which businesses would make sense to it and what competencies could be brought to the fore.

2. Yahoo! must exit its long tail services as soon as it can- This will increase focus on what it really could do with any difference and possibly provide capital for a larger scope in online business.

3. Yahoo! must stop being quintessential US and regionalize fast- Yahoo! could look at taking the pole position in emerging economies such as India, Indonesia, China, South Africa with a regional focus. The next big growth curve is past Europe and America and if Yahoo is able to capitalize its internet lead in these nations, there might still be a story waiting to happen.

4. Is there a story in enterprise search or vertical searches on small screen computing devices? There may be a choice out there. Is there a case for search engine for Apps?

5. Can Yahoo! create the ability to search through integrated user linked information across Flickr, Yahoo mail accounts, tweets, FB updates

6. Is there a case for Yahoo! becoming world’s largest content aggregator? It sure has the bits and pieces. Yahoo! will need to think about stitching all the disparate pieces together in quick time.

This may not yet be the magic portion, but Yahoo! needs to look at discontinuity in its product lines, in its DNA and its thinking to get ahead.

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