Has Yahoo Finally Found its White Knight? Surprise! Its Yahoo’s CEO

Hola Todos!

Yahoo has been an interesting company to follow as of late.  Late last year, I wrote that I was sick of the “who was going to buy Yahoo” stories in the popular business press and instead advocated that Yahoo save itself (for full post, click here for “Yahoo Should buy Twitter and than merge with AOL”).

That said, current CEO Scott Thompson has only been on the job for about three months now, yet, we believe he’s finally charting Yahoo on a path towards some specific strategy; something former CEOs Carol Bartz or co-founder Jerry Yang never did.  Although some elements of the new direction have been trickling out in the press, we should see the entire plan sometime next week when Yahoo reports its Q1 earnings.

Here what we know (click here): Thompson is cutting about 2,000 employees or about 14% of Yahoo’s workforce.  Beyond the balance sheet boost this will eventually create, the main purpose of this overhaul is to streamline the massive sprawl of Yahoo’s portal.  Most important, Thompson has finally directly answer the question that I, as well as, so many other strategists have asked over the last 5 to 8 years: What is Yahoo?  In Thompson’s view, it’s a media company and he wrote in a memo to Yahoo employees: “Our online media presence has long been our company’s clearest competitive advantage.”

What I also found interesting was Yahoo’s massive user base.  Yahoo’s network of sites is the third largest in the U.S., trailing only Google and Microsoft according to the latest data from traffic tracker ComScore. In February 2012, Yahoo’s network had 174 million unique visitors, even more than Facebook’s 159 million. WOW!

Now that Yahoo is only a clearly defined path as a media company, Yahoo and it’s new CEO must avoid the mistake of previous CEOs who guided Yahoo on a path to nowhere. Once the Internet’s first and largest Web portal, 17-year-old Yahoo has lost its edge in nearly every area to newer, nimbler rivals.

Thompson must get ahead of in some key areas before major competitors also claim those market places.  Two easy developing areas are mobile advertising and social browsing services like GetGlue or Miso.  The mobile advertising space has been hot in the last six to nine months with Google, Apple and other gobbling up the main players although a few smaller firms still remain and could be had at a good price.  Perhaps more promising are the social browsing sites such as GetGlue and Miso which allow users to actively participate in their favorite TV shows, movies and other verticals such as books, restaurants, stocks, etc. We know Facebook just dropped $1 billion on Instgram.  For $1 billion, Yahoo could buy 2 or 3 hot mobile commerce firms that could not only complement their new media content strategy but also chart Yahoo towards strong future growth.

Something to think about today…

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, PhD

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

Yahoo should buy Twitter (and then merge with AOL)

Hola Todos!

I’m going to be honest here.  I am getting tired of the “Who is going to purchase Yahoo?” talk.  It’s be an on and off again headline for too long (for instance, click here).  Its like Yahoo is waiting for a “White Knight” to save them from their strategic nadir.  Well, my crazy idea of the day is for Yahoo to save itself and to buy Twitter (e.g., give Twitter an offer they cannot refuse).

Two questions you might be asking yourself right now are HOW and WHY.  The HOW is the easier of the two and believe it or not, Yahoo can accomplish this maneuver without lifting a penny off of its balance sheet.

I was reading The Wall Street Journal the other day and what I learned that Yahoo owns a 40% stake in the Chinese e-commerce company Alibaba Group Holding Ltd (click here). Through something I know nothing about called a “cash-rich split-off,” Yahoo can sell its stake in Alibaba, recently valued by Yahoo at about $14 billion, and avoid paying taxes on the profit from a sale (e.g., a tax savings of about $5 billion).

Twitter could be persuaded to take an all cash offer (with benefits) given their current situation and what’s happening in the marketplace.  I do not care what Twitter’s “potential” evaluation could be, Twitter is not IPO ready, does not have a significant revenue generating model, and the stock market will NOT to be ripe for tech IPO for quarters to come.  Give Twitter $3 or $5 or even $8 billion in cash now because who knows if they will get it in the future.  Then, Twitter can concentrate of what it does best without worrying about developing a revenue-generating model that Wall Street will accept.

As for the WHY – first, Yahoo can use Twitter to increase page views of their sites.  Yahoo’s strength is display advertising.  Yahoo can only increase rates for display advertising if they gain more eyeballs.  Twitter can act as the highway to draw more eyeballs to Yahoo properties.  Done.  Second, Yahoo needs leadership.  Twitter has the executive talent to run Yahoo.  In addition, with Twitter’s brand, Yahoo will be able to attract and keep talent as opposed to losing everyone to Apple, Google and Facebook.

The final maneuver would be for Yahoo/Twitter to merge with AOL.  Like Yahoo, AOL strength is display advertising.  Yes, Twitter can also act as the highway to draw more eyeballs to AOL properties but more importantly, a Yahoo/AOL is a much stronger display advertising play for marketers then either Yahoo or AOL by itself.

The new entity – YAT Inc. or TAY Companies (you have fun with anagrams) – will be powerful enough to be a player, as opposed to an also ran, in today’s marketplace.

So what do you think about that?

Best

Dr. Dan-o