Strategy Analysis

Carla Miranda Section A

Yahoos Competitive Advantage

There was a time when Yahoo was the web portal leader of the internet, being at one point the most visited website in the world.
However, 20 years later, Yahoo not only has lost this position, but it also has lost its identity and is no longer growing. Part of the
problem is that Yahoo does not have a clear strong Competitive Advantage as a core for their Strategy. In the 2014 Annual Report
of Yahoo Inc we find the following statement:
Yahoos competitive advantage centers on the fact that we are a guide focused on making users digital habits inspiring and entertainingthis includes
daily activities like communicating, searching, reading and sharing information. We believe our principal competitive strengths include the usefulness,
accessibility, integration, and personalization of the online services that we offer; the quality, personalization, and presentation of our search results; and
the overall user experience on our leading premium content properties and other Yahoo Properties. Although it describe

Although it is a fine value proposition, it does not make the company unique, and is a proposition that can easily be copied by any
competitor. In fact, this is what has happened. Yahoo has been eclipsed by many other companies, in their content , social media,
advertising and search efforts
What can Yahoo do differently or better than others to achieve its goal to make the world's daily habits inspiring and entertaining?
Currently, Yahoo continues to make money mainly because of its large base of users: Over One billion all over the world. And
with such a large base, Yahoo has an asset that It has not really taken advantage of: Data.
Other strong points that we can rescue: mainly the integration of its services, and their easyness of use.

SWOT Analysis
Strengths

Weaknesses

Strong Brand, high awareness

Large base of users (Over 1 billion worldwide).
Partnerships with some of the biggest players, including some
of its competitors: Microsoft, Google.
For financial value: Its stakes in Alibaba, valued in 32bn

Unprofitable acquisitions. Tumblr has a $1.1 bn price and there has still
not been results
Lack of disruptive / differentiating products.
Some products are unknown or have lost their status: Flickr, Yahoo
Screen was just shot down.
High expenses that reduce profits
It missed the prosumer revolution. Although it had Yahoo Answers as
an user generated content platform, it did not grasp the opportunity to
create a strong social network
It also missed the opportunity to to reach younger audiences.. It had to
buy Tumblr to gain access to millennials

Opportunities

Threats

Growing number of internet users in emerging countries

Growing number of mobile users globally
Trend: Companies are increasingly spending in digital and
mobile advertising
Change in consumer habits: multi screen usage: more traffic to
place ads

The Internet Business has shown many times that making a

comeback is almost impossible.
Strong competitors in content creation and management:
newspapers, app stores, music services, netflix, etc
Changing consumer habits. microblogging and instant
messaging are distracting users.
Privacy concerns
The next big tech and media startup can come out of nowhere

Industry Analysis: Internet Media

Suppliers

New Entries

Customers

Among the suppliers we can consider those that

provide hosting services, software services, content
rights, etc. For content creations, companies can
either contract or create it themselves.
For other specific services, such as search engines
or APIs, the big players are willing to sign
collaboration agreements

Everybody wants to launch or invest in the next

big internet start up.
Traditional content companies are investing more
and more in digital platforms to distribute their
content. Since they have the content creation
mechanism in place, translating this to the web is
not that difficult

The customer is volatile and it is not loyal. There

have been many examples where they change a
website or app for another: Messenger, Myspace,
etc
The only cost of switching now can be related to
the network of the user, something more relevant
to social sites, more than content platforms

MODERATE TO HIGH

HIGH

LOW
Competitors

Media companies not only face competition

among the big global portals and content
platforms, but they also face local competition.

MODERATE TO HIGH

Substitutes
Consumers can get their information and
entertaining from a wide variety of sources, not
only digital / mobile. Although the trends seem to
favor the later

MODERATE

The Internet Media industry is highly competitive and it is also really vulnerable to change and disruption.

Assessment of Industry

+
+ /-

Yahoo has the supplier force under control. In most cases, it produces its own content, and for other
requirements It has established important and lasting agreements with the biggest players in Silicon
Valley: Microsoft, Google .

Yahoo is exposed to many new entries in an industry such as this one. Yahoo has responded to this
threat by acquiring some tech and media companies. However, this is not always easy nor cheap, since
there are many investors bidding for the most promising new companies

Yahoo still maintains a large base of Customers. Its current focus on the development of mobile
services is a great first step to try to remain relevant to the consumer. Also, Yahoo has hinted that it is
developing a new product related to predictive search, that maybe what consumers are looking for
next.

Competitors are an important threat to Yahoo, mainly because Yahoo does not have a strong
differentiating factor, but also because the most important players are offering experiences to the
customers that have an important switching cost. For example people will not leave facebook if their
friends are still using this platform.

Substitutes Thanks to the change of direction proposed by Marissa Mayer, (CEO) by betting on mobile
services, Yahoo is still relevant at least in technology to its users.

Yahoos Financial Situation on a glimpse

Founded in january 1994 by David Filo and Jerry Wang. Incorporated as Yahoo! in March 1995. Went Public en April
1996.
Current Market Cap: 30.41 Bn, most of which is attributable to the stake that Yahoo currently owns on Alibaba
Current CEO Marissa Mayer
Yahoo has not reported a significant Profit Growth since 2008.

8,000,000
6,425,679

7,000,000

6,969,274

7,521,731

7,208,502
6,460,315

6,324,651

6,000,000 5,257,669

4,984,199

5,000,000

2,000,000

4,680,380

3,945,479

4,000,000
3,000,000

4,986,566

1,877,407
731,568

1,000,000

639,155

418,921

597,992

1,231,663

1,048,827

2010

2011

4,618,133

1,366,281

0
2005

2006

2007

2008

2009
Net Income

Revenue

2012

2013

2014

Yahoos Challenges
Challenges
Become
relevant
to users

Profits

Corporate
challenges

Need for action

Yahoo has not led neither the search or social media industry and it just
focused on mobile during the last couple of years.

Develop a stronger value proposition and find a truly

competitive advantage.

Yahoo is not indispensable for users. Their identity is not strong enough

Yahoo has lost relevance, specially to millenials. Companies such as Google,

Facebook and Apple offer better ways for people to communicate or to be
entertained online. Missed the rise of user generated content

Renewal of the services and products and the brand

as a result

Find the best way to turnaround the company to achieve once again
profitable growth.

Reevaluate investments to see if some acquisitions

can be sold

Turn acquisitions into profits. Major investments have been made and results
are still not visible.

Cutting costs in expenses not related to product

development

Other expenses are considerable (traffic acquisition, product development.

These are squeezing earning

Find new ways to monetize, since its display ads revenue is decreasing and the
mobile and native ads are not growing as expected

Once the most important portal on the internet, today the stagnation of
growth has made its investors impatient and they have begun to Marissa
Mayers role as CEO (after 3.5 years on the position).

Yahoos market cap depends mainly on its investment in Alibaba and Yahoo
Japan.

After a failed attempt to spin of its investments in

Alibaba an Yahoo Japan into a new company, there is
currently the option to sell or to spin the Core Internet
business, which in spite of still generating cash it
represents a little part of the market cap.

Yahoos Growth Options

Yahoo is a company that needs big changes, considering that it currently is on a decline stage. Independently if Yahoo
sells or spins off its core business, we suggest the following options to increase profitability in the core operations .
Leverage the data they have to develop new products that turn Yahoo into an indispensable tool to the customers.
Such tools should be disruptive enough to have a chance in the industry. They can use the user base to test the
products cheaply
Develop products to advertising agencies and private companies , leveraging the many years of knowledge that they
have: New Division B2B
Merge with other content companies to cut expenses.
Explore e-commerce opportunities, leveraging the association they have with Alibaba
Explore the change in the business model to include the selling of content in a Netflix inspired Model
Enter the hardware business though the development of mobile and wearable devices, leveraging its investment in
mobile product development. This entrance could be done with a partner.