Summary
Yahoo is about 14 years old now. It has accomplished a great deal.
Analysis
Like any business, Yahoo may or may not be going through a lifecycle change. Markets change, society changes, and companies are impacted. The problem Yahoo is facing is one that many companies face when they reach maturity – it is relevance.
The reality is that the barrier to entry into the Internet portal business is largely a matter of software and brand. Software costs cash. Software as opposed to physical capital is relatively easy to deal with. Despite the recession there is cash out there but the idea has to make sense before investors throw there money at the idea. Brand is another matter. Brand is one of those intangible but critical assets that cost a fortune to build and lots of time to build. Brand is one of those intangible assets that can crash and burn in a heartbeat with one major mistake.
In the last 15 years, Yahoo has largely survived on its initial image. Yahoo faced Google and lost. Yahoo blew a perfectly good offer from Microsoft in early 2008 thinking they were worth far more than the markets thought it was worth. Strategically, Yahoo offered Microsoft one thing, a branded search engine. Microsoft has tried for years to launch a search engine of its own. Yahoo had a chance to make billions but in the blew the deal. Read my past postings.
In the end Yahoo has had to layoff thousands of employees in response to the beating Google has given it and its own inability to compete in a very rapidly changing market.
Yes, Microsoft and Yahoo signed a deal in July 2009 where Microsoft will have access to Yahoo’s search engine in order to support Microsoft’s search engine called Bing. Bing is not a bad tool and a lot more pleasing to look at than Yahoo’s web page. Microsoft did not have to pay a dime up front to Yahoo to close this deal. In the end Microsoft won this one and Yahoo lost.
Now, Yahoo wants to launch a $100 Million marketing campaign. Okay, what is Yahoo’s inherent consumer value? Tell me and the marketplace why we need to use Yahoo. What is the value proposition? Its nice to say you are “cool” but you got to produce something of value.
Is it user control? Well that might be the case but guess what the entire information and telecom industry is moving towards user controlled platforms and user focused experiences. Yahoo is not the only one focusing its efforts on personalization efforts.
I don’t blame Bartz at all. Bartz was handed a lemon with no way of turning it into lemonade.
Is Yahoo still relevant? The answer is NO.
Did Yahoo just waste $100 Million? The answer is YES.
The ads will only produce a slight buzz that stock brokers will try to use to coax the consumer to spend their money on stock. However, Wall Street will fail at producing any real lasting excitement over Yahoo.
Yahoo needed to move beyond a simple search platform or free email service. Yahoo needed to leverage Microsoft to move into telecommunications. Microsoft is already embedding itself into the wireless telecom space. Google has a plan to reach deep into the wireless arena through its Android initiative. Are they going to be successful? My answer is the plans make sense but success will be dictated by the marketplace. At least Microsoft and Google have real plans.
Yahoo says it wants to become a hub for information management and social networks; so does everyone else. The current crop of social networks is claiming to be working towards this type of integrated consumer experience. What value is there in being the hub when one spoke of the wheel is leading to a somewhat valueless search engine and you have no social network of your own? This is a basic value chain analysis and Yahoo needs to determine what its value is in the chain of consumer service.
Yahoo’s spending of $100 Million on a global marketing campaign is a mistake. The money should be spent on product improvements and development.
P.J. Louis consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
