Case study: Is Yahoo!'s Business Model Working in 2011?
Jieyi Shao
Yahoocasereportsample.pdf
1
Case Study #23:
Is Yahoo!’s Business Model Working in 2011 and Today?
BUS 189 - Prof. Larry Gee
Team # 5 - The A+ Students Aimee Gohil - # 7260
Sean Luis - # 0283 PM - Karin Proven - # 7884
Krysta Sumabat - # 2199
Friday, December 4 2015
2
Table of Contents Appendix 1: History, Development, and Growth ……….………………………………………. 3 Appendix 2: Internal Strengths and Weakness ….………………………………………………. 8 Appendix 3: Nature of External Environment …..……………………………………………... 11 Appendix 4: SWOT Analysis…………….………….…………………………………………. 12 Appendix 5: Corporate-Level Strategy ...………………………………………………………. 18 Appendix 6: Business- Level Strategy …………………………………………………………. 20 Appendix 7: Company Structure and Control Systems………...………………………………. 22 Appendix 8: Recommendations...………………………………………………………………. 24 Case Question 1 ……….………………………………………………………….…….……… 25 Case Question 2 ……….………………………………………………………………..……… 29 Case Question 3 ………………………………………………………………………..………. 32 Case Question 4 ……………………………………………………………………….….……. 36 Conclusion …………………………………………………………………………….….……. 38 Bibliography………………………………….………………….……………………….….…. 40
3 Appendix 1: The History, Development, and Growth
Yahoo! is a global technology company best known and recognized for their search
engine, web portals, email services, and similar technologies. Yahoo! is currently working hard
to stand out from competitors by executing several strategies, including corporate level strategies
such as acquisitions, horizontal and vertical integration. It is clear with the struggles Yahoo! has
faced over the past 7 years that they need to regain market share, expand their demographics,
improve innovation, and build brand loyalty to be profitable. The company’s past strategy of
acquisitions has been costly and has not produced the desired result.
Yahoo! was founded by David Filo and Jerry Yang and the company is based in the heart
of the Silicon Valley in Sunnyvale, California. (McCullough) In 1994, David and Jerry were
graduate students at Stanford University, studying to obtain their Ph.D. in Electrical
Engineering. The World Wide Web was a tool they used, but the user experience left them
extremely frustrated. Thousands of pages would appear which were random and unorganized,
making the tool overly cumbersome and difficult to use effectively. Realizing there was a better
way to organize the information, the pair found a way to manage all these websites by specific
content. What David and Jerry provided was a hierarchically organized index compared to an
index of pages. They named this organized hierarchy “David and Jerry’s Guide to The World
Wide Web” and published it in 1994.
Initially their site was used mainly by their friends and for their own personal
use. However, over time, more and more people came across the time saving website, spreading
the word about “David and Jerry’s Guide to The World Wide Web.” The attention pushed the
once personal organization space into the realm of a viral website. As the number of visitors
4 consistently increased, David and Jerry realized they had a valuable and unique commodity on
their hands. Both graduate students decided to put aside their studies at Stanford in order to focus
on their search engine and build the business. They renamed their website and company to
Yahoo! and it was incorporated in 1995. Yahoo! became the first published web portal.
The team was then joined by the first CEO, Tim Koogle, who worked vigorously in order
to develop the initial business strategies. After recruiting many people in the marketing and
software engineering departments, Yahoo! grew a competent team to accomplish their new
strategies. One of the company’s strategies was to attract and retain various consumers and to
become more than just a search engine. With this goal in mind, Yahoo!’s team created the
following portals: personal, government, cultural, corporate, stock, and internet shopping
portals. Yahoo! benefitted from each of these portals in different ways. The internet or
e-commerce portal brought in revenue through implementation of user (seller and buyer)
transaction fees. In 1996, one year after being incorporated, the company had revenue of $21.5
million. In 1998, after Koogle’s implementation of the new business strategy and model, the
revenue had grown to $203 million. (Hill and Jones)
Over the years, Yahoo! wanted to become a “mega brand” for all online users. (Hill and
Jones) Management put a huge focus on adding more content, which led to adding Rocketmail,
Geocities, Broadcast.com, instant messaging, dating sites, and more retail sites. Furthermore, an
extremely important factor of the new business strategy was the use of a customization
feature. When having a customized website, customers’ needs and wants are specifically
addressed. It’s an understood phenomenon called “switching costs” that prevents customers
from moving to new providers. When people invest time into customizing their profile with
Yahoo!, then it is less likely they will go elsewhere for the same information, unless someone
5 else created a killer application. Attracting people with the option for customization was
successful. We see this success in the early 2000’s when the company’s market value was
approximately $220 billion, with about 15 million visitors a day. (Hill and Jones) In 2015
however, due to no longer being in the dot-com era, increased competition, and other companies
such as Google and Facebook who were offering killer applications, Yahoo!’s market value has
decreased to about $33.02 billion. (Yahoo Finance)
Yahoo’s execute team saw several changes since it originated, including two interim
CEOs Tim Morse (2011-2012) and Ross Levinsohn (2012). Carol Bartz, Yahoo!’s CEO from
2009-2011, had the arduous task to recover from a steep decline Yahoo! experienced in 2008.
(See Figure 1). Bartz had
begun to cut costs and
worked to improve margins.
It was stated Bartz changed
the “organizational
structure, replaced executives
and cut 5% of the workforce.” (Oreskovic) By looking at Yahoo!’s revenue statement, it is
apparent that Bartz’s attempts to turn a profit were unsuccessful as Yahoo! still saw a steep
decline all the way until 2011.
Scott Thompson took the helm in 2012, after the interim CEO Tim Morse returned to his
position as the company’s Chief Financial Officer. Thompson was Yahoo!’s CEO for less than a
year, yet he implemented the filing of 10 patent infringement lawsuits against Facebook resulting
in a partnership between the pair for new advertising. (Yousouf) After a resume scandal
involving Thompson, he was fired from Yahoo! only four months after being hired. (Pepitone) In
Figure 1 Gale Business Insights: Essentials 2015 gale Company Intelligence Database 2015 www.businessinsider.com
6 2012, Yahoo! brought Marissa Mayer, an ex-Google executive, to the team to help Yahoo!
define their vision and stay current in the dynamic environment. Yahoo! showed 700 million
users per month, but the company still struggled with generating revenue. (Perlroth) Since 2012
Marissa Mayer is the youngest person to ever be a CEO of a fortune 500 company. (Leahey) The
mission statement used to be “To be the most essential Global Internet Service for consumers
and businesses.” This has been updated in their 24th revised mission statement that states
Yahoo! is a guide focused on making users’ digital habits inspiring and entertaining.” (Le Ray)
Yahoo has made many notorious acquisitions and has received the reputation that it “kills
startups”. (Pepitone) The World Public Library shows Yahoo! has acquired nearly 90 different
companies globally since 1997. Per CNN Money, some of the notable acquisitions include
Broadcast.com which was acquired in April 1999 for $5.7 billion and GeoCities for $3.6 billion.
Both were deemed unsuccessful with a hefty price tag (Pepitone).
In 2003, under Terry Semel’s leadership, Yahoo! acquired Overture Services for $1.63
billion. SEC records state Overture Services, Inc. was an online advertising service that provided
a “Pay-For-Performance” search which is the main area of Yahoo!’s generated revenue.
Yahoo!’s revenues show that this expensive acquisition was a success because revenue continued
to climb for four more years (See Figure 1). The spending continued under Semel. In July of
2004, Yahoo! acquired Oddpost to improve Yahoo!’s expertise in email services. The cost of the
acquisition was $30 million.
In 2012, under Marissa Mayer’s leadership, Yahoo! acquired Stamped. The Wall Street
Journal stated Stamped was a mobile application company. This acquisition was right in line
toward improving Yahoo!’s mobile realm. In 2013, Mayer also implemented the acquisition of
Tumblr for $1.1 billion which included the acquisition of Tumblr’s founder, David Karp, as well.
7 This strategic move is seen more to obtain the talents of Karp over what Tumbler and their users
have to offer. (O’Donnell) Most recently in July 2015, Yahoo! has acquired Polyvore, a leader in
social shopping. This acquisition is intended to improve “consumer and advertising offerings”.
(Business Wire)
Looking over Yahoo!’s history, we conclude this is a business in constant flux. There has
been a revolving door of leadership and ideas that clearly has an impact on the company’s health,
productivity and profitability. Most acquisitions should have a positive impact on the bottom line
for a business, but it appears Yahoo! is still unable to effectively utilize this realm. While Mayer
has made strides in slowing the decline and leveling off revenues, it’s clear Yahoo! needs to
make headway to compete in the dynamic environment.
8 Appendix 2: Identification of Company’s Internal Strengths and Weaknesses Strengths
One of Yahoo!’s key strengths is their competitive advantage provided by their
increasing user base. Within recent years, Yahoo! has made numerous acquisitions ranging from
small startups, such as Summly, to popular websites, such as Polyvore and Tumblr. According to
forbes.com, Tumblr is one of Yahoo!’s best acquisitions to date, not only for the number of users
but also for its founder, David Karp. (O’Donnell) Through acquisitions, Yahoo! has been able to
not only increase their user traffic, but also expand their demographics to bloggers, photo
enthusiasts, the younger generation, and Millennials.
Another strength Yahoo! is focusing its attention on is the mobile aspect of their
company. They have made great strides in the industry by establishing a mobile presence
through their inorganic growth strategy. Part of the strategy is to acquire smaller companies with
engineering talent and mobile computing specialists, such as Stamped. (Efrati) By doing this,
Yahoo! has been able to broaden and strengthen their expertise in the mobile segment as the
usage of mobile devices such as smartphones and tablets continues to increase.
Weaknesses
While several of the acquisitions stated in “Strengths” have improved Yahoo!’s ability to
compete in the dynamic market, some of the acquisitions have taken billions from the bottom
line, hurting Yahoo!’s overall performance. Costly acquisitions, such as Broadcast.com and
GeoCities have been shut down and the funds used have no return on invested capital. These
9 acquisitions hurt Yahoo!’s overall profit margin. It is clear Yahoo! is relatively weak compared
to its peers when comparing revenues of rival companies. While their competitors, such as
Google and Microsoft, have been increasing their revenues at a quick pace, Yahoo! is unable to
register growth (See Figure 2). The disparity between revenues highlights Yahoo!’s competitive
disadvantage. This disadvantage has led to sluggish revenues.
Yahoo!’s small footprint in
the social media and social
networking segments is also a
weakness. Although the company
acquired Flickr and Tumblr to
develop a greater presence in the
social networking segment, they lack
significant presence compared to
their peers, Facebook and Google.
Figure 3 shows social login
preferences for Facebook was 45%
and Google was 35% while Yahoo!
trailing far behind with only 7%. This
discrepancy is very detrimental to
Yahoo!’s future success and needs to be corrected to achieve profit.
Figure 3- Source: Olson, Michael. "Social Login Trends Across the Web for Q4 2014." Janrain. 2 Jan 2014. Web. 3 Nov 015
Figure 2- Source: Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015
10
Yahoo! also needs to have stability in leadership. There have been seven (7) Chief
Executive Officers leading Yahoo! over the past decade, including two interim leaders, both in
2012. This constant change and shift leads to instability and a lack in confidence from
consumers. Having an executive team that can build consumer confidence will help Yahoo! to
achieve their goals.
11 Appendix 3: The nature of the external environment surrounding the company
The external environment of Yahoo! is highly competitive with several opportunities and
threats that exist in this environment that surrounds Yahoo!. An opportunity that Yahoo! can take
advantage of is making business deals at regular intervals to improve their business. By doing
this, Yahoo! can designate a revenue sharing agreement that benefits them both.
A second emerging opportunity for Yahoo! is the strong growth in display advertising
and mobile ad spending. Advertisers in the United States are expected to spend on various
display ad formats served to desktops and laptops as well as mobile phones, tablets, and other
devices. The rising spend will enable Yahoo! to boost their revenues. As Yahoo! continues to
deliver products that cater to this market, they will be able to enjoy benefits from the positive
trends in the industry.
For external threats, Yahoo! is competing with social platforms that are major players in
the industry. Facebook, for example, although is not the fastest growing social networking site, is
gaining the highest number of visits. It has the potential to emerge as a medium that is cost
effective for advertisers and has been proven to have the potential to emerge as an effective tool
to reach audiences. Yahoo! suffers against better-performing social networking platforms in
terms of user time, engagement, and advertiser interest.
Another threat is the existence of stringent regulations. No matter the level of business,
governments impose regulations and restrictions on companies and Yahoo is no exception. When
the government passes new laws or makes changes, normal business processes can be affected,
which can lead to legal ramifications, including fines and fees.
12 Appendix 4: A SWOT analysis
After evaluating Yahoo!, we identified strengths that give them a competitive advantage
in their industry. Ever since being appointed CEO of the company in 2012, Marissa Mayer has
implemented changes that have made a positive impact and has allowed Yahoo! to gain some
leverage.
Firstly, as previously mentioned, Yahoo! enjoys a strong customer base as well as a
significant reach. Various acquisitions contributed greatly to this. For instance, the acquisition of
Flickr in 2005 allowed Yahoo to gain an entire online community of photo researchers and
enthusiasts all around the world. Another example is the acquisition of the blogging site, Tumblr,
which was made in 2013. Prior to this acquisition, Yahoo! had a total amount of 800 million
monthly active users. Tumblr, which continues to grow faster than any other social network,
increased Yahoo!’s monthly active user base to over 1 billion. (Garner)
Also contributing to Yahoo!’s increased user base was the company’s launch of the
refreshed Yahoo! Mail application for mobile phones and tablets. Since the launch, the
application alone increased Yahoo! Mail’s daily active users to 110 million users globally, which
is an increase of more than 120%. (Nieva)
Secondly, Yahoo! has implemented the inorganic growth strategy to keep up with the
continued growth of mobile usage all around the world. Out of Yahoo!’s 1 billion users, 575
million of them are active on mobile. (Smith) These numbers go to show just how important it is
for Yahoo! to keep their mobile segment strong. Part of their inorganic growth strategy is to
acquire smaller companies with engineering talent and mobile computing specialists. Over the
last 2 years, Yahoo! purchased more than 37 companies, allowing them to become more
13 diversified and advanced in the fields of applications, mobile phones, and tablets, which are
areas they had been lagging in compared to their peers.
Yahoo!’s strengths allow them to stay in the fight against their competitors, but they
possess weaknesses that prevent them from being more successful. One weakness is Yahoo!’s
relatively poor performance compared to their peers. As shown in Figure 4, Yahoo! displays
stagnant growth rates compared to Google and Microsoft, who have increasing revenues.
Yahoo!’s revenues declined by 1.3% in fiscal year 2014 compared to fiscal year 2013. Google,
on the other hand, had a revenue increase of 18.9%. Further, Facebook’s revenue grew by 58%
during the same period.
Another weakness, as mentioned
earlier, is Yahoo!’s limited presence in
social media and networking. They have
always struggled to compete with their
peers in this segment, and therefore have
made various attempts to make a name for
themselves. For example, in 2005, Yahoo! announced Yahoo! 360º, a personal communication
portal that enabled users to create personal web sites, share photos, and maintain blogs. After just
2 years of operation, global visits to the 360º site dropped significantly. It never gained
popularity in the United States, so Yahoo! decided to stop providing support for it. By 2009, the
entire service was officially closed. During its 4 years of existence, it remained in its beta stage.
The ideology behind this move was for Yahoo! to find ways to better-improve the service and
help it to become more popular, but they were never successful. Today, Yahoo! still struggles to
Figure 4- Source:Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015
14 find solutions that enables them to closely compete with Facebook and Google, who currently
hold the leadership positions.
Through the acquisition of Flickr and Tumblr, Yahoo! was able to expand their presence
in the social networking segment. As shown above in Figure 3 (pg 9), they still sit far behind the
leaders, Google and Facebook, with only 7% market share compared to Google’s 35% and
Facebook’s 45%. Video sharing is another part of the social segment that Yahoo! lacks. In the
past, they announced plans of video sharing platforms similar to YouTube, but they have yet to
mark their presence in this segment. Lack of presence in these areas puts Yahoo! at a
disadvantage compared to their competitors.
Although Yahoo!’s weaknesses make it difficult for them to compete, there are still
various opportunities that allow them to improve. One of these opportunities exists in their recent
restructured partnership with Microsoft. In April 2015, the two companies made a new search
deal that extends until 2020. According to Yahoo!’s Corporation Information page on
Yahoo.com, the deal established a transformative relationship between the two companies where
Microsoft exclusively provided paid and algorithmic search services on PC to Yahoo!. In this
agreement, Microsoft pays Yahoo! a percentage of Bing Ads revenue delivered from Yahoo!
searches. With the extension, Yahoo! is given the flexibility to improve the user search
experience on both desktop and mobile devices. This agreement doesn’t limit Yahoo! because
they still have the ability to use other back-end search providers, such as Google or Ask.
A second opportunity Yahoo! can take advantage of is the positive trend in smart device
usage. According to global statistics, smartphone shipment volume is expected to reach 1,733.9
million units by 2017. This represents a compound annual growth rate of 14% from the period of
15 2014 through 2017. By 2017, tablets and smartphones are expected to account for 87% of the
overall smart connected devices around the world. (“Phablets Will Start”)
Recently, it has been noted that Yahoo! has emphasized great focus in the mobile
segment of their company. As previously mentioned, they introduced a new version of their mail
product to capitalize on this growing trend. The new mail product was released across four
platforms including desktop, iOS, Android, and Windows 8. In May of this year, Yahoo!
released numerous updates to Flickr introducing additional intelligent tool features that are more
user friendly, making it easier to access, organize, find, and share photos and videos across
devices. Yahoo! is positioned to
benefit from their strong focus on
introducing products catered
specifically for smart devices.
It’s important to acknowledge
advertising spending is still on the rise,
and this is a revenue generator for Yahoo!. Figure 5 reveals that there has been positive
momentum in the amount of advertising spent by companies and is expected to continue
throughout 2018. The spending growth is an opportunity for Yahoo! to generate a big portion of
revenues from display and mobile advertisements. According to industry estimates, worldwide
mobile advertising generated $18 billion in 2014 compared to $13.1 billion in 2013. (Yakowicz)
The increase was primarily due to the growth in smartphone and tablet usage. With the influx of
spending, the mobile advertising space would be a key growth/opportunity area for Yahoo!.
One last opportunity to mention is the increase in search queries. Figure 6 shows the
constant upward trend of Internet users worldwide, reaching 3 billion users in 2014. Currently,
Figure 5 Source: "Total US Ad Spending to See Largest Increase Since 2004 - EMarketer." Total US Ad Spending to See Largest Increase Since 2004 - EMarketer. Web. 1 Nov. 2015
16 there are 3.2 billion users, and by 2021, the industry estimates there to be 3.8 billion users
worldwide. An increase in internet users leads to an increase in the amount of internet searches.
This means that search queries on Yahoo! properties are also expected to increase. Yahoo!’s
initiative to improve its
content will enhance user
experience, resulting in
greater market share in years
to come.
Reviewing the
struggles Yahoo! has faced since its inception, it’s clear to see
there are many threats in this segment of industry. There are
several things Yahoo! executives who are forming strategies
must be aware of for them to succeed. It is important to
remember, Yahoo! is a content portal and competing with
social platforms already offered by industry leaders
is very difficult but vital. While the social network
market is rapidly growing, Facebook is gaining the majority of the visits. As shown in Figure 7,
the total amount of current social network users is 179.7 million users. Of that amount, 156.5
million of them are Facebook users. (Fleischmann) Although Yahoo! did acquire Tumblr, they
still sit far behind with 19.1 million users. Tumblr has not made a huge impact in the social
networking segment and the platform did not offer a high barrier to entry for competitors
because its model can be easily replicated. Tumblr has a very small spread of demographics,
Figure 6 - Source: "Internet Users" Number of (2015). Web. 3 Nov 2015
Figure 7- Source: "Infographic: Who's Really Using Facebook, Twitter, Pinterest, Tumblr and Instagram in 2015"
17 attracting mainly the youth and young adults and having absolutely no presence in the senior
community. Facebook, who is the leader, is gaining much more share visits than any other social
networking site, making it difficult for Yahoo! to compete.
Another threat is government regulations. Yahoo! is subject to numerous laws, which can
and often do, vary from state to state or country to country. There are different federal, state, and
international laws regarding privacy and protection of user data that Yahoo! is required to
comply with. Yahoo! has already established their methods and procedures on how to run their
business, so when new laws are put into place, it forces them to adjust, which can lead to
expensive future compliance costs. Changes in practices can also impact business and hamper
user engagement, putting the company at a big risk.
Examining Yahoo!’s SWOT analysis, we believe that although Yahoo! is competing in
an industry with fierce competition, they still have a fighting chance and they have not
completely lost the battle. As long as they capitalize on their strengths and take the opportunities
presented to them, they can overpower many of the weaknesses they possess and challenge the
threats that they encounter. While Yahoo! may have extreme difficulty surpassing their powerful
peers, they still have plenty of room to grow and become a more ferocious contender in their
industry.
Appendix 5: The kind of corporate-level strategy that the company is pursuing.
Corporate level strategies focus on how to maximize the long run profitability. Some of the
corporate level strategies we have seen Yahoo! implement are acquisitions, horizontal integration
18 and vertical integration. In the early years of the growth, we saw a large number of acquisitions.
Between its start and 2008, Yahoo! acquired or merged with over 50 companies. Today we are
seeing horizontal integration with the example of Katie Couric being added to Yahoo!’s news
team. Katie Couric became Yahoo!’s “Global Anchor” in 2014 with the strategic hope she’d
expand Yahoo!’s market shares and build credibility to Yahoo! news.
Mayer’s vertical integration strategy can be seen by the many brand extensions Yahoo! has
experienced. This included Yahoo! Magazines, which derived from the acquisition of Tumblr.
Looking at the home page we also see Yahoo! Advertising which ties all of the platforms
together to make a more uniform and united feel for the user. Users are also able to now use the
Smart TV app which links a user’s Yahoo! content to their own TV.
Under Mayer’s leadership, Yahoo! has also implemented the strategy to hire talented people.
Previously, Yahoo! hired more and more individuals to their team to develop ideas and products
instead of ensuring employees provided knowledge capital. Morgan Stanley Research noted
Yahoo!’s revenue per employee was $369,451 compared to Google’s $1,231,362. The median
revenue was noted to be $539,717 which Yahoo! is still attempting to reach. Mayer is working to
acquire talent as noted in Business Insider’s article from March 2014. The article stated when
Mayer was hired in 2012, there were only 40 mobile engineers. Today Yahoo! has nearly 400
mobile engineers to address the vast opportunities in the mobile realm. The article continues to
explain that 400 million users of Yahoo!’s 800 million users are mobile users. The impact from
mobile is profound and clear.
We have also noted that Yahoo! has used the strategy of strategic alliances. We see this
in relation to their improved relationship with Microsoft and the Bing search engine. The
relationship Yahoo! has with Google and Facebook are further examples of how Yahoo! is
19 attempting to implement this strategy. Instead of alienating themselves, Yahoo! is working to be
a bigger part of the industry.
On the negative side of the spectrum, Yahoo! announced the sale of their Alibaba stake.
Alibaba has helped Yahoo!’s struggling revenue, so it’s uncertain how this sale will impact the
bottom line. It should be noted with this sale that Yahoo! may face hefty tax penalties that could
potentially have a negative impact on it’s already struggling finances. All of these shifts cause
volatility for Yahoo! and its stock price, as well as, damaging the confidence of current and
potential shareholders. The executive team needs to really stay focused on using their strategies
to get traction in the market.
Appendix 6: The nature of the company’s business-level strategy
20
Yahoo!’s business level strategy currently in effect under Marissa Mayer’s leadership is
to gain market share. In 2014, Yahoo! appeared to hold the 2nd place position far behind Google
in search engine providers. Per the Market Share Reporter, it stated Google had 75% of the
market share while Yahoo! only had 12%. This is a huge disparity between the leading provider
and Yahoo!. The discrepancy between Google and Yahoo! is even more pronounced when we
review financial statements. As Figure 8 from Yahoo.finance.com shows, Yahoo!’s profit margin
is less than 5% and Google enjoys a profit margin of nearly 23%. The return on assets for
Google is healthy with over 8.5% compared to Yahoo!’s meager .04%. This number is
concerning because it represents
how effectively management is
utilizing a company’s assets. It’s
clear that Yahoo! is
underperforming and the assets
Yahoo! holds are not being used
to their full potential. It was
believed once Mayer joined the
leadership role, Yahoo! would
experience a great turn around. In contrast, it appears Yahoo! still struggles to find its new
identity in the market.
To offset the expenses Yahoo! will need to determine how to utilize their assets more
effectively and increase market share to regain strength and improve the balance sheet. To do
this, Yahoo! is redesigning the company’s website, improving content, and focusing on attracting
a younger generation of users through acquisitions such as Tumblr and Flickr. Yahoo!’s leaders
Figure 8- Source: Yahoo.finance.com
21 believe that the more Yahoo! is able to integrate into the users’ lives, they will be able to grow
and have more leverage in the market.
How to implement this strategy effectively is not always very clear. We do know that
Yahoo! will need to hire talent that can bring knowledge capital to the table. The business needs
to keep costs down by minimizing the number of employees needed and keeping their overhead
lean. Keeping costs down will lower prices to potential advertisers which is a low cost strategy
Yahoo! is working to implement. This strategy is in place to differentiate Yahoo! and generate
revenue. Unfortunately, competitors such as Google are leading in advertising money being
generated by the service they provide as well as a low cost to the advertisers.
Appendix 7: The company's structure and control systems and how they match its strategy
22
It’s easy to see the drastic decline in Yahoo!’s success from its inception. Today we
observe Yahoo! struggling with their identity and to overcome mistakes of the past. Previous
strategies of acquiring businesses ended up being very costly, producing little to no change in the
market share Yahoo! achieved. Realistically we are seeing Yahoo! fighting to come back to
relevance against the leading competitors Google, Microsoft, and Facebook. Note Google is the
winner for the best place to work per Fortune.com in 2015. Yahoo! hasn’t been on this list since
2008. How much does employee satisfaction play into the success of a company?
The culture must play a key role in employee satisfaction so it’s important to discuss a
notable shift in culture that occurred after Mayer took the helm. The industry was in shock when
Mayer revoked the ability for employees to work from home and demanded employees come
into the office. She stated in an interview that while individuals work better alone, they innovate
better together. This mindset was her basis on revising the work from home norm. It has been
noted that Yahoo! has struggled with cohesive teams and top notch work so Mayer had the stock
price removed from the intranet homepage to potentially lessen the impacts from a declining
stock price. She has also added weekly leadership meetings to improve morale and teamwork.
(Moulton)
There were other changes as well, including Mayer’s personal touch on hiring. Every
potential hire is reviewed by Mayer herself, which speaks true to the strategy that Yahoo! needs
to hire talented people versus just hiring more people. This shift in hiring allowed the company
to quickly gain control and set the tone for employee expectations.
Mayer has also taken some of the lessons learned from the success of Google and began
to offer free food to employees. To improve employee satisfaction, employee benefits are
23 competitive and per Yahoo!’s website, include access to a health club, education reimbursement,
and medical insurance for employees’ dependent children and parents as well. Yahoo! also
provides free transport between locations so employees are able to collaborate. This perk is
helping to support the teamwork ideology Mayer is working hard to instill in the culture.
It’s important Yahoo! continue to realign its business model and the changes noted above
are steps in the right direction. Yahoo!’s shifts in strategic alliances with competitors reinforces
their business model of collaboration. Yahoo!’s corporate website clearly states how they’d like
the company to be seen: “Yahoo is focused on making the world’s daily habits inspiring and
entertaining – whether you’re searching the web, emailing friends, sharing photos with family, or
simply checking the weather, sports scores or stock quotes.” Mayer has stated that she wants
users to reach out through Yahoo! as a subconscious habit. Building that habit will reinforce
brand loyalty and eventually improve revenue.
Appendix 8: Recommendations
24 Brand loyalty is a key aspect of any business’ success. Yahoo! needs to continue to
produce a product consumers are eager and excited to be a part of. We believe Yahoo! needs to
build a stronger brand image which can be accomplished partially by Marissa Mayer’s strategy
to create a clear vision for Yahoo!. When employees and consumers know what products Yahoo!
provides, the confidence increases and the bottom line typically sees a positive result.
Building a mobile sector in Yahoo!’s business is vital to their improvement. It is key for
Yahoo! to begin generating a profit and since they are not a first mover in this realm, they need
to ensure they execute their plans effectively. As previously stated, the mobile engineering staff
has grown since Mayer took over, so it’s time to turn those assets into profits through innovation.
Improving saturation in the mobile sector is sure to positively impact the bottom line, if
executives can control expenses.
We’d also recommend Yahoo! continue to build strategic alliances with other businesses.
Alliances will grant Yahoo! key aspects they need to be successful without having to incur the
expense to acquire businesses for a few potentially profitable applications. Alliances will allow
the business to focus on tactical acquisitions which can improve their market position by
improving revenue, adding talented works, and building advertisements.
It’s vital Yahoo! work on developing more effective advertisements and cut overhead as
much as possible. It’s important to note overhead includes, but isn’t solely headcount, so other
expenditures need to be reviewed for their real value. Yahoo! needs to continue to be innovative
with advertisement placement. Currently native advertisements, which is the blending of an
advertisement with the content is a successful concept. It’s also a creative way to beat Google’s
advertisement placements.
25 Case Question 1: Using Porter’s five‐forces model, what does Yahoo!’s competitive
structure and industry look like? What are the implications of this structure for the long‐
run profitability of Yahoo! in the market?
In order to get a better perspective on Yahoo!, we must look at its structure and industry
through Porter’s five-forces model. The five forces are broken out below:
Threat of New Entrants:
In this portion of Porter’s five-forces model we will examine how attractive this industry
is for new firms to join. When there are new entrants into the industry it’s expected profitability
will decrease. Current players want to block new firms from joining to maintain their own
profitability. The blocks are referred to as barriers to entry and businesses currently in the
industry want this to be high. Yahoo! is in a relatively good position because the threat of new
entrants is low. The cost for a new company to join the ranks effectively will be extremely costly
so that influences potential new players to opt for other more viable business ventures. Yahoo!
is part of the search engine industry, which is seen as a maturing market, meaning the market is
saturated, leaving limited market share to acquire. This segment does not appear to be a lucrative
proposal to new entrants so they decide to find more profitable segments.
Determining the barrier of entry, we need to understand many aspects of the industry. It’s
stated that the most attractive business segments are segments with high barriers of entry,
limiting who is able to join and low exit barriers. Having low exit barriers allows a company to
easily leave the segment. Google and Microsoft have dominated the market through the
advanced improvements of their search engines, increased market share and utilizing their assets
effectively. Google is touted as delivering optimal search results according to “The Ultimate
26 Google Algorithm Cheat Sheet” by Neil Patel. PageRank, who ranks search engine results,
claims this superior result is linked to Google having the best algorithm.
Threats of substitute products or services:
There is a low threat of substitute products or services in the search engine segment.
Search engines, to date, are the quickest and most efficient medium to retrieve information.
Substitute products or services could include bulletin boards but they are cumbersome for the
user who will have to sift through the data to obtain the information they are hoping to find.
Bulletin boards would therefore be considered a substandard product in comparison to leading
search engine services.
Switching costs is one way companies like Yahoo! and Google can prevent users from
moving to other services. This is why Yahoo! implemented customized pages for their customer.
Once a user has invested the time into customizing their space, they are less likely to move
because they will lose all of their efforts already invested. It’s difficult to substitute what the
current search engine providers have to offer, all of which lower the threat of substitutes.
Bargaining Power of Suppliers:
Knowledge is the commodity being supplied in this segment, so people holding the
knowledge are considered the suppliers. Currently the bargaining power of suppliers is low to
moderate. In this industry, software engineers and programmers (suppliers) are growing at a high
rate. According to the Bureau of Labor Statistics, there will be an increase of 222,600 employees
from 2012 to 2022. As of 2012, the amount of software engineers stood at 1,018,000. For
programmers, there will be an increase of 28,400 from 2012 to 2022 and there are 343,7000
employees as of 2012. Essentially, these workers will be easy to find and the most talented
workers will receive the best positions at the best companies, thereby making it less difficult to
27 find talented and skilled workers. However, if we perceive this as the business-to-business
aspect, the power is moderate.
Bargaining Power of Buyers:
Search engines generate the majority of their revenue through advertisements. Search
engines with the most traffic will receive business opportunities to sell advertisements for
companies, generating profit. The bargaining power of buyers, which in this case are companies
and customer’s seeking services is moderate.
Companies such as Google, who have healthy profit margins, are able to decide if they want to
sell space to buyers (advertising companies) or not. Google is granted the flexibility to decided
what products they want to have connected to their search engine. This is an example of a lower
bargaining power of buyers.
Competitive Rivalry:
It’s important to look at the competition currently in the marketplace and determine if it’s
highly competitive, with a limited number of key players, or not very competitive, with many
players involved. The search engine portion of Yahoo!’s industry is high.
According to the Michael Porter, if there is more spending on non-price competitive
strategies, or both, the intensity of competitive rivalry is high. (Hill and Jones 53) Currently,
Google and Yahoo! are busy developing non-price competitive strategies. For example, Google
has purchased YouTube and Yahoo! has purchased Tumblr. These websites come at no cost to
the competitor and were purchased to enhance Google and Yahoo!’s advertising revenue.
These acquisitions diversified their portfolios and differentiated the respective companies.
After reviewing Porter’s five forces we can conclude that these factors in regards to the
long-run profitability of Yahoo! is concerning. While competitors such as Google have a lower
28 bargaining power of customers, they are allowing to maintain more control of what they sell
advertising space for and this has Yahoo! struggling to survive. The survival tactics and recovery
strategies Yahoo! is implementing still leave them susceptible to failure.
While Google ranks high in employee satisfaction, they have a high competitive potential
workforce (suppliers) wanting to join their ranks. Many of the workforce are from elite colleges,
such as Stanford, and this causes a highly competitive environment for people who want to joint
Google because of what it has to offer. Yahoo! has an uphill struggle to ensure their suppliers
(workforce) want to be employed by them. An example of this can be seen in the acquisition of
Tumblr. Most people believe Yahoo! paid far over market value for the company to gain David
Karp’s talents. David Karp in this instance is the supplier and he had a very high bargaining
power.
Long term issues for Yahoo! with regards to the bargaining power of buyers is high
compared to companies like Google. Yahoo! struggles to make a profit and does not have the
luxury to be picky in which products they advertise to their consumers. With the limited
revenue, the bargaining power of buyers is higher because they are able to negotiate Yahoo! to a
lower cost.
Yahoo! is situated in a highly competitive industry with high barriers entry so that does
allow Yahoo! some breathing room for the long term. Having these two facets help control rising
substitutes that allow Yahoo! to potentially maintain their current market share. Yahoo! hopes to
regain a portion of the market share they have lost to other businesses in the long term, but only
time will tell if the strategies Mayer has in place can achieve those goals.
29 Case Question 2: Has Yahoo! permanently lost the battle to Google? Can Yahoo! reinvent
itself? What strategies would you recommend?
The disparity between Google and Yahoo! is tremendous. While it appears to be
hopeless, we’d like to believe there is always a chance for the underdog. Google is currently
experiencing a lead of 69.24% in the global search engine market share while Yahoo! shows a
meager 9.19% in October. Since breaking the news that Yahoo! is looking to sell off profitable
business units as well as 15% of their stake in Alibaba, the gap between Google and Yahoo!
appears only to be intensifying in distance.
Yahoo! still has a chance of succeeding, but it must take the proper steps moving
forward. They must effectively apply the following strategies: form strategic alliances, make
tactical acquisitions, develop more effective advertisements than Google, and reduce
expenditures. Strategic alliances play a big role in Yahoo!’s transformation to success. They are
currently in a new contract with Microsoft which offers some hope for a turn around. According
to the article “It Looks as If Marissa Mayer Drove a Pretty Hard Bargain with Microsoft” by
Matt Rosof, the deal enables Yahoo! to keep 93% of the gross revenue produced per Bing ad that
Yahoo! chooses to run.
Yahoo! can use Bing’s search results without Microsoft’s ad listings next to them.
If/when this occurs, Yahoo! incurs a fee for the search result and will be granted the entire
revenue share from the ad. Included in this deal, the conditions stipulate that Yahoo! could
terminate the deal after October 1, 2015. On May 1st, a renegotiated contract required Yahoo!’s
mandatory use of Microsoft’s search ads and web results. Only 51% of search ads and web
results were given to Microsoft, meaning that the remaining 49% could be provided by Yahoo!,
30 or outsourced to Google (or any other company). On October 20, 2015, Yahoo! entered into a
contract with Google, more specifically, a unit of Alphabet Inc. In this deal Google will provide
Yahoo! with search ads for its search results. In return, Yahoo! must pay an undisclosed amount
of revenue produced by that ad. Arrangements like this assist Yahoo!’s search engine and
improve its revenue stream by harvesting traffic. These alliances help enhance its relations with
its competitors and also act as a mutual aid. Marissa Mayer must continue to hunt for more
revenue generating opportunities such as these in order to sustain the company’s health.
The next strategy mentioned earlier is acquisitions. These purchases can help in three
ways: improve the company’s talent pool, increase revenue production, or offer diversification.
Acquisitions can also be a combination of each. To not fall into the same mistakes of the past,
Yahoo! must be sure to avoid acquisition pitfalls. In the article “Pros and Cons of Business
Acquisitions” by Richard Bloch, acquisition pitfalls are discussed. The pitfalls, provided by
Bloch, are the following: conflict of corporate culture interest between purchasing company and
purchased company, employee fear of removal from the company, and debt accrued from
excessive purchasing. There is a possibility that Yahoo! could capture a company with a
conflicting corporate culture. If this is the case, there may be a loss of skilled employees that
prefer a certain culture. As a result, the acquisition may become a waste of expenditure. Another
result from an acquisition pitfall is the employee fear of layoffs. Working in fear is unhealthy to
the employee and is detrimental to the company’s performance. Also, when a company acquires
another company, debt may accrue from excessive acquisitions. Marissa Mayer has sent Yahoo!
on a startup shopping spree. Acquiring companies may be a smart move, but it costs more than
its purchasing price. As there are more businesses under Yahoo!, there are more employees to
31 pay and other costs to cover. If the calculations are incorrect, Yahoo!’s operating income could
collapse due to its failure to slow down purchasing and calculate its expenditures.
Another move is to enhance their advertisements relative to Google. Although this may
remove Google’s involvement with Yahoo!, Yahoo! might want to consider enhancing its
advertisements. This move will put Yahoo! in direct competition with Google’s ads. Yahoo! has
developed an advertising service called Gemini, which empowers advertisers by developing
marketing content on mobile and native applications for mobile and tablet devices. According to
“Yahoo! Gemini: Complete Guide to Yahoo!’s Mobile & Native Advertising” by Miranda
Miller, ads are blended with the editorial content in the native formatted websites. This makes
the advertisement much more imposed than others, thereby making it difficult to miss for the
viewer. According to research by Sharethrough, in the article provided by Miller, a company that
develops native advertising software found that 23% of viewers were more likely to look at
native ads than banner ads. Native ads were viewed 53% more than banner ads. Yahoo! has a
tool that can be very helpful in the future if improved upon properly.
Lastly, reducing expenditures is vital move for Yahoo!. According to Professor Larry
Gee, labor is not the only expenditure for business, but is the biggest cost to a company, so
reducing the workforce can have a positive impact on the bottom line. Yahoo! produces less
revenue per employee than Google. Google yields 3.33x more revenue per employee than
Yahoo!, which is a huge disparity. If Yahoo! desires to compete against Google and regain the
lead, they must find a way to produce more revenue with fewer employees. Since Mayer is
focused on hiring better talent and the company prefers to keep their employees, they must find a
solution to optimize their workforce in order to yield more revenue. Yahoo! is work in progress,
which means their business model is too.
32 Case Question 3: What steps can Yahoo! make to realign its business model?
If Yahoo! opts to keep their core business units and sell less of their stake in the Alibaba
Group, we believe Yahoo! can continue taking steps to realign its business model. Their business
model is to provide content through vertical integration (the different free applications provided
by Yahoo! such as news, games, fantasy sports, dating, etc.), web search, and email at no cost to
the consumer. In addition, the consumer is granted access to self-customization of their email
and web portal pages. In return, Yahoo! receives traffic. This traffic becomes attractive to
marketers resulting in companies seeking to place marketing content with Yahoo!, generating
much needed revenue. Essentially, Yahoo! generates revenue by gaining traffic created by the
many users of their website. Yahoo!’s sole existence is funded by the ads, which are brought in
by high volumes of consumer traffic. The way Yahoo! is attempting to achieve increased traffic
is through their strategic alliance with Microsoft and Google, reducing their workforce,
developing a stronger corporate culture, improving downward communication, improving user
experience, finding hosts for advertisements, and improving the mobile experience. The
alliances Yahoo! has formed with Microsoft and Google can only help the company generate
revenue.
The reduction of costly expenditures is imperative and a stronger culture can help
improve collaboration and cohesion within the company. To improve cohesion Yahoo! needs to
focus on the top-down communication. Downward communication of company strategy has been
an issue for employees. In a Harvard Business Review article, “When CEOs Talk Strategy, Is
Anyone Listening,” a survey conducted at 20 major Australian corporations showed that 71% of
employees did not understand their employer’s strategy. Without knowing the strategy,
employees may potentially move off target, costing the company hundreds of thousands of
33 dollars. Although this study was conducted outside of the United States where cultures differ, it
sheds light on the possibility that downward communication at a corporation is faulty today.
Marissa has made it a point to communicate so that her employees and consumers understand the
company’s vision. In a plethora of interviews, Mayer can be heard repeating the same words,
driving the company’s ideology home. This was her method of instilling the company vision and
plan and resulted in shaping employee's’ identity with the company.
Another way Yahoo! is realigning its business model is through their Graphic User
Interface. The reason for traffic (amount of visitors at a website), which helps advertisement
placement demand, is the web portal’s interface. Yahoo!’s platform allows users to customize
their experience by allowing them to highlight the verticals they prefer to prioritize on their
homepage. Another is applying the MAYA principle, which aims to reduce anxiety by gradually
(Schneider) improving the learning curve of users to the new software. These two attributes are
helping to attract new customers and are what has assisted in maintaining its 800 million users
Yahoo! experiences today.
Yahoo!’s GUI has its downfalls. There are too many verticals that make the process more
complicated than it should be. This needs to be improved in order to realign its business model,
which is driven by growing traffic. The three principles for its interface are simplicity,
efficiency, and entertaining. Having a complicated process is counter to this philosophy. On the
contrary, Google’s homepage achieves all these objectives well. Yahoo! must make the same
effort in order to increase its consumer base. Although Yahoo! has a web portal to host
advertisements, they must also locate advertisement spots for their acquired companies. The
acquisition of companies such as Flickr and Tumblr have paved the way for this. On Flickr, ads
are posted in users’ albums. In Tumblr, sponsored content is layered in between other posts. The
34 above suggestions are lucrative ways Yahoo! can generate revenue. However, it has not been
effective just yet. This means that the company must either modify their ad placement or find
other hosts where the ads yield moderate to high revenues. Finding hosts for advertisement is one
way Yahoo! is realigning its business models.
Another way is in how it deals with its mobile experience. The mobile market will be
growing to $40 billion in 2019, and Yahoo! is attempting to capitalize on this growth. They are
implementing two different methods of advertisements for the mobile and tablet users. They
have downloadable applications for iTunes and Google Play to increase accessibility for the user.
Unfortunately, Yahoo! faces a problem concerning their application. It needs to work on its iOS
version of the “Yahoo! – News, Finance, Sports & More” which has received bad reviews. It has
had ten ratings with a ranking of one and a half stars out of five. If Yahoo! wants to attract more
mobile customers, they must have high quality applications to build market shares. Yahoo!’s
other applications have four or more out of five stars when reviewing both app stores.
Acquiring more businesses is another way the company is able to realign its model.
When Yahoo! makes an acquisition they must be sure to be tactical because purchasing the
proper companies can lead to three positive outcomes: increased talent pool, enlarged revenue
streams, and diversification of a company’s portfolio. Having more skilled employees helps with
productivity and innovation and improves various aspects of the company. For example, in the
article “Marissa Mayer Spends $640 Million To Buy A Video Advertising Company” by Matt
Rosoff, Yahoo! purchased Brightroll, a video advertising company that assisted Tumblr’s
improvement of video ads. However, an increase in workforce is contradictory to improving
revenue per employee. In this case, Yahoo! might have to select the most talented workers and
release the others. The situation is quite complex because the psychology of worker morale may
35 be negatively affected such that they work in fear, or create tension within the workplace. This is
a pitfall Yahoo! must avoid. Moving forward, some acquisitions may result in cash cows. This
means that the asset produces high revenue growth. Tumblr is currently a potential cash cow.
According to the article “Tumblr Plans To Turn Into A $100 Million Business By Taking On TV
and Newspapers” by Lara O’Reilly, the company publicly stated that they expect Tumblr to
gross $100 million in revenue in 2015. Another outcome provided by acquisitions is the
expansion of a company. For example, Marissa Mayer became a first-mover in the mobile
industry when she announced that Yahoo! was going mobile. However, she lacked a mobile
hardware and software division as well as a web browser. This made her path to success difficult.
To move forward, she acquired companies such as Aviate and Flurry that would help with the
mobile aspect of its business. In doing so, she expanded Yahoo! by diversifying its products and
services. Marissa Mayer is nothing short of an underdog in her industry. However, she has a
business strategy that aims to turn the tides in hopes to return Yahoo! to its once dominant era.
36 Case Question 4: What is Marissa Mayer's business strategy? How does it tie into Porter's
Five‐forces in Question 1. Explain.
Two of Marissa Mayer’s strategies include gaining market share and reducing cost. In
review, Yahoo! is mostly affected by bargaining power of buyers (the companies seeking
advertisement space), and intensity of competitive rivalry. Advertisers have options about who
they choose to do business with, making the strategy to gain market share difficult. Yahoo! must
be able to provide a differentiated service to the customer to draw them to their company.
Yahoo!’s strategy has been to improve consumer traffic to their websites, persuading potential
advertisers that their message will reach a broader audience, thus generating Yahoo! revenue.
In terms of intensity of competitive rivalry, Yahoo! is in dire need of an effective course
of action to stay relevant. They must find a way to differentiate themselves from their
competitors and build a solid identity for the struggling company. Mayer’s strategy in this area
piggy backs on the same strategy to reduce the power of buyers. Yahoo! focuses on increasing
traffic, making their advertising space more desired. In the mobile realm, Yahoo! has developed
Gemini, an advertising platform, which attempts to improve the marketing content and enhance
the mobile user experience. This offering is different from competitors because it is brought
about by the native advertisement.
With the current news that Yahoo! is looking to sell off core business units, we are
unclear if improving market share is even possible moving forward. We believed Marissa Mayer
was doing what she could to improve Yahoo!’s current state but the recent announcements are
concerning. Selling off business units that are profitable can lead to the end of Yahoo!.
37
Mayer’s previous strategies to turnaround Yahoo! can be seen with the company’s
investment in Katie Couric, advertisements, acquisitions, and alliances which all seemed
promising and full of potential. Most of these tactical decisions seem to have fallen flat, not
reducing the power of suppliers. It is clear Mayer’s strategy to develop a focused identity for the
company can have a profound result. Being able to differentiate itself from competitors, is one of
the few things Yahoo! can control. To build credibility the company brought a highly renowned
journalist to their team, Katie Couric. On Yahoo!’s homepage, we can see that news is the
highlight of the web portal, placed in the center position of the webpage, making it impossible to
miss. It’s believed Katie Couric will generate traffic by developing original content, which the
competitors don’t currently offer.
To further address the competitive rivalry Mayer is acquiring companies to improve
Yahoo!’s presence. Through acquisitions, Yahoo! will have access to more talented employees,
potential revenue streams, and expand the company’s portfolio. Mayer has also formed alliances
with its competitors in order to improve revenue growth and address the high level of
competition. With all the changes Yahoo! has undergone and is in the middle of today, we can
only wait and watch to see whether Yahoo! improves.
38 Conclusion:
Yahoo! has been through many ups and downs since its inception. Within 72 hours of this
document being due, Yahoo! announced startling and concerning news. Per the New York Times
it appears Yahoo! has begun to discuss selling off core business units. Some of these units would
include the most profitable sectors, pay-per-click advertising, and their email services. If Yahoo!
was to move in this direction, it appears the company is beginning to disassemble itself. It is sure
to be the end of Yahoo! if it is left with only its search engine technology. The search engine
sector for Yahoo! has declined heavily, it is not profitable, and has always been dependent on
advertising revenue to be profitable.
In addition to the potential sale of Yahoo!’s core businesses being sold, Yahoo! is also
discussing plans to sell 15% stake in the Alibaba Group. The sale of these stakes will generate
cash flow but the taxes are said to be hefty, making the sale potentially ineffective. Tactical
strategies such as these have been Yahoo!’s Achilles heel for many years.
Shareholders had hoped Marissa Mayer would be able to turn the business around. Four
years after taking over as CEO, many shareholders are seeking to remove Mayer, citing that
Yahoo! has not experienced the turnaround they expected. It was stated Yahoo! has not
introduced any “break through products”, but they do acknowledge Mayer was able to stop the
major decline Yahoo! had been experiencing.
The environment they are in is extremely dynamic and highly competitive. Yahoo! may
have enjoyed the first-mover advantage in the beginning of its run, but those days are gone. It’s
vital Marissa Mayer continue to implement strategies that recreate Yahoo!’s identity and
improves their market share. We don’t believe selling off profitable business units improves
market share. Strategic alliances are key to increasing revenue and rebuilding the company.
39 Acquisitions need to be limited to truly necessary purchases and acquisition pitfalls need to be
avoided at all costs. Both of the most recent acquisitions, Tumblr and Polyvore, have not shown
their real value to Yahoo!, damaging consumer confidence.
With Yahoo! losing money every quarter, it is only a matter of time before Yahoo! will
be acquired by a larger company and be forced to sell off business units to survive, or completely
go belly up. Innovation will be what makes a difference in their future. The time is now for
Yahoo! to make the necessary shifts and changes to achieve success again. With all the current
news, we are forced to wait for the board’s decision on their next steps. The future for Yahoo! is
uncertain, but with some of the ideas stated we still believe they can become profitable again.
40
Bibliography
Associated Press. "Google Buys YouTube for $1.65 Billion."MSNBC. MSNBC, 10 Oct. 2006.
Web. 20 Nov. 2015. <http://www.nbcnews.com/id/15196982/ns/business-
us_business/t/google-buys-youtube-billion/#.Vl0Qw3tNLjB>.
Bloch, Richard. "Buy, Sell, or Join Forces?" Pros and Cons of Business Acquisition. 2015. Web.
21 Nov. 2015.
<http://www.thehartford.com/business-playbook/in-depth/business-acquisition-pros-cons>.
Business Wire “Yahoo to Acquire Polyvore” BusinessWire 31 July 2015. Web. 10 Nov 2015.
<http://www.businesswire.com/news/home/20150731005868/en/Yahoo-Acquire-
Polyvore>.
Bureau of Labor Statistics. "Software Software Developers: Occupational Outlook Handbook."
U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 8 Jan. 2014. Web. 20
Nov. 2015.
<http://www.bls.gov/ooh/computer-and-information-technology/software-
developers.htm>.
Carew, R., MacMillan , D., & Benoit , D. “Yahoo Board to Weigh Sale of Internet Business.”
Wall Street Journal. 1 Dec. 2015. Web. 2 Dec 2015
<http://www.wsj.com/articles/yahoo-board-to-weigh-potential-sale-of-internet-business-
sources-say-1449015461>
Cohan, Peter. "Yahoo's Tumblr Buy Fails Four Tests Of A Successful Acquisition." Forbes.
Forbes Magazine, 20 May 2013. Web. 22 Nov. 2015.
<http://www.forbes.com/sites/petercohan/2013/05/20/yahoos-tumblr-buy-fails-4-tests-of-
a-successful-acquisition/>.
Costill, Albert. "50 Things You Should Know About Tumblr - Search Engine Journal." Search
Engine Journal. 9 Jan. 2014. Web. 20 Nov. 2015.
<http://www.searchenginejournal.com/50-things-know-tumblr/84595/>.
Del Ray, Jason. "Yahoo Paid Around $200 Million for Polyvore, a Search Engine for Fashion."
Recode. Recode, 3 Aug. 2015. Web. 21 Nov. 2015.
<http://recode.net/2015/08/03/yahoo-paid-around-200-million-for-polyvore-a-search-
engine-for-fashion/>.
41 Duthrie, Doug. "Marissa Mayer: Choosing Corporate Culture Over Worker Independence."
Forbes. Forbes Magazine, 8 Mar. 2013. Web. 22 Nov. 2015.
<http://www.forbes.com/sites/dougguthrie/2013/03/08/marissa-mayer-choosing-corporat
e-culture-over-worker-independence/>.
Efrati, Amir “Yahoo Buys Mobile-App Maker Stamped” Wall Street Journal 25 Oct. 2012.
Web 10 Nov 2015.
<http://www.wsj.com/news/articles/SB10001424052970204076204578078842424741154>.
Fleischmann, Casey. "US Social Media User Statistics for 2015 [INFOGRAPHIC] #smlondon."
Social Media London Smlondon. 15 Jan. 2015. Web. 1 Dec. 2015.
<http://socialmedialondon.co.uk/us-social-media-stats-2015/>.
Forbes “Yahoo’s Top 10 Biggest Acquisitions” Forbes No Date. Web. 11 Nov 2015.
<http://www.forbes.com/pictures/eeji45ejede/1-broadcast-com/>.
Garner, Patricia. "Why Yahoo's Acquisition of Tumblr Generated Revenue." Yahoo Finance.
26 Jan. 2015. Web. 11 Nov. 2015. <http://finance.yahoo.com/news/why-yahoo-
acquisition-tumblr-generated-145210517.html>.
Harvard Business Review Staff. "When CEOs Talk Strategy, Is Anyone Listening?" Harvard
Business Review. 1 June 2013. Web. 20 Nov. 2015.
<https://hbr.org/2013/06/when-ceos-talk-strategy-is-anyone-listening/ar/1>.
Hill, Charles, and Gareth Jones. "Case 23: Is Yahoo's Business Model Working in 2011?"
Strategic Management An Integrated Approach. 10th ed. South-Western Cengage
Learning, 2013. Print.
Hill, Charles W. L., and Gareth R. Jones. "External Analysis: The Identification of Opportunities
and Threats." Strategic Management: An Integrated Approach. 10th ed. Mason:
South-Western, Cengage Learning, 2013. 53-57. Print.
Hines, Matt “Yahoo acquires Oddpost to bolster e-mail.” CNet 12 July 2004. Web 10 Nov 2015.
<http://www.cnet.com/news/Yahoo-acquires-oddpost-to-bolster-e-mail/>.
Kotter International. "5 Ways Mayer's Trying To Kick-Start The Yahoo Culture." Forbes.
Forbes Magazine, 8 July 2013. Web. 21 Nov. 2015.
<http://www.forbes.com/sites/johnkotter/2013/07/18/the-marissa-mayer-method-5-steps-
to-kick-starting-the-yahoo-culture/>.
42 Leahey, Colleen. "The Marissa Mayer Timeline." Fortune. 17 July 2012. Web. 30 Nov. 2015.
<http://fortune.com/2012/07/17/the-marissa-mayer-timeline/>.
Le Ray, Jean-Marie. "Translation 2.0: Yahoo’s Mission."Translation 2.0: Yahoo’s Mission.
Translation 2.0, 31 July 2015. Web. 24 Nov. 2015.
<http://translation20.blogspot.com/2015/07/yahoos-mission.html>.
Lee, Wendy. "Yahoo Waiting for CEO's Acquisition Plan to Pay off." San Francisco Chronicle.
San Francisco Chronicle, 7 Nov. 2015. Web. 20 Nov. 2015.
<http://www.sfchronicle.com/business/article/Can-Yahoo-s-acquisitions-give-company-a
-6614164.php>.
Lunden, Ingrid. "Yahoo Buys Mobile Analytics Firm Flurry For North Of $200M." TechCrunch.
TechCrunch, 21 July 2014. Web. 22 Nov. 2015.
<http://techcrunch.com/2014/07/21/yahoo-is-buying-mobile-analytics-firm-flurry-for-no
th-of-200m/>.
Macmillan, Douglas. "Yahoo Scorecard: Measuring Marissa Mayer Against Her Words." The
Wall Street Journal. 24 Nov. 2015. Web. 22 Nov. 2015.
<http://blogs.wsj.com/digits/2015/11/24/yahoo-scorecard-measuring-marissa-mayer-agai
nst-her-words/>.
McCullough, Brian. "Internet History Podcast." ON THE 20TH ANNIVERSARY – THE
HISTORY OF YAHOO’S FOUNDING. Internet History Podcast, 1 Mar. 2015. Web. 1
Nov. 2015.
"Microsoft and Yahoo Agree to Amend Search Partnership." Yahoo. 16 Apr. 2015. Web.
1 Nov. 2015.
<https://info.yahoo.com/press-center/article/microsoft-yahoo-agree-amend-search-
130000454.html>.
Miller, Miranda. "Yahoo Gemini: Complete Guide to Yahoo's Mobile & Native Advertising
Offering." The WordStream Blog. WordStream, 6 May 2014. Web. 20 Nov. 2015.
<http://www.wordstream.com/blog/ws/2014/05/06/yahoo-gemini>.
Merced, Michael. “Yahoo’s Board is Said to Weight Selling Off Core Business.” NY Times.
2 Dec. 2015 Web 1 Dec. 2015
43 Moulton, Maureen. “What Culture Means to Yahoo!” Corvirtus. 13 Apr. 2015. Web.
22 Nov. 2015.
< http://www.corvirtus.com/the-importance-of-company-culture-to-grow-yahoo>.
Montoy-Wilson, Paul. "Yahoo Aviate." Yahoo Aviate. Yahoo, 12 Feb. 2015. Web. 21 Nov. 2015.
<http://yahooaviate.tumblr.com/>.
Nieva, Richard. "With Update, Yahoo Tries to Ride Popularity of Mail App." CNET.
29 Apr. 2013. Web. 10 Nov. 2015.
<http://www.cnet.com/news/with-update-yahoo-tries-to-ride-popularity-of-mail-app/>.
O’Donnell, Charlie “Yahoo’s $1.1 billion acqui-hire of David Karp.” 20 May 2013. Web.
10 Nov 2015
<http://fortune.com/2013/05/20/Yahoos-1-1-billion-acqui-hire-of-david-karp/>.
O'Reilly, Lara. "Tumblr Plans To Turn Into A $100 Million Business By Taking On TV And
Newspapers." Business Insider. Business Insider, Inc, 12 Nov. 2014. Web. 22 Nov. 2015.
<http://www.businessinsider.com/david-karp-says-tumblr-is-best-place-for-aspirational
marketing-2014-11>.
Oreskovic, Alexei “Hope and fear mark Yahoo at crossroads.” Reuters 5 May 2009. Web 10
Nov 2015.
<http://uk.reuters.com/article/2009/05/05/Yahoo-idUKLNE54400I20090505>.
Oveture Details from SEC:
<http://www.sec.gov/Archives/edgar/data/1060439/000095014803000429/v88074e10vk.
htm>
Patel, Neil. "The Ultimate Google Algorithm Cheat Sheet." Neil Patel The Ultimate Google
Algorithm Cheat Sheet Comments. 17 Feb. 2015. Web. 20 Nov. 2015.
<http://neilpatel.com/2015/02/17/the-ultimate-google-algorithm-cheat-sheet/>.
Pepiton, Julianne “Yahoo and Facebook settle patent brawl.” CNNMoney 6 July 2012. Web
10 Nov 2015.
<http://money.cnn.com/2012/07/06/technology/Yahoo-facebook-patent-
settle/index.htm>.
44 Pepiton, Julianne “Yahoo confirms CEO is out after resume scandal.” CNNMoney
14 May 2012. Web 10 Nov 2015.
<http://money.cnn.com/2012/05/13/technology/Yahoo-ceo-out/index.htm>.
Pepiton, Julianne “Yahoo must learn from past merger mistakes.” CNNMoney
20 May 2013. Web. 10 Nov 2015.
<http://money.cnn.com/2013/05/20/technology/social/Yahoo-tumblr-
acquisitions/index.html>.
Perlroth, Nicole. “Marissa Mayer hopes to improve user experience at Yahoo.” Inidantimes
17 July 2012. Web 11 Nov. 2015.
<https://web.archive.org/web/20120717195637/http://timesofindia.indiatimes.com/tech/e
nterprise-it/strategy/Marissa-Mayer-hopes-to-improve-user-experience-at-
Yahoo/articleshow/15015065.cms?>.
"Phablets Will Start Eating into Tablet Sales over the next 12-18 Months." IBNLive.
15 Sept. 2014. Web. 11 Nov. 2015.
<http://www.ibnlive.com/news/india/phablets-will-start-eating-into-tablet-sales-over-the-
next-12-18-months-639007.html>.
Primack, Dan. "Marissa Explains It All: Yahoo CEO on AOL, Katie Couric and Sergey Brin's
Parting Advice." Fortune. Fortune, 19 May 2015. Web. 22 Nov. 2015.
<http://fortune.com/2015/05/19/marissa-explains-it-all-yahoo-ceo-on-aol-katie-couric-an
d-what-sergey-brins-parting-advice/>.
Rosoff, Matt. "It Looks as If Marissa Mayer Drove a Pretty Hard Bargain with Microsoft."
Business Insider. Business Insider, Inc, 20 Apr. 2015. Web.
<http://www.businessinsider.com/yahoo-microsoft-search-deal-official-details-published-
2015-4>.
Rosoff, Matt. "Marissa Mayer Spends $640 Million To Buy A Video Advertising Company."
Business Insider. Business Insider, Inc, 11 Nov. 2014. Web.
<http://www.businessinsider.com/yahoo-buys-video-ad-platform-brightroll-2014-11?r=U
K&IR=T>.
Schneider, Speider. "Yahoo vs. Google: Quick UI/UX Design Lessons." Studio by UXPin.
UXPin, 29 June 2015. Web. 21 Nov. 2015.
45
<http://studio.uxpin.com/blog/google-vs-yahoo-quick-uiux-lessons/>.
The Search Engine List. "The Search Engine List: Home." The Search Engine List RSS. 21 May
2010. Web. 22 Nov. 2015. <http://www.thesearchenginelist.com/>.
Smith, Craig. "45 Amazing Yahoo Statistics." DMR. 7 Nov. 2015. Web. 10 Nov. 2015.
<http://expandedramblings.com/index.php/yahoo-statistics/>.
Sullivan, Danny. "What Is Google PageRank? A Guide For Searchers & Webmasters." Search
Engine Land. 25 Apr. 2007. Web. 22 Nov. 2015.
<http://searchengineland.com/what-is-google-pagerank-a-guide-for-searchers-
webmasters-11068>.
Taibi, Catherine “Katie Couric Makes Yahoo ‘Global Anchor’ Debut” Huffington Post 23 Jan.
2014. Web 8 Nov 2015.
<http://www.huffingtonpost.com/2014/01/13/couric-global-anchor-debut-yahoo-katie_n_
4590506.html>.
Thomas, Owen. "Here's The Saddest Thing Marissa Mayer Said About Yahoo."
Business Insider. Business Insider, Inc, 25 Jan. 2013. Web. 21 Nov. 2015.
<www.businessinsider.com/marissa-mayer-yahoo-mobile-2013-1>.
Tkaczyk, Christopher. “Marissa Mayer breaks her silence on Yahoo’s telecommuting policy.”
Fortune. 19 Apr. 2013. Web 29 Nov. 2015
< http://fortune.com/2013/04/19/marissa-mayer-breaks-her-silence-on-yahoos-
telecommuting-policy/>
Trefis Team. "Yahoo's Strategy Behind Launch Of New Mobile Developer Suite." Forbes.
Forbes Magazine, 26 Feb. 2015. Web. 22 Nov. 2015.
<http://www.forbes.com/sites/greatspeculations/2015/02/26/yahoos-strategy-behind-laun
ch-of-new-mobile-developer-suite/>.
Winkler, Rolfe. "YouTube: 1 Billion Viewers, No Profit." The Wall Street Journal. The Wall
Street Journal, 25 Feb. 2015. Web. 20 Nov. 2015.
<http://www.wsj.com/articles/viewers-dont-add-up-to-profit-for-youtube-1424897967>.
Yahoo. "Advertisers Can Now Use Flurry Personas in Yahoo Gemini." Yahoo Advertising.
Yahoo, 8 Apr. 2015. Web. 22 Nov. 2015.
<https://advertising.yahoo.com/Blog/FLURRY-PERSONAS-YAHOO-GEMINI.html>.
46 “Yahoo! buying BCST.com.” CNN 1 Apr. 1999. Web 10 Nov 2015.
<http://money.cnn.com/1999/04/01/deals/Yahoo/>.
“Yahoo! buys GeoCities.” CNN 28 Jan. 1999. Web 10 Nov 2015.
<http://money.cnn.com/1999/01/28/technology/Yahoo_a/>.
"Yahoo Inc." Yahoo Finance. 30 Nov. 2015. Web. 30 Nov. 2015.
<http://finance.yahoo.com/q?s=YHOO>.
Yakowicz, Will. "Global Spending on Mobile Advertising To Reach $18 Billion in 2014."
Inc.com. 21 Jan. 2014. Web. 10 Nov. 2015.
<http://www.inc.com/will-yakowicz/report-global-spending-mobile-ads-18-billion-
2014.html>.
Yousuf, Hibah. “Yahoo sues Facebook for patent infringement.” CNN 12 Mar. 2012. Web
10 Nov 2015.
<http://money.cnn.com/2012/03/12/technology/Yahoo-facebook-lawsuit/index.htm>.
