Yahoo case analysis

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Yahoo case analysis
Introduction
Yahoo! Inc. was founded in 1994 by David Filo and Jerry Yang with its headquarters in Sunnyvale, California. The two were then doctorate candidates at Stanford University. They had developed the website as a personal website directory. They realized the potential of the website to generate revenue from advertisement. Sequoia Capital, a capital firm, decided to invest in the company. Yahoo first went public in 1996; selling a share at $13, rising to $33 at the end of the same day (CNET, np). As of 2017, Yahoo had 225 million monthly users; with markets in more than 30 regions across the world, showing the company’s global reach. Some of Yahoo’s products include; email, advertising, finance, social media and search engine. Over the years Yahoo has become a global brand with its services provided in over 20 different languages. It has changed how people access information, communicate to one another and buy products. Over the years, Yahoo has made changes to its business model, objectives and both internal and external strategies. For example, in 2012, Yahoo reduced its workforce by 14%; saving $375 million.
Yahoo has various stakeholders. Stockholders invest capital in the company; they are concerned with generating more company revenue and profits. Advertisers use Yahoo’s internet services to market their products and they are mainly concerned with connecting with their market. Employees provide the intellectual capacity for new innovative products.

As of mid-2017, Yahoo has about 9100 employees (Forbes, np). Employees are mainly concerned with ethical treatment, fair and stable jobs. Customers are concerned with innovative and enjoyable products. Yahoo’s most important core values are customer fixation and innovation; these values are essential in the industry.
External analysis of Yahoo! Inc.
Industry overview and analysis
Yahoo operates in the internet services and retailing industry; under the technology sector. Since this industry is dependent on technology, it changes rapidly hence highly competitive. Some of the competitors in the industry include; AOL, Facebook, Microsoft and Google. Google controls majority of market share in this industry; with 74.52% as of 2018 (Netmarketshare, np). Revenue generation in the industry depends on the user base. Advertisers, who are the main source of revenue for this industry, prefer to use web portals with large user base to advertise their products. Competition in this industry is high due low advertising prices and innovation of new products. However, product differentiation is difficult due to the oligopoly where few firms control the market. Mature markets for the industry are found in Europe and North America; with emerging markets in South America, Asia and South Africa.
Porter’s five forces analysis
Threat of new entrants: low
Due to the nature of internet, it is easy to enter the industry. However, it is difficult to attract a large user base due to technological knowledge, amount of capital and innovative skills required. Therefore threat of new entrants is low.
Threat of substitutes: low
The industry does not have many substitutes for the products offered. The substitute for the email service is the postal service; the search engine has no efficient substitute and the substitute for the financial services is the financial newspapers. These substitutes are not effective hence provide a low threat.
Bargaining power of buyers: medium
The low cost of switching products and high competition in the industry contributes to high bargaining power of buyers. However, since companies are not dependent on individual users or advertisers makes the bargaining power of buyers to be medium.
Bargaining power of suppliers: low
Suppliers of search engines which enable users to search for content on the internet have low bargaining power. This is because the content is available on the internet for free.
Intensity of competitive rivalry: high
There is little product differentiation in the industry; hence users can easily switch products from one firm to another. The cost of switching products is also low; the main products which include search and email are free of charge. These factors contribute to the high intensity of rivalry.
Internal analysis of Yahoo! Inc.
Yahoo distinctive competence
Yahoo’s distinctive competency is its ability to help its users connect to their passions. This is evident from the company’s mission statement which states that, “Yahoo wants to connect people to their passion, communities and world’s knowledge.” Yahoo also enables people relate to their passions through their range of products; Flickr is a user friendly imaging database and Yahoo Finance provides its users with accurate financial data. The other competency is Yahoo’s global brand name. Yahoo has been able to keep users even when there are no new innovative products. Yahoo maintains its competitive advantage by providing contextual and customized mobile segment and advertising.
Changes in management over the past few years in Yahoo, such as the appointment of Marissa Mayer as the company’s CEO, shows that the company is more concerned with its internal environment rather than its external. The company aims to improvise on its products by increasing creativity and innovation in the company; hence increase its market share and financial performance.
Yahoo SWOT analysis
Strengths
Yahoo has over 225 million active monthly users as of early 2017. This high number of users helps the company generate high amounts of revenue through profitable internet advertising.
Yahoo has billions of mail subscribers; this makes Yahoo one of the most powerful marketing companies. This attracts companies to advertise their products through Yahoo hence generating high revenues for Yahoo.
Yahoo offers various platforms for its users which include; Yahoo finance, search engine, Yahoo mail, Yahoo answers and Yahoo directory.
Yahoo also offers a wide range of products to its users which include; Flickr, Yahoo Buzz, Yahoo real estate, Yahoo shopping, Yahoo mobile, Yahoo messenger, Yahoo personnel, Yahoo mail, Yahoo meme, Yahoo boss and Yahoo 360.
Weaknesses
Yahoo controls a small market share of the search engine. As of 2018 it was reported that Yahoo controlled 5.41% of the market. This is low compared to its competitors such as Google who control majority of the market with 74.52% and Microsoft’s Bing controlling 7.98% (Netmarketshare, np).
Yahoo is also losing ground to Google in the mailing services providers. Google has established its presence in the search engines market and this has helped gain more market share in mail services providers.
Yahoo is struggling financially and this is keeping away potential investors. Both tangible and intangible assets of the company are declining in value hence it is difficult for investors to invest in the company.
Most of Yahoo’s products such as mail services, financial data, shopping, business directory and news are offered by other organizations like Money Control, MSN, eBay and CNN.
Google’s dominance as service providers on the internet enables them to collect lots of advertisement revenue compared to Yahoo.
Opportunities
Yahoo Directory is the most authentic and best structured business directory. Further development on the product according to user needs will certainly generate more revenue for the company. There is also increasing number of Small Medium Enterprises who are potential advertisers on the directory platform.
Developing markets such as in South America, India and some parts of Africa provides opportunities for Yahoo to increase its number of users hence increase its market share.
There is also huge potential in Yahoo’s social media platform s such as Flickr. It is almost mandatory for companies to advertise their products on social media and the internet. With Yahoo already owning a social media platform presents the company with an opportunity to generate more revenue through advertisement.
Threats
Service providers on the internet, on a global scale, are normally threatened by increased competition especially from local markets. This is evident in the Chinese market where Baidu, local search engine, controls majority of the Chinese market.
Google’s dominant presence in the search engine services continues to pose significant threat to Yahoo survival in the market.
There are always new innovations in the internet by young entrepreneurs. This increases competition for Yahoo hence a threat.
Yahoo’s dominance of the advertisement market is also under threat from social networking sites such as MySpace and Facebook.
Yahoo key strategies
Yahoo has been acquiring infant companies; buying over 40 companies since 2012 (Baer, np). The company’s biggest buy was Tumblr for $1.1 billion. The company makes three types of acquisitions. Yahoo tries to snap up the best talents in mobile technology and editorial talents. The aim is to come up with new innovative products that are user friendly; hoping to increase users on its platforms. The company also makes strategic acquisitions; this evident by the purchase of Summly. Summly powers the company’s news digest app. Yahoo also makes major acquisitions such as Tumblr. These types of acquisitions help the company expand its global brand.
Yahoo has also extended its brand for the past few years. Such extensions include; Yahoo Magazine, the Smart TV app, Yahoo Advertising and Yahoo technology. These brand extensions aim to provide specialized news for different categories of people.
Yahoo has formed partnerships with some of its competitors. Yahoo does not own a mobile operating system, a mobile hardware, a social network or a browser. It is therefore difficult for them to compete with companies such as Google, Apple and Facebook. Yahoo works with Apple for a mobile operating system and Facebook for a social network. The aim of these partnerships is provide the best experience for users of the Yahoo site.
Yahoo financial performance
Yahoo is able to generate non- operating income from its investment in Alibaba, an e-commerce company based in China, where Yahoo owns about 15% as of end of 2015 (Downie, np). Yahoo also owns 35.5% of Yahoo Japan Corporation (Downie, np). Yahoo generated $4.68 billion in revenues between 2013 and the fall of 2014 (Statista, np). This was attributed to the acquisition of Tumblr which led to strong equity market. In 2017, the company generated $5.169 billion in revenues (Statista, np). However, Yahoo’s internet services were bought by Verizon in a deal worth $4.8 billion (Downie, np).
Recommendations
Yahoo should pay attention on one of their two main products; that is either search engine or media. They should further develop one of those areas by innovating new products that would attract more users to its platforms.
Yahoo should also consider further diversifying their sources of revenues. Yahoo should further venture into sectors that are less likely to be affected by poor performance of economy such as entertainment.
Yahoo should also consider offering country specific services such as target advertising. This would improve advertisement results compared to mass oriented advertising.
Works cited
CNET. “Yahoo IPO Closes At $33 After $43 Peak.” CNET, 1966, https://www.cnet.com/news/yahoo-ipo-closes-at-33-after-43-peak/.Forbes. “Yahoo! Inc..” Forbes.Com, 2017, https://www.forbes.com/companies/yahoo/.Netmarketshare. “Search Engine Market Share.” Netmarketshare.Com, 2018, https://netmarketshare.com/search-engine-market-share.aspx?options=%7B%22filter%22%3A%7B%22%24and%22%3A%5B%7B%22deviceType%22%3A%7B%22%24in%22%3A%5B%22Desktop%2Flaptop%22%5D%7D%7D%5D%7D%2C%22dateLabel%22%3A%22Trend%22%2C%22attributes%22%3A%22share%22%2C%22group%22%3A%22searchEngine%22%2C%22sort%22%3A%7B%22share%22%3A-1%7D%2C%22id%22%3A%22searchEnginesDesktop%22%2C%22dateInterval%22%3A%22Monthly%22%2C%22dateStart%22%3A%222017-02%22%2C%22dateEnd%22%3A%222018-01%22%2C%22segments%22%3A%22-1000%22%7D.
Baer, Drake. “7 Brilliant Strategies Marissa Mayer Used To Shake Up Yahoo.” Business Insider, 2014, http://www.businessinsider.com/strategies-marissa-mayer-used-at-yahoo-2014-3?IR=T.
Statista. “Yahoo: Annual Revenue 2016 | Statistic.” Statista, 2018, https://www.statista.com/statistics/266253/yahoos-annual-gaap-revenue/.Downie, Ryan. “Yahoo’s Stock: Only 8% Return In 10 Years (YHOO).” Investopedia, 2016, https://www.investopedia.com/articles/markets/072816/yahoos-stock-only-8-return-10-years-yhoo.asp.