What a Perfect Rebound Strategy!
Jyoti is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Yahoo! (NASDAQ: YHOO) is going through a rough patch of late. The shares are not showing any signs of improvement. The competitors like Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB) are becoming stronger day by day.
It all started during the late 2000 where the shares tumbled like a house of cards from around $110 (in and around January 2000) to a mere $4. They did gather a little momentum in 2007. But then they slowly started to lose their way. They tried all possible ways of getting back into the game by shuffling the top management, bringing in new CEOs, trying different acquisitions, and getting into different segments but all in vain! If we take a look at the revenue figures for the past few years it will depict the entire story:
- Revenue Figures ( Dollars in Billion) (Source – Yahoo’s Annual Statements)
- Display – Revenue generated through the display of graphical advertisements
- Search – Revenue generated through the display of text based links to advertisers
If we observe the chart carefully we will see that the major portion of the revenue comes through Search which has the highest dip as well. This can be primarily attributed to the growth of Google and Microsoft in the search domain.
Google has been known primarily for its search engine. It has the highest market share with a standing, as high as 66.8%. The search market has grown by leaps and folds and Google has been getting stronger day by day. This is quite evident from the chart below:
- Y-Axis represents the market share (in Percentage )
- X-Axis Represent the Year (Month-Year)
- Data Courtsey ( ComScore)
This chart depicts the growth story of Google and how Yahoo has been losing its way slowly and steadily. This has diverted a lot of ad revenue from Yahoo and other search engines towards Google. Google has added a lot of features to its search like News, its web based email (Gmail), Language Translator, Navigation Map and Online Video Streaming (Youtube). Google puts everything in one basket creating a comfort zone for its users. This is one of the reasons for its dominance in this market.
Facebook on the other hand has, altogether, created a different online social world. They have provided people to connect with each other, share photographs (Instagram), birthday reminders, Professional Connectivity (Glassdoor) and many other features. It currently stands at a mammoth database of 955 million users. They had one of the most successful IPOs in the recent past. But have not been able to maintain it, as the share prices have dropped by around 35 percent. This does not mean that they have lost their market share. They still continue to dominate the social networking world. The problem they are facing is how to transform their web revenue generating model into their mobile application!
On the other hand, Yahoo! has tried a lot of possible ways of getting back into the game by persistently trying newer sources of revenue generation. They did a lot of acquisitions in different fields like Web Search, Online Gaming, Internet radio, Data Analysis, Online Auctions, Web-Based Email, Voice Over Internet protocol, Calendaring Software, Social Media, News Site etc. The history shows that these acquisitions did not materialize at all. Some of them had a huge potential like Flickr.com – the best online digital photo sharing tool around 3 years ago. But since it was acquired by Yahoo, Flickr is lost in its own world.
These diverse acquisitions have raised a question on the existence of Yahoo. Basically a question that a common man would ask is - What is Yahoo? Is it a search engine like Google or a photo sharing application like Facebook’s Instagram or the online music store like AOL? This is where it is getting a bad hit which is finally identified by its young and enthusiastic CEO, Merissa Mayer.
Marissa Mayer is like the infusion of new blood into a dying patient – with a hope of survival. She has been proactive and has made a lot of substantial changes in the organization which are heading towards a positive direction. Last week she invited the entire Yahoo group to announce the turn-around strategy. She wanted to infuse a common goal into everyone’s mind i.e., to become the leading Mobile Personalization Company.
Why A Perfect Strategy?
She has potentially targeted the hottest revenue generating section in this technology world possibly for the next few years to come. A whole new world of opportunity exists with the way Smartphones and Tablets are gaining momentum in the recent past. This market has not been captured properly and marketers are trying all different possible ways.
Internet search provider Yahoo is about to embark on renewed efforts improve its search capabilities and advertising platforms, two areas of its business operation that have weighed on profitability (as depicted in the chart above) and scared off investors, AllThingsD reported on its website last Tuesday. It is planning to use its existing resources and add a few more in order to provide a totally personalized way of experiencing everything a user would expect on a mobile. It is developing a software that would help mobile applications deliver so-called personalized content, such as news and entertainment articles that differs based on each user's interests. This also includes gaming, online shopping, surfing, chatting, online music and many other features.
Marrisa Mayer recently launched the “Yahoo! Smart Phones, Smart Fun!” program. Here she offered all its employees to choose their free smartphones from a bunch of choices which also included iPhone 5. This was not just an employee engagement program to boost their morale. It was a strategic move with a vision of directing the employee towards the common goal (as mentioned earlier).
If she can execute it as planned and is able to create a single interface for a Personalized Mobile experience, then success would be knocking at their doors. This would pose a big challenge in front of their competitors. But do not expect that its competitors like Google and Facebook will sit back quietly. They are also slowly moving in strong. The question in the reckoning is who will dominate this Mobile war? Will it be the king of search engine – Google? Or The czar of Social Networking – Facebook? Or The new transformed Yahoo, which is due for a comeback?
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jyotiadvisor has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.