Smart Players in the Dot-Com Sector
usman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The technology industry is heading towards its maturity stage, leaving little room for growth. A new ray of hope has emerged, however, as some industry players have repositioned their strategies to revive the technology industry. These companies are trying to attract visitors and advertisers by coming up with innovative products and continue to make investments to add new features. In this article, I will find out how Baidu (NASDAQ: BIDU), Yahoo! (NASDAQ: YHOO) and Yandex (NASDAQ: YNDX) are implementing their new techniques to survive in the industry and which have been successful so far.
Baidu, the leading Chinese-language Internet provider, announced its intent to purchase the entire issued share capital of 91 Wireless, a subsidiary of NetDragon. 91 Wireless is mainly engages in the development and operation of two leading smartphone applications distribution platform in China. Up until now, over 10 billion apps have been downloaded through this platform and it is declared as the top-ranked third party apps distributor in China. The company was acquired for $1.9 billion and provides a huge potential for Baidu. It will help the company achieve greater prominence in the mobile Internet market and will increase its earnings and capital base.
In addition to this, Baidu made another acquisition at the beginning of this month. In this transaction, it acquired the online video business of PPS, the leading Chinese Internet video provider, for $370 million. The online video business will be merged into Baidu’s video platform, iQiyi. The combined entities will provide China’s largest online video platform in terms of number of mobile users and video viewing time. The synergy created by the merger includes better marketing value and a broader range of options for advertisers. It will build a base for Baidu to become a great technology company with strong media DNA.
Yahoo! has launched Nuevo Pais, Nueva Vida in collaboration with Western Union. The new immigration resources website is available on Yahoo! en Espanol and provides educational information about the immigration process through editorial articles, slideshows, videos and other content. This service will draw more Hispanic users to the company's website.
In its latest acquisition, Yahoo! purchased Admovate, an advanced mobile and technology startup. Admovate will help marketers reach their desired audience at the right time and at the right place. The company’s personalization technology will increase Yahoo!’s capacity for mobile advertising.
The company has also acquired Tumblr for $1.1 billion in the last month. Tumblr will bring complementary content to Yahoo!’s media network and search experiences. It is anticipated that by acquiring Tumblr, Yahoo!’s audience will increase by 50%. This will help in increasing Yahoo!’s revenues, which have been shrinking over the years. The acquisition is overpriced, however, as the Tumblr's 2012 revenue was only $13 million and it will be hard for the company to recover its acquisition costs in the next few years.
Now let’s see what steps have been taken by the largest European Internet company, Yandex, which operates Russia’s most popular search engine. The company has entered into a joint venture with Sberbank of Russia. Under this deal, the bank acquired 75% interest in the charter capital of Yandex.Money for approximately $60 million. The goal of this venture is to bring innovation in online retail payment solutions. It will provide a payment solution for small and medium-sized businesses, and will also provide solutions for both online and offline customers to make frequent simple transactions.
Additionally, the company has introduced a new approach to emailing which automatically sorts personal emails. In addition to sending and delivering messages, the new service helps its users to complete all kinds of tasks from planning meetings to registering for flights depending on the type of correspondence. The company also released a full-fledged mobile browser for iPad and Android smartphones. These ventures will expand Yandex’s customer base and will increase the number of advertisement orders placed. This will eventually generate higher revenues and make Yandex a more recognizable brand name.
China’s Internet space is booming as the country has the largest Internet user population at 564 million. This rising trend will tremendously benefit Baidu. The company’s revenues almost doubled and tripled in 2011 and 2012 respectively as compared to 2010. Constant innovation has been the driving force behind the increasing revenues. Its recent acquisitions will make Baidu the leader in the mobile Internet market and online video platform in China, so I would recommend buying the company's stock based on its bright future.
The revenues of Yandex also skyrocketed in 2011 and 2012 as compared to 2010. As of March 2013, 61.9% of its search traffic came from Russia. The joint venture with the Russian bank and the launch of a mobile browser is likely to increase profits for the company. Yandex has a bright future ahead and I would make a buy recommendation for this company's stock as well.
Yahoo!’s performance, on the other hand, is not very pleasing since the company is losing its market share and its revenues have been decreasing over the years. Its debt profile is also getting worse. Moreover, its acquisition of Tumblr is not going to provide synergistic benefits as the transaction is overpriced. Admovate may help the company in improving its position, but it will take some time. As a result, I would not recommend buying the company's stock right now.
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usman iftikhar has no position in any stocks mentioned. The Motley Fool recommends Baidu and Yandex. The Motley Fool owns shares of Baidu. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!