Business Analytics Capstone

Yahoo!’s Framework for Strategy

Jason Lim Chee WaiAugust 1st, 2016

Problem Statement

Effect on Customers: Diminishing Relationship• Adblocks are destroying the relationship between Yahoo!'s advertisers and consumers, costing the

company tens of millions of dollars in ads impressions a year. According PageFair, use of ad blocking software also grew 41% in 2015 and there are currently 198 million active adblock users around the world.

• Adblocking software diminish users experience and in that sense become an issue for users themselves. As free contents becomes costlier for publisher to support, any users with ad-blocker will be asked to pay for access unless the websites are whitelisted. Thus adblocks punishes good advertising and ruin the relationship between consumer and advertiser. At a publisher or property level some ads are useful but if the adblocker blocks all types of ads, it would destroy the value exchange and the ecosystem.

• In an attempt to circumvent adblocking applications, some online publishers may opt to to serve ads from their own servers instead of serving ads from Yahoo!. This may provide publishers the advantage of having escape common filter rules, which are targeted at large advertising servers like Yahoo!'s. In doing so, the publishers now have to manage their own ads publishing application along with ads management, which leads to higher cost of advertising and operations.

Effect on Revenue: Costs to Unblock• A report from web development firm '10up' predicts that mobile ad blockers could deprive publishers

of between 3% and 11% of their ad revenue within the next eight months, this would have a direct impact towards the bottom line of Yahoo!’s revenue from online advertising.

• Adblockers may charge ads publisher like Yahoo! a similar display-for-pay arrangement. Adblock Plus for instance, lets Microsoft, Amazon, Google, and roughly 70 other companies pay to be whitelisted by default.

• In another case, an opposition to 'Adblock Plus' led by small web sites has led to decisions to block all Firefox users from their sites in retaliation. Yahoo! pays Firefox hundreds of millions of dollars a year to become Firefox's default search. Blocking firefox users will make the browser less desirable for users and becomes counter-intuitive for Yahoo! to continue paying Firefox. However, some free websites resorts to just asking visitors if they would kindly turn their ad blockers off.

• Small publishers and niche sites who does not have the technical capabilities to overcome adblockers with localized ads management could face high challenges to monetize their content. Blocking display ads eventually hurts their business, and is unethical because it allows users to view content without paying the implied price of an ad impression, unless they pad adblockers to be whitelisted.

Problem StatementThe problem Adblockers present to Yahoo!

Effect on Operations: Change in KPI and Focus• Due to new technological, the organization may need to change its focus on new innovation in

delivering ads to users as well as new solutions against adblockers.• Yahoo! will need to hire new talent to develop new channel to deliver their ads through non-traditional

channels and create new platforms where relevant ads and users co-exist in balance with internet contents.

• This may require overhaul of Yahoo!’s business focus and strategy, which will have an effect from the top of the management and all the way down along the chain of management to ensure that key performance index reflects them.

Effect on Internal Organization: Business Model Not Sustainable• Yahoo! may suffer from diminishing ads publishers as they flee from the web and publish their contents

into apps where ads cannot be blocked. Ads publishers may also make apps of their own, or choose to publish with social media platforms like Facebook to host and deliver their content.

• Publishers may also jump ship to news aggregators like Apple News, a newsreader app Apple introduced with the same update that brought ad blocking to iPhones, but this could result in a bad experience for users accustomed to reading news on the web rather than constantly shifting through different apps. For publishers, ad blocking may just lead to a jump in sponsored or native content, or more publisher-produced paid apps.

• Apple has been making attempts to devalue the web in favor of apps, publishers dependent on ads as primary revenue may be forced to publish with Apple only. Such moves will have an adverse effect on Yahoo!'s revenue which depends mostly on ads. And yet if more ad blocking does make publishers more dependent on third-party platforms such as Apple News, Facebook Instant Articles, and Snapchat Discover, it could help consolidate those companies’ power as gatekeepers to determine what qualifies as news. This may leads to publishers prioritize alternative monetisation methods away from Yahoo!'s ads platform adverts.

Problem StatementThe problem Adblockers present to Yahoo!

Strategy

Overview• Online ads contributes more than half of Yahoo!’s revenue an that poses a serious business risk.• All of Yahoo!’s content that depended on their ads platform to sustain itself will be jeopardized.• Yahoo! needs to find alternative revenue source and stop purchasing more ads platform.• Increased visibility for their ads will not help increase revenue as ads platform faces stiff competition

from other internet giants.

Strategies to Pursue1. Diversify revenue source

• Starting with lowest hanging fruit, Yahoo! should recognize viable core products that still retains its users and start offering a subscription based model as options.

• Along with these enterprise solutions that Yahoo! provides with its subscription based model, it may need to start developing web applications as a complementary service.

• As Yahoo! develop more products and subscription based services, overtime it will develop a productive online platform for their users to continue using their services within it's own online platform and presence.

2. Deeper understanding of customers• Information about how Yahoo!'s users interact with their products can be mined and used for

making their products better.• The same information can also be used to measure user activity with Yahoo!'s other cross web

applications.• Yahoo! will need to start collecting metrics, surveys and truly be on the ground with their

customers to find how much they really know about their customers.• In the process, Yahoo! will discover its real identity, in which the company has been searching for

years.

StrategyProposed strategy for Yahoo!

3. Evolve constantly• Yahoo! will need to emulate best practices of other successful technology companies when it

comes to product development; which is plenty of testing, iteration and systems of feedback loops between the company itself and customers to ensure product success.

• Yahoo! also has to ensure all their product development and customer data are integral so that information are readily available during validation stage. Any decision to bring forth a product to the next stage needs to be supported by facts and evidences.

• By understanding their customer better, it is in the hope that in the long term this may give hint to Yahoo!'s identity and position in the long term.

StrategyProposed strategy for Yahoo!

Effects and Measurement

Effects and MeasurementAnticipated effects of the strategies and how to measure them

Anticipated Effects From the Strategy

• Choosing to pay ad blocker to be whitelisted will see the an increase of ads view increase but may not be back to its previous high

• Increase in paid subscribers over users from organic traffic as we start to introduce more paid services• Subscription revenue from web application services slowly replacing ad based revenue• Increased in web traffic over signups of new users interested in Yahoo!’s new offering of web services• Increased in staffing for web applications development over ads platform

The listed effects from the strategy requires that we implement the correct metrics of measurement for customers, revenue, and the internal organization.

Measuring Effects

1. Customer Analytics• We may announce and implement more detailed data collection of customer metrics for those who

prefer to continue using Yahoo!’s freemium option.• We may track customer's usage activity for Yahoo!’s web application for internal use to improve

customer experience.• We would measure the take up rate of some of the subscription plans customer have chosen and

revise subscription plans that are not popular.• Web analytics comes to mind to record user behaviour such as frequencies of unique and organic

pageviews, date and time, clicks, demographic profile and other data obtained across Yahoo!’s online offerings.

ImplementationFor each of the web application that Yahoo! is developing as part of its effort to switch away from being ad revenue dependent to subscription based revenue model, it would need to produce one of the example measurements provided for each of the three customer lifecycle below;Customer Acquisition Customer Retention Customer Churn

Customer Acquisition Cost: calculated by simply dividing all the costs spent on acquiring more customers by the number of customers acquired in the period the money was spent.

Recency, Frequency, Average Spending: tracking customer’s spending behaviour to enable better targeted marketing through customized email template.

Number of New VS Churned:the rate at which a subscription based service is losing its customers due to account cancellations or non-renewal of subscriptions.

Effects and MeasurementAnticipated effects of the strategies and how to measure them

2. Accounting Analytics• We may start to look at disposing assets that is non-core to the strategy of replacing ad with

subscription based revenue from web services.• Keeping tab of hiring and development cost for web application development.• The business will need to report revenues coming from new sales channel, changes in asset ratios

of ad based.• Tracking ad based and subscription based revenue separately, matching these two revenue type

according to costs incurred accordingly.

ImplementationWhen developing a new product, costs attributed to it needs to be apportioned and allocated properly. Methods of measurement that complies with accounting standards needs to be determined before hand. This will allow calculations related to returns of investment and efficiency to be determined for each functional departments as follow;Administration Marketing Operations

Apportioning of costs through use of floor space, tools, computer equipment, fixtures and fittings for each department that is sharing the resources to determine costs incurred accurately.

Costs incurred for each marketing campaign for digital and offline spending, matching them against increased sales from each channel attributable for each period of the campaign.

Using proper project management and tasks tracking to measure man hours that directly and indirectly contribute towards the running of the operations to measure efficiency.

Effects and MeasurementAnticipated effects of the strategies and how to measure them

3. People Analytics• Creation of new KPI to encourage practical creative initiatives• Coming out with investment policies to push promising ideas, developed by employees, into

commercialization• Creating surveys to find out what employees feel about the company’s short and long term

direction• Measuring service level agreement against service down time• Quarterly organization goal to reduce ad based revenue with subscription based revenue• Creating a platform for idea submission, ratings and collective feedback to measure viability• Measuring ratios of employee time spent on various development of company’s product and

services such as man-hours spent on discussion, development, planning and research to better understand the hours go into a product development.

ImplementationWhen executing corporate strategy, it is important that the vision and mission trickles down the chain of command properly. In order to ensure this, KPIs developed needs to reflect the corporate strategy and customize accordingly as follow;

Senior Executives Team Lead Individual

Develop incentives that is tied directly to company’s profitability. Among the contributing factors will be revenue and expenses. The amount achieved will be benchmarked against budget to enable long term goal seeking. These will be used as tangible KPIs to measure execution effectiveness of corporate strategies.

Managers, team leaders and supervisors KPIs will be measured through the team’s agreed Service Level Agreement (SLA). The SLA’s contain a benchmark of an agreed number of product and feature releases for the web application they are developing, thus ensuring that they are delivered on time. This ensure good use of man hours.

Every employee will have KPIs unique to their own specific role. This may incorporate ratings for performances that exceeds expectation or individual decisions that has an impact across the company and other departments. KPIs that recognizes individual growth promotes job satisfaction and career grooming.

Effects and MeasurementAnticipated effects of the strategies and how to measure them