Yahoo: Failures

Jonathan | Naveen | Durga | Saloni

W H A T A M E S S !

“ I just try to ship products that I’m not ashamed of ” – Jeff Bonforte, Senior Vice

President, Communication Products, Yahoo. (Dec. 1, 2015, New York Times)

What is Yahoo’s business model today?

Value Proposition

“ Portal for customer’s needs (search engine, email, news, weather, etc.)

Creates value for advertisers with a streamlined, simple advertising technology ”

Revenue Model

Revenues come from display and search advertising (pay-per-click and banner ads)

Why is Yahoo failing?

1. Lack of Strategic Focus

•No business line focusSearch vs advertising vs media vs investments

•No market segment focusattempted to serve all demographics

•Didn’t play to win in a winners-take-all market

2. Poor acquisitions and deals

•Excessive reliance on acquisitionsinstead of organic growth

•Poor Acquisition Decisionslack of synergies, integration, and strategic fit + paid too much

•Poor Deals Partnerships failed to maximize Yahoo’s interests (eg. Alipay, Mozilla)

3. Poor Corporate Governance

• Incompetent boardas pointed out by activist shareholders

•Excessive CEO changes8 CEOs in the past 10 years

Timeline: GROWTH (1994 – 2000)1

99

4

19

95

19

96

19

99

19

99

Yang

and

Filo

created

search

engine

Raised

$2MM

in

venture

capital

Went

public

Acquires

Broadcast

.comAcquires

Geocities

Acquires

many

other

companies

Stock

reaches

all time

high of

$475

Yahoo’s

human

editors

couldn’t

keep up

with the

search

engine

“Spider Bot”

19

99

20

00

Yahoo

is born

20

00

Timeline: COMPLACENCY (2000 – 2010)2

00

1

20

02

20

04

20

05

20

07

Stock

closes at

an all

time low

$8.11

Yahoo

invested

$1Bn in

Alibaba

Yahoo co-

founder &

CEO Jerry

Yang steps

down after

18 months

Microsoft

and Yahoo

agree to

search

partnership

20

08

20

08

Yahoo

tries to

buy

Google

for $3Bn.

Google

denied

the offer

20

09

Yahoo

acquires

many

media

companies

Microsoft

tries to buy

Yahoo for

$44.6Bn

Yahoo

denied

offer

Yahoo

launches

its own

search

engine

technology

Timeline: FAILURE (2011 – 2016)2

01

2

20

12

20

12

20

13

20

14

Scott

Thompson

appointed

as CEO

following

dismissal

of Carol

Bartz

Acquires

Tumblr for

$1.1Bn,

Summly,

and

others

Acquires

Polyvore

(online

shopping

site) for

$230MM

States

that

current

strategy

is to

focus on

“Search,

Mail,

Tumbler”

20

14

20

15

Sells half

of its

Alibaba

stake for

$7.1Bn

20

16

Acquired

Wander

(social

diary

website)

Acquired

Flurry

(mobile ad

company)

for

$200MM

Levinsohn

(interim

CEO)

leaves;

Marissa

Mayer

appointed

as CEO

“ … the core Yahoo business is actually destroying value.

It's possible that Marissa Mayer (Yahoo’s CEO) could increase her stock price by simply announcing

that she was shutting down all of Yahoo's websites and laying off all of its employees.” – VOX Technology analysis

%

The decline of Yahoo

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Global Search Market Share (%)Yahoo vs Google

Google

Yahoo

Recommendations for the future

1. Focus only on key strengths

•Decide on strategic focus: Technology vs media vs Venture Capital

•Play to winSet goals, motivate people

•Move into adjacent markets later

2. Only make acquisitions that make strategic sense

•Have discipline when pursuing acquisitions

•Don’t overpay for acquisitions

•Ensure integration of acquisitions

•Make sure synergies can be achieved through the acquisition

3. Improve Corporate Governance

•Make Board fully accountable for CEO appointments

•Choose the right CEO who has the necessary skills

•Shareholder activism serves as a check-and-balance against Board of Directors

Thank you!

Jonathan | Naveen | Durga | Saloni

ReferencesYahoo Financial Report 2015, files.shareholder.com, 2015

Timothy B. Lee ,Yahoo is laying off 1,700 and putting itself up for sale, Vox,February 2, 2016, 5:50 p.m. ET

Wkipedia Yahoo, https://en.wikipedia.org/wiki/Yahoo!

Timeline of Yahoo!, https://en.wikipedia.org/wiki/Timeline_of_Yahoo!

Krishna G Palepu and others, HBR case study, Strategy and Governance at Yahoo! Inc , October 31st 2011

Tony Hannidies, 12 Yahoo Services That Will Shut Down by September ,Lazy Tech Guyz, June 29th 2013

Motley fool staff, Google stock: Buy it and hold it for life, fool.com,May 21st 2013

Margarit Reliv, Yahoo logos from 1994 till now, logoblink.com, May 11th 2012

Walter Frisk , The decline of Yahoo in its own words, HBR.org, June 2nd 2016