From misjudged partnerships to acquisitions of misfits, Yahoo! has done all to curdle its business model & jeopardise its future. Time is less & dollars are precious. Can Carol Bartz fight inevitability? by Steven P. Warner
Where Bartz lacks most is where Yahoo! continues to lose out to Google: online-advertising. Its revenues from search-based ads for Q2, 2010, was $331 million – a y-o-y fall of 8%. Credit Suisse estimates the revenue from this stream to dry-up further – a 9% y-o-y fall for FY2010. As Jason Helfstein of Oppenheimer tells B&E, “Yahoo! search continues to suffer from search monetisation issues. Yahoo! is the leader is display ads and is the #2 search player, but it has lost share in both businesses...” Translation: advertisers have started doubting Yahoo!’s competence as an effective web engine, thanks to its confusing mix of product pedigrees. And for this, Bartz (along with her predecessors) can take as much blame. Since 2007, the company has spent $2.81 billion in acquisitions, higher than its aggregate income of $2.70 billion – most of the targets proving wrong chords for its yodel. And the prized catches? Rivals.com, BlueLithium, BuzzTracker, Zimbra, FoxyTunes, Maven Networks, Inquisitor, Xoopit, Maktoob.com, citizensports.com, Associated content and Koprol. Yahoo! could have bought a stake in Facebook for $2.70 billion instead!
Bartz has to understand that Yahoo’!s search and mail platforms are its flagship revenue earners, and that she has to improve them through partnerships, the right partnerships. Its 10-year alliance with Microsoft Bing, which seems to be bringing little to Bartz’s table, is a lesson. Yahoo! expected annual earnings of $500 million from this arrangement. Four quarters later, benefits have totalled $164 million. As per Goldman Sachs, the reimbursements over the next four years will fall $630 million short of expectations. Since the deal, Bing’s US search engine market has grown by 4.30% to 12.70%, while that of Yahoo! declined by 0.70% to 18.90%.
We see a similar mistake in the making in Japan today, where Yahoo is #1 in search (57% market share). On July 30, 2010, it entered into a partnership with Google (the #2; 37% share). As per the deal, Yahoo! Japan will switch to Google’s search engine starting Q4, 2010, and will use Google’s online ad system. Yahoo! will also pass on online shopping and live ad-related auction data to Google. Market experts claim that the deal will give Google a literal 94% control over all ads in the world’s #3 search ads market. Google’s top brass is pleased. Yahoo!’s investors are not. Another year, another wrong partnership for Bartz.
Bartz has other obstacles to leap over, including an execution risk of turnaround efforts, pricing pressure on its network business, potential loss of network partners and increased opex due to competition. She can’t also try to simulate the diversification efforts of Google, Microsoft or Apple. These companies have the dollars and time. Yahoo! doesn’t. Experts around the world have started expecting less from Yahoo!, as James Mitchell of Goldman Sachs tells B&E, “We cut our future revenue estimates by about 5% on 2Q, 2010 performance, reducing our income estimates by 10-20%. Our new 2010E/ 2011E/ 2012E EPS are $0.92/ $1.12/ $1.30, down 3%/9%/5%.”
Bartz has to learn from both Google & Bing and scout for “profitable” revenue-sharing agreements with localised search engines like Baidu (China, with a 77% market share), Yandex (Russia, 94%), Seznam (Czech republic, 62.5%), Naver (South Korea, 61%) et al. Any other strategy, except a sell-out, would be fatal. [As we go to print, Bartz is planning to acquire Fwix, a local news feeds network.]
Bartz has to understand that Yahoo’!s search and mail platforms are its flagship revenue earners, and that she has to improve them through partnerships, the right partnerships. Its 10-year alliance with Microsoft Bing, which seems to be bringing little to Bartz’s table, is a lesson. Yahoo! expected annual earnings of $500 million from this arrangement. Four quarters later, benefits have totalled $164 million. As per Goldman Sachs, the reimbursements over the next four years will fall $630 million short of expectations. Since the deal, Bing’s US search engine market has grown by 4.30% to 12.70%, while that of Yahoo! declined by 0.70% to 18.90%.
We see a similar mistake in the making in Japan today, where Yahoo is #1 in search (57% market share). On July 30, 2010, it entered into a partnership with Google (the #2; 37% share). As per the deal, Yahoo! Japan will switch to Google’s search engine starting Q4, 2010, and will use Google’s online ad system. Yahoo! will also pass on online shopping and live ad-related auction data to Google. Market experts claim that the deal will give Google a literal 94% control over all ads in the world’s #3 search ads market. Google’s top brass is pleased. Yahoo!’s investors are not. Another year, another wrong partnership for Bartz.
Bartz has other obstacles to leap over, including an execution risk of turnaround efforts, pricing pressure on its network business, potential loss of network partners and increased opex due to competition. She can’t also try to simulate the diversification efforts of Google, Microsoft or Apple. These companies have the dollars and time. Yahoo! doesn’t. Experts around the world have started expecting less from Yahoo!, as James Mitchell of Goldman Sachs tells B&E, “We cut our future revenue estimates by about 5% on 2Q, 2010 performance, reducing our income estimates by 10-20%. Our new 2010E/ 2011E/ 2012E EPS are $0.92/ $1.12/ $1.30, down 3%/9%/5%.”
Bartz has to learn from both Google & Bing and scout for “profitable” revenue-sharing agreements with localised search engines like Baidu (China, with a 77% market share), Yandex (Russia, 94%), Seznam (Czech republic, 62.5%), Naver (South Korea, 61%) et al. Any other strategy, except a sell-out, would be fatal. [As we go to print, Bartz is planning to acquire Fwix, a local news feeds network.]
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
