Yahoo free essay sample

Yahoo! Inc. is a global US Internet Corporation, founded in California in 1994, which provides a range of products and content, including email, media streaming and downloads. Surviving the dot. com crash in 2001, Yahoo concentrated on pursuing partnerships with telecoms and internet providers to compete with AOL, they acquired smaller search engines and built their own technology to control the search results. There were various merger discussions held between Yahoo and Microsoft over the course of 2005-2007, however all attempts to form a merger were unsuccessful. The company had maintained it’s value proposition from 2005-2009 as one of the market leaders in search, it had healthy top line growth however it suffered from falling profits, web traffic and share price and this resulted in the appointment of their new CEO, Marissa Mayer in 2012. This essay will examine Yahoo’s business model, it’s value proposition and attempt to forecast its future financial performance based on ability to generate future revenues, drive traffic to it’s properties and investors’ confidence in Mayer’s strategy for the remainder of 2013. We will write a custom essay sample on Yahoo or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Business Model Yahoo business model is primarily a two-sided business model. According to Evans Schmalensee (2005), this business model is where firms act as platforms and sell two different products to two different groups of buyers taking into account that demand from one group of buyers depends on demand from the other group of buyers, while buyers of the two groups do not take this indirect network effects into account, so that these are in fact externalities for buyers. According to Wely (2010), three key characteristics of two-sided markets are; (1) price discrimination between two distinct groups of users, (2) cross network effects between market sides and (3) bilateral market power of the platform. NETWORKED MARKETED 1 SIDE 2 SIDE PLATFORM PROVIDERS Web Search Searchers (subsidy side) Advertisers Yahoo, Google, Bing Yahoo offers free use of its search services and products to its’ users. It provides a range of services to consumers via their web portal, search engine Yahoo Search and related services including Directory, Mail, Finance, Groups, Answers, mapping, video sharing and social media. It also sells Internet user data to third party affiliates, who have integrated their advertising offerings into their websites. Thirdly, it provides a range of marketing tools to advertisers and publishers who visit Yahoo and it’s affiliate sites. Yahoo generates revenues by providing marketing services to advertisers across a range of Yahoo owned and affiliate sites. Yahoo also charges for a range of premium services that it offers users for some of it’s services. In 2011, Yahoo and Microsoft formed a Search Alliance, which enabled Microsoft to provide web, video and image listings to Yahoo. Yahoo’s value proposition Yahoo is a global brand name, reaching large audiences with leading positions in search function and display advertising. Yahoo’s value proposition has been created for both it’s customers (advertisers and affiliates) and it’s users (search, products) by creating quality services that attract over 500 million users worldwide. Yahoo’s emphasis is on the quality of the user experience, personalised content and information. Yahoo’s strategy CEO and former Google executive, Marissa Mayer has been in control of the new business strategy for just over 12 months. According to Mayer, Yahoo’s biggest opportunities for growth are increasing usage, growing its international presence and appealing to a broader demographic of users, in that order. Mayer has been in the spotlight for the number of acquisitions she has bought, including the popular blogging site Tumblr. com for 1. 1billion. Graph 1: BLOOMBERG BUSINESSWEEK Data from YAHOO financial reports Mobile Market Mayer says Yahoo has more than 200 million unique mobile users a month, but is struggling to monetize it’s offerings, although as Mayer points out, neither has any of its’ competitors. In response to the fast growing mobile advertising market, Yahoo has been actively pursuing partnerships with carriers and original equipment manufacturers in the mobile industry, as well as tailoring their existing marketing services to mobile user. Mayer is trying to improve or enhance existing products in the mobile market, acquiring apps, redesigning and recreating their web offerings for mobile. Recently Apple launched a new weather app, which looks identical to that of Yahoo’s and according to Jay Yarow from Business Insider,â€Å"If Mayer really wants to succeed in mobile shes going to have to create new categories not just iterate on the existing categories. † Financial performance and performance forecast As reported in Yahoo’s 2nd quarter 2013 financial reports, year on year their revenue remained flat at $4. 98 billion, although the company grew net income 276. 18% from 1. 05 billion to 3. 95 billion. Yahoo’s 2nd quarter 2013 revenue of 1. 07bn was below the prior year’s 2nd quarter results. Yahoo Financial Highlights Yahoo’s display advertising revenue dropped 12% and search advertising revenues fell by 9%. Mayer attributes this to the fact that as the company is growing traffic, the opportunity to run more ads presents itself however this hasn’t translated to revenue growth yet. Mayer is confident that this will follow through in Quarter 4. According to the financial analysts reporting to markets. ft. com, Yahoo’s revenue will increase in Q4 (see graph 3). Mayer will concentrate now on improving Yahoo’s top-line revenue which is projected will rise by the end of 2013. The projection is that she will roll out the mobile advertising platform which will attract advertisers who are eager to utilise the power of mobile. Her new products and acquisitions are growing in popularity and will drive traffic to Yahoo properties. This combined with the seasonal boost for the final quarter of 2013 will bring their final revenue for 2013 to a projected 5. 1 billion. Graph 3: YAHOO FINANCIAL REVENUE FORECAST 2013 markets. ft. com Market Capitalisation According to Selena Larson from ReadWrite. com Yahoo’s market capitalisation has grown by $14 billion since Mayer’s appointment as CEO in 2012. Mayer attributes this to the increased value of Yahoo’s investments in Yahoo Japan and China. Yahoo’s growth in earnings per share items increased 301. 54% and according to market. ft. com the company’s five year annualised earnings per share growth ranks above the industry average relative to its peers. Mayer’s aggressive acquisition strategies have impressed the market along with the company’s focus on mobile growth, as the consensus among financial forecasters across a variety of agencies is that Yahoo will outperform the market in the final quarter of 2013. The forecast is that their share price will rise to a high of $36. 00 in the next 12 months. Graph 4: YAHOO FINANCIAL SHARE PRICE FORECAST 2013 markets. ft. com Web Traffic According to comScore almost 197 million individuals visited a Yahoo! website in July 2013 versus 192 million for Google. This figure does not include traffic of recently acquired blogging site Tumblr, which itself had 38 million visitors that month, nor mobile phone usage. The number of unique visitors to yahoo. Yahoo’s strategy to drive traffic to its’ properties appears to be working, users are rediscovering Yahoo and its’ affiliate sites. Yahoo believes there is a future value for users and customers in personalisation, having recently launched a new homepage called â€Å"My Yahoo†, where users can personalise their homepage newsfeed. Yahoo’s new CEO, Marissa Mayer personally took to Twitter with a promise to retweet anyone who would make the new product their homepage. Yahoo offers a range of premium digital media through their web portal, comprising of 63 different products and services. Conclusion Yahoo is operating in a highly competitive market, where the cost of revenue appears to be rising faster than the growth in revenue, which poses a challenge for the Internet giant. However, in the 12 months since Marissa Mayer took over as CEO, Yahoo stock has risen 75%, she has reorganised the workforce and attracted new talent including some of her old colleagues from Google. Under her direction, the company launched a new products that are engaging consumers, acquired new ventures that will enable the company to and has made Yahoo an attractive place to work. Her strategy to date appears to be working, this is still very early stages of the Yahoo turnaround and Mayer needs to concentrate on developing new products that are unique, personalised and engaging and reach consumers via mobile in order to drive web traffic, increase Yahoo’s top-line revenue and increase the share price. References Ankeny, J. Yahoo tops 340m monthly mobile users, suffers Q2 revenue decline† Fiercemobilecontent. com Chaey, C. (2013) â€Å"Marissa Mayer: Yahoo will crack out a dozen products that fix â€Å"digital daily habits†. FastCompany. com Evans, D. Schmalensee, R. (2005), â€Å"The Industrial Organisation of Markets with Two-Sided Platforms,† NBER Working Papers, National Bureau of Economic Research, Inc. Juliet Garside (2013). Google overtaken by Yahoo! in US website visitors for first time in two years. The Guardian. Larson, S. â€Å"With 800 Million Monthly Users, Yahoo CEO Touts Turnaround in Growth.