Strategic Analysis of Yahoo Inc!

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1) Yahoo! Inc. The Internet Giant

Following the success of Netscape and its web browser, Internet became a resource and communication platform idolized by many IT students in the universities. What started off as a hobby-cum-research[1] work by Jerry Yang (now Chief of Yahoo!) and David Filo (Co-founder of Yahoo!) for their Ph.D. dissertations; has evolved and became an Internet sensation over time. What they did was to compile all their favourite web links to form an online directory for easy navigation in the World Wide Web. The duo’s work immediately garnered a lot of attention from many surfers in the Internet world and before they realized it, Yahoo! became one of the most highly visited websites of all time. The duo saw the potential in turning their part-time hobby into a profitable business by relying on what we will now called a ‘portal’ concept into practice. In its rudimentary form, a portal is a website which will provide a search engine as well as an integrated package of content and services all in one place (Traver & Laudon, 2008).

In April 12 1996, Yahoo! conducted its first Initial Public Offering (IPO) to attract the much-needed funds from venture capitalists for its expansion needs. Yahoo! raised approximately US$33.8 million (statistics from Yahoo! Pressroom, History of Yahoo! Inc). Yahoo! has claimed first-mover advantage (Chandler, 1977) by capturing a large user base during the Internet Age (1994 onwards), Yahoo! quickly became a marketing[2] beacon in the business world. Businesses from local and around the world wanted to have their online advertisements to be put on Yahoo!’s web portal. In the last decade, we have witnessed Yahoo!’s amazing transformation to become an Internet Giant and to date, the most lucrative form of business model is in the marketing services and online advertising. This segment alone accounts for nearly 88% of its total revenue.

2) Our Scope

We will engage in a critical analysis of the company’s past and present business models and strategies in a holistic manner during the significant periods[3] experienced by every Internet enabled business models, a snapshot of the financial health report from the last five years of her business, along with an analysis on the value chain, the significance of its investment in technologies on the business, the social and some of the probable legal issues that confronts Yahoo! in recent years and last but not least, we will provide a comprehensive SWOT analysis between Yahoo! and her main rival, Google Inc so as to help us in analyzing the company future prospect, the likely challenges she might faced and the areas for improvements which will have an impact on the economic viability[4] (Traver & Laudon, 2008) of the company, and in a broader sense, the ability to remain competitive in the long term.

3) Business Model

There are about five generic types[5] of e-commerce models that exist in the Internet today, with B2B been the fastest and most aggressive revenue generating model. Following closely behind is the B2C model. The latter is where the variety and variability of online content becomes visible to the participants in the E-commerce arena. Yahoo! falls squarely under what we called a ‘Horizontal portal[6]’. It is a B2C variant where online merchants will attempt to sell their products or services online to prospective buyers. There are four generic characteristics that we can normally relate to a portal operation. There are:

- Aggregation of content in the form of up-to-date news such as world and local news, weather forecasts etc;

- E-Commerce in the form online sales and marketing of products and services;

- Distribution of content from other content operators such as ABC news, stocks and investments bulletins etc;

- Searching the Internet for relevant content.

Three specific groups of audiences can be identified in Yahoo!’s value chain network (Porter, 1985). There are:

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