Overview of the company’s business model, value proposition and projected financial forecast.
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. 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.
Searchers (subsidy side)
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.
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...
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Evans, D. & Schmalensee, R. (2005), “The Industrial Organisation of Markets with Two-Sided Platforms,” NBER Working Papers, National Bureau of Economic Research, Inc.
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Weyl, E. Glen (2010), "A Price Theory of Multi-sided Platforms". American Economic Review
Yahoo company profile. Crunchbase.com
Yarow, J. (2013) “Apple makes Yahoo’s pretty good weather app totally obsolete”, . BusinessInsider.com
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