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-'''Yahoo! Inc.''' ([[Nasdaq]]: YHOO) is a global internet services company that operates the Yahoo! Internet portal. It provides varied products and content, from email and search to media streaming and downloads. According to comScore, the company had more than 660 million unique visitors worldwide, as of June 2010<ref>[http://online.wsj.com/article/BT-CO-20100624-711073.html?mod=wsjcrmain Yahoo CEO Says Company Now Has 660 Mln Worldwide Users," Wall Street Journal, 06/24/2010]</ref>.+'''Yahoo! Inc.''' ([[Nasdaq]]: YHOO) is a global internet services company that operates the Yahoo! Internet portal. It provides varied products and content, from email and search to media streaming and downloads, while its main revenue sources come from advertising and marketing services. In fiscal year 2010, Yahoo reported revenues of $6.3 billion and net income of $1.2 billion. While Yahoo's main presence is in the United States, its well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. 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 users.
-Yahoo's "marketing services" segment - which makes up its [[Impact of Internet Advertising|online advertising business]] - made up 88% of the company's revenues in FY2009<ref name=10Q-17>{{cite 10k|link=http://www.wikinvest.com/stock/Yahoo!_(YHOO)/Segments |ticker=YHOO|form=10-Q|year=09Q1|pg=17}}</ref>. [[Google (GOOG)|Google]] and Yahoo! are the recognized leaders in this market, but the balance of power shifted significantly since 2004, when the companies posted similar revenue and operating margins. Google has since eclipsed its main rival - in fiscal 2009, it generated nearly four times as much revenue ($24.9 billion) as Yahoo! ($6.48 billion) with a profit margin over three times as high (28.3% vs. 12.2%).<ref>[http://www.wikinvest.com/stock/Yahoo!_(YHOO)/Data/Key_Metrics Wikinvest Data Central: Yahoo!]</ref>[http://www.wikinvest.com/stock/Google_(GOOG)/Data/Key_Metrics Wikinvest Data Central: Google]</ref> 
-In 2008, news of software giant [[Microsoft (MSFT)|Microsoft's]] unsolicited $46 billion bid to buy Yahoo! were widely reported, raising questions about Yahoo!'s future. At the time, a combined Yahoo!-Microsoft would have had 32% of the ad revenue market versus 44% for Google, and 32.7% of internet search versus Google's 58.4% market share<ref>{{cite web|url=http://seekingalpha.com/article/63120-will-yahoo-accept-microsoft-s-bid |title=Will Yahoo! Accept Microsoft's bid?|publisher=Seekingalpha.com|date=02-05-2008}}</ref> Although after two failed bids Microsoft withdrew its offer, the two tech giants announced an agreement in July 2009 to combine their search engine operations in an effort to compete with Google. The terms of the deal make Microsoft's Bing search engine the exclusive platform on Yahoo!'s sites. Under the terms of the deal, Yahoo!'s exclusive platform will absorb Microsoft's Bing search engine. Yahoo! will sell advertising tied to online search for both companies and will keep up to 88% of the revenue for the first five years, while Microsoft will pay Yahoo! for the traffic it generates and will absorb most of the expenses<ref name=Deal>[http://articles.sfgate.com/2010-02-19/business/17946886_1_yahoo-ceo-carol-bartz-search-space-microsoft-s-bing "Microsoft, Yahoo! deal gets regulators' OK," SFGate.com, 02/19/2010]</ref><ref>[http://www.trefis.com/articles/11721/microsoft-deal-to-boost-yahoos-search-advertising-margins/2010-02-23 "Microsoft Deal to Boost Yahoo’s Search Advertising Margins," Trefis, 02/23/2010]</ref>. As of May 2010, the partnership accounted for 30.4% of online search, trailing Google's market share of 63.7%<ref>[http://www.marketwatch.com/story/report-raises-questions-on-yahoo-microsoft-search-2010-06-11?dist=WSJfeed&siteid=WSJ "Report raises questions about Yahoo!, Microsoft search," MarketWatch, 06/11/2010]</ref>.+==Company Overview==
-==Company Overview==+Founded as a web directory by two Stanford graduates in 1994, Yahoo! has since become a dominant player in the field of Internet services. While the company has experienced healthy growth in top-line revenue year over year for the last four years, net income has fallen year-over-year due to increased costs of doing business in the increasingly competitive sphere of [[Impact of Internet Advertising|internet advertising]]. Specifically, Yahoo!'s year over year [[cost of revenue]] is increasing faster than their revenue growth.
-===Business and Financial Metrics===+
-Founded as a web directory by two Stanford graduates in 1994, Yahoo! has since become a dominant player in the field of Internet services. While the company has experienced healthy growth in top-line revenue year over year for the last four years, net income has fallen year-over-year due to increased costs of doing business in the increasingly competitive sphere of [[Impact of Internet Advertising|internet advertising]].<ref name = YHOO10kItem8/> Specifically, Yahoo!'s year over year [[cost of revenue]] is increasing faster than their revenue growth.<ref name = 10K-56/>+===Business Segments===
 +In fiscal year 2010, Yahoo reported revenues of $6.3 billion and net income of $1.2 billion. Yahoo's operations are divided into several main segments--marketing services, fees, product-based offerings, and content-based offerings.
-In 1Q10, Yahoo reported revenues of $1.6 billion, a 1% QoQ increase. Yahoo! attributed its growth to a 20% YoY increase in display advertising, as well as guaranteed display of 24% in response to a advertisers’ anticipation of an uptick in the U.S. economy. During the quarter, Yahoo! also received regulatory clearance from the European Commission and Department of Justice for its online search partnership with Microsoft. In an attempt to continue its content-driven growth, it also agreed to acquire Citizen Sports, a sports-based company specializing on mobile devices and social networking. It also expanded the availability of its TV Widget experience globally through new+====Marketing Services====
-partnerships with Hisense, ViewSonic, MIPS Technologies, and Sigma Designs.+Yahoo!'s primary revenue stream is from the sale and facilitation of [[Impact of Internet Advertising|internet advertising]] and related services, generally referred to as "marketing services." This segment has remained at a steady portion of the company's' income year after year.<ref name = YHOO10kItem1a>[[stock:Yahoo!_%28YHOO%29/Filing/10-K/2009/F1934932#tx31724_3 | Yahoo! Inc. Form 10-K for Fiscal 2008, Section 1a]]</ref>
-<ref>[ http://files.shareholder.com/downloads/YHOO/949636180x0x367386/96efdac3-64ca-4d3d-a372-862be9cc14ef/YHOO_Q110PressRelease.pdf “YAHOO! REPORTS FIRST QUARTER 2010 RESULTS,” Yahoo Investor Relations, 04/20/2010]</ref>.+
 +====Fees====
 +Yahoo! gets the remainder of its revenue from fees for premium services such as music downloads, small business services, and data storage. As with the Marketing Services segment, fees have accounted for a consistent percentage (11-12%) of Yahoo!'s total revenues year after year.<ref name = YHOO10kItem7>[[stock:Yahoo!_(YHOO)/Overview | Yahoo! Inc. Form 10-K for Fiscal 2008, Section 7]]</ref>
-{| {{table}} 
-| Width="200" align="center" style="background:#f0f0f0;"|'''Annual Financial Data, ''in millions<ref name=Morningstar>[http://quicktake.morningstar.com/StockNet/Income10.aspx?Symbol=YHOO&Country=USA "Yahoo," Morningstar Investment Research]</ref>''''' 
-| Width="90" align="center" style="background:#f0f0f0;"|'''FY2005''' 
-| Width="90" align="center" style="background:#f0f0f0;"|'''FY2006''' 
-| Width="90" align="center" style="background:#f0f0f0;"|'''FY2007''' 
-| Width="90" align="center" style="background:#f0f0f0;"|'''FY2008''' 
-| Width="90" align="center" style="background:#f0f0f0;"|'''FY2009''' 
-|- 
-| align = "center" |'''Revenue'''|| align = "center" |$5,257.7 || align = "center" |$6,425.7 || align = "center" |$6,969.3 || align = "center" |$7,208.5 || align = "center" |$6,460.3  
-|- 
-| align = "center" |'''Gross Profit'''|| align = "center" |$3,161.5 || align = "center" |$3,750.0 || align = "center" |$4,130.5 || align = "center" |$4,185.1 || align = "center" |$3,588.6 
-|- 
-| align = "center" |'''Operating Income'''|| align = "center" |$1,107.7 || align = "center" |$941.0 || align = "center" |$695.4 || align = "center" |$13.0 || align = "center" |$386.7  
-|- 
-| align = "center" |'''Net Income'''|| align = "center" |$1,896.2 || align = "center" |$751.4 || align = "center" |$660.0 || align = "center" |$424.3 || align = "center" |$598.0 
-|- 
-|  
-|} 
- 
-===Business Segments=== 
-====Marketing Services (88% of Revenues in FY2009)==== 
-Yahoo!'s primary revenue stream is from the sale and facilitation of [[Impact of Internet Advertising|internet advertising]] and related services, generally referred to as "marketing services". This segment alone accounted for 88% of total revenue in fiscal 2008, and has remained at a steady portion of the company's' income year over year..<ref name = YHOO10kItem1a>[[stock:Yahoo!_%28YHOO%29/Filing/10-K/2009/F1934932#tx31724_3 | Yahoo! Inc. Form 10-K for Fiscal 2008, Section 1a]]</ref> 
- 
-====Fees (12% of Revenues in FY2009)==== 
-Yahoo! gets the remainder of its revenue from fees for premium services such as music downloads, small business services, and data storage. As with the Marketing Services segment, fees have accounted for a consistent percentage (11-12%) of Yahoo!'s total revenues year over year.<ref name = YHOO10kItem7>[[stock:Yahoo!_(YHOO)/Overview | Yahoo! Inc. Form 10-K for Fiscal 2008, Section 7]]</ref> 
- 
-===Offerings=== 
-Yahoo!'s offerings can be divided into two categories, product-based and content-based. In addition to these basic offerings, Yahoo! has expanded into mobile advertising, content, and services.  
- 
-*'''Product-based offerings''' include Yahoo! web mail and Messenger, Maps, and classifieds/personals options. In addition, Yahoo! 360° offers a blog/web community that tries to rival MySpace, small business solutions (online stores, business-grade email, web hosting/domains), and commerce opportunities (Yahoo! Shopping, Autos, Auctions, Travel). Yahoo!'s flagship product remains its search engine, recently revamped and renamed OneSearch. OneSearch tries to deliver an integrated search experience, letting users benefit from the convenience of hybrid search types while also leaving the option of type-specified search (e.g., image search). 
- 
-*'''Content-based offerings''' are focused on entertainment and media. Yahoo! boasts an extensive collection of video and music for streaming/download, and its 2005 acquisition of Flickr also gives it a strong presence in the photo upload/sharing niche. Yahoo!'s news offerings include finance, news, movies, and sports information.  
 +===Offerings===
 +Yahoo!'s offerings can be divided into two categories, product-based and content-based. In addition to these basic offerings, Yahoo! has expanded into mobile advertising, content, and services.
 +
 +*'''Product-based offerings''' include Yahoo! web mail and Messenger, Maps, and classifieds/personals options. In addition, Yahoo! 360° offers a blog/web community that tries to rival MySpace, small business solutions (online stores, business-grade email, web hosting/domains), and commerce opportunities (Yahoo! Shopping, Autos, Auctions, Travel). Yahoo!'s flagship product remains its search engine, recently revamped and renamed OneSearch. OneSearch tries to deliver an integrated search experience, letting users benefit from the convenience of hybrid search types while also leaving the option of type-specified search (e.g., image search).
 +
 +*'''Content-based offerings''' are focused on entertainment and media. Yahoo! boasts an extensive collection of video and music for streaming/download, and its 2005 acquisition of Flickr also gives it a strong presence in the photo upload/sharing niche. Yahoo!'s news offerings include finance, news, movies, and sports information.
 +
Yahoo! has also recently reorganized its company structure around three areas of focus: Audience (general web traffic), Advertisers and Publishers (those paying to advertise through Yahoo!), and Technology (new platform/product development). Yahoo! has also recently reorganized its company structure around three areas of focus: Audience (general web traffic), Advertisers and Publishers (those paying to advertise through Yahoo!), and Technology (new platform/product development).
==Trends and Forces== ==Trends and Forces==
-===Partnership and Merger Potential===+===[[Microsoft]] Partnership===
-Following [[Microsoft (MSFT)|Microsoft's]] aborted attempt to buy Yahoo!, the company has explored other partnership opportunities with two of its biggest competitors. In June, 2008, Yahoo! and Google announced a plan that would allow Yahoo! to place Google ads on its web site. This revenue sharing agreement would have potentially netted Yahoo! $800 million a year. The deal was initially seen as an attempt by Yahoo! to fend off Microsoft. Because of Google's dominance of the search market -- Yahoo! is No. 2 -- many advertisers oppose this plan. Google and Yahoo! together control 80% of the search advertising market, and, as a result, the plan has been opposed by the U.S. Public Interest Group on grounds of antitrust. <ref>[http://tech.yahoo.com/news/nm/20081029/wr_nm/us_yahoo_google_uspirg_2 Consumer group opposes Google, Yahoo partnership (Reuters) news.yahoo.com released October 29, 2008]</ref>Inevitably, in order to avoid further antitrust law complications, Google backed out of the deal in early November, 2008.<ref>[http://www.cnn.com/2008/BUSINESS/11/05/yahoo.google.ap/index.html?section=cnn_latest Google scraps ad deal with Yahoo - November 5, 2008]</ref>+Following [[Microsoft (MSFT)|Microsoft's]] aborted attempt to buy Yahoo!, the company has explored other partnership opportunities with two of its biggest competitors. In 2008, Yahoo! and Google announced a plan that would allow Yahoo! to place Google ads on its web site. Google and Yahoo! together control 80% of the search advertising market, and, as a result, the plan has been opposed by U.S. public interest groups on grounds of antitrust. <ref>[http://tech.yahoo.com/news/nm/20081029/wr_nm/us_yahoo_google_uspirg_2 Consumer group opposes Google, Yahoo partnership (Reuters) news.yahoo.com released October 29, 2008]</ref>Inevitably, in order to avoid further antitrust law complications, Google backed out of the deal.<ref>[http://www.cnn.com/2008/BUSINESS/11/05/yahoo.google.ap/index.html?section=cnn_latest Google scraps ad deal with Yahoo - November 5, 2008]</ref>
-As a result of Google withdrawal from a deal that would have netted Yahoo! approximately another $800 million, the possibility that Microsoft would again bid for Yahoo! was revived. In May of 2008, Microsoft offered Yahoo! $33 a share, but rescinded their offer when CEO Jerry Yang demanded $37, a price that Yahoo! had not reached since early 2006. Now, with the Google Yahoo! partnership removed, Yahoo! CEO has announced that "To this day, I believe the best thing for Microsoft to do is to buy Yahoo!".<ref>[http://tech.yahoo.com/news/ap/20081106/ap_on_hi_te/yahoo_yang_2 Yahoo CEO to Microsft: Make us another offer - November 5, 2008]</ref>As of November 5, 2008 there are no known talks between Microsoft and Yahoo!, with Microsoft CEO claiming, "I'm sure there are still some opportunities for some kind of partnership around search, but I think acquisition is a thing of the past,".<ref>[http://tech.yahoo.com/news/afp/20081107/tc_afp/usitinternetmicrosoftyahoo_081107170550 Microsoft CEO rules out yahoo bid - November 7, 2008]</ref>+In 2009, Microsoft and Yahoo! announced a 10-year collaboration in internet search and online advertising. Microsoft's search engine Bing will also be used by Yahoo!, and Yahoo! will spearhead advertising sales efforts for both companies, with Yahoo! obtaining 88% of the ad revenue generated by search results on Yahoo!'s web sites during the first 5 years of the agreement. The partnership will help Yahoo! cut costs, while enabling Microsoft to become a powerful force in Internet search.<ref>{{cite web| title= Microsoft, Yahoo! search pact cleared in Canada, Australia
- +
-As of May, 2009, media outlets are reporting that top executives from [[Microsoft]] and Yahoo! have been meeting to discuss a potential partnership focused on search.<ref name = BizInsiderHeadline>[http://www.businessinsider.com/henry-blodget-yahoo-microsoft-closer-to-search-ad-deal-2009-5 ''Business Insider'' Coverage of the potential deal, retrieved 5/10/2009]</ref> Such a partnership would bring together Googles two biggest rivals in the search sphere, potentially boosting Yahoo!'s revenue and net income by cutting into Google's market share. On July 29, 2009, the two companies announced a 10-year collaboration in internet search and online advertising. Microsoft's well-regarded new search engine 'Bing' will also be used by Yahoo!, and Yahoo! will spearhead advertising sales efforts for both companies, with Yahoo! obtaining 88% of the ad revenue generated by search results on Yahoo!'s web sites during the first 5 years of the agreement. The agreement is subject to regulatory review. Canadian and Australian antitrust regulators see no problem with the partnership and have approved the deal, and if U.S. regulators approve it as well, Microsoft and Yahoo! will together hold about 30% of the market. The partnership will help Yahoo! cut costs, while enabling Microsoft to become a powerful force in Internet search.<ref>{{cite web| title= Microsoft, Yahoo! search pact cleared in Canada, Australia+
| url= http://www.marketwatch.com/story/microsoft-yahoo-pact-cleared-in-canada-australia-2009-11-24-173000?siteid=yhoof| date=November 24, 2009}}</ref> | url= http://www.marketwatch.com/story/microsoft-yahoo-pact-cleared-in-canada-australia-2009-11-24-173000?siteid=yhoof| date=November 24, 2009}}</ref>
- +The two companies hope to achieve better efficiencies of scale by a division of labor, with Microsoft focusing on search engine development and Yahoo! focusing on advertising sales. With a greater critical mass of viewers, prospective advertisers may be more amenable to utilizing their search resources.
-As the New York Times characterized the transaction, "the bumpy, marathon mating dance between Microsoft and Yahoo! finally concluded." The two companies hope to achieve better efficiencies of scale by a division of labor, with Microsoft focusing on search engine development and Yahoo! focusing on advertising sales. With a greater critical mass of viewers, prospective advertisers may be more amenable to utilizing their search resources.+
===Increase in Online Advertising=== ===Increase in Online Advertising===
-Advertising spending continues to show a disproportionate skew in favor of newspaper, TV and direct mail. However, the Internet channel has grown at approximately 18% per year since 2001--faster than any other channel--taking share from stagnant channels such as newspaper, which has been flat over the same time period. At its current growth trajectory, worldwide Internet use is expected to nearly double by 2010, hitting 1.8 billion distinct users. Continued growth in quality and availability of Internet access means that the Internet services sector--particularly [[Impact of Internet Advertising|Internet advertising]]--will remain lucrative for some time to come. An increasingly pronounced trend of replacing print directories and classifieds with virtual alternatives will also create a push for online search use as well as increase demand for online classifieds.+Advertising spending continues to show a disproportionate skew in favor of newspaper, TV and direct mail. However, the Internet channel has grown at approximately 18% per year--faster than any other channel--taking share from stagnant channels such as newspaper, which has been flat over the same time period. Continued growth in quality and availability of Internet access means that the Internet services sector--particularly [[Impact of Internet Advertising|Internet advertising]]--will remain lucrative for some time to come. An increasingly pronounced trend of replacing print directories and classifieds with virtual alternatives will also create a push for online search use as well as increase demand for online classifieds.
'''Online Video Advertising Growth''' '''Online Video Advertising Growth'''
-[[Online Video|Video]] advertising promises to be a particularly lucrative area of rapid growth in the online advertising sector, expected to grow by more than one third of its current size in one year. While Yahoo! stands to gain from any increase in video advertising, it with its Yahoo! Videos offering lags significantly behind [[Google|Google's]] YouTube, with the latter boasting roughly 40 times the viewership of the former.<ref name = QuantcastYahooVideo>[http://www.quantcast.com/video.yahoo.com Quantcast's analytics data for Yahoo! Video retreived 5/10/2009]</ref><ref name = QuantcastYouTube>[http://www.quantcast.com/youtube.com Quantcast's analytics data for YouTube retreived 5/10/2009]</ref>+[[Online Video|Video]] advertising promises to be a particularly lucrative area of rapid growth in the online advertising sector as online video viewership continues to rise. In research released by comScore, data shows that 175 million U.S. Internet users watched online video content in October for an average of 15.1 hours per viewer.<ref name=video>[http://seekingalpha.com/article/236931-hulu-generated-1-1-billion-video-ad-impressions-in-october "Hulu Generated 1.1 Billion Video Ad Impressions in October," Rao, Leena, TechCrunch, November 15, 2010]</ref>. In terms of video property and viewership, Yahoo ranked second with 53.8 million viewers, behind [[Google|Google Sites's]] 146.3 million unique viewers and ahead of Viacom Digital, VEVO, and Facebook<ref name=video />.
-* '''Branded vs. Search Advertisin'''+* '''Branded vs. Search Advertising'''
-Branded advertising is often image-based and usually priced on an "impressions" basis--the more times it shows up, the more the advertiser pays. Search advertisements are primarily text-based and usually rely on click-through; the more times a particular link is clicked, the more Yahoo! is paid. Together, the two constitute a good balance of different kinds of online advertising. However, branded advertising tends to depend very heavily on the economic situation of the brands in question--so if the United States experiences an economic slowdown, for instance, Yahoo!'s branded advertising would suffer significantly.+Branded advertising is often image-based and usually priced on an "impressions" basis--the more times it shows up, the more the advertiser pays. Search advertisements are primarily text-based and usually rely on click-through; the more times a particular link is clicked, the more Yahoo! is paid. Together, the two constitute a good balance of different kinds of online advertising. However, branded advertising tends to depend very heavily on the economic situation of the brands in question.
* '''Mobile Advertising''' * '''Mobile Advertising'''
-Mobile advertising is in its nascent stages and is currently growing at more than 20% per year, making it a powerful source of potential growth for Yahoo! On its end, the company has been actively pursuing partnerships with carriers and original equipment manufacturers in the mobile industry, as well as tayloring their preexisting marketing services to specifically mobile users.<ref name = YHOO10kItem1a/>+Mobile advertising is in its nascent stages and is currently growing at more than 20% per year, making it a powerful source of potential growth for Yahoo! On its end, the company 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 users.<ref name = YHOO10kItem1a/>
===Expanding International Markets=== ===Expanding International Markets===
Strong expansion in Internet connectivity and activity in Asia and Europe means that Internet service companies will have to consider much more than just the domestic advertising scene. Yahoo! is well-positioned for a rise in Asian traffic and advertising. Asian companies exhibit a tendency to stick with familiar, well-known, tried-and-true options, both for search and for advertising. Yahoo!'s well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. [[Internet Penetration Acceleration|China's Internet demand]] has risen dramatically and now has the second largest number of Internet users in the world. Strong expansion in Internet connectivity and activity in Asia and Europe means that Internet service companies will have to consider much more than just the domestic advertising scene. Yahoo! is well-positioned for a rise in Asian traffic and advertising. Asian companies exhibit a tendency to stick with familiar, well-known, tried-and-true options, both for search and for advertising. Yahoo!'s well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. [[Internet Penetration Acceleration|China's Internet demand]] has risen dramatically and now has the second largest number of Internet users in the world.
-But in Europe, Yahoo! may face more challenges, losing significant search share here to Google and Microsoft.+But in Europe, Yahoo! may face more challenges, losing significant search share there to Google and Microsoft.
-Yahoo! owns a roughly 40% stake in Alibaba, a Chinese internet company that [[Initial Public Offering (IPO)|IPO'd]] in Fiscal 2008.+Yahoo! owns a roughly 40% stake in Alibaba, a Chinese internet company that [[Initial Public Offering (IPO)|IPO'd]] in 2008.
- +
-===Declining Relations with Telecommunication Companies===+
-Yahoo!'s partnerships with companies like [[AT&T (T)|AT&T]] to provide "premium" email and other services are being shaken by the recent trend among other Internet service providers of reducing or eliminating fees for premium features. As a result, Yahoo!'s premium email is no longer worth so much to the telecommunication companies' consumers. AT&T announced in March 2007 that it would be looking to renegotiate its contract with Yahoo!, a move which will likely result in a loss of revenue for Yahoo! About 15% of Yahoo!'s total revenues currently come from premium fees, and of this fee-based revenue, 40% comes by way of telecommunications partnerships (about $300-400 million).+
-vary.+
==Competition== ==Competition==
-*[[Google (GOOG)|Google]] is Yahoo!'s biggest competitor in search advertising. Its recent acquisition of popular [[Online Video|video]] site YouTube put it directly against Yahoo! in media streaming, and the two already have a long-standing rivalry over search-based [[Impact of Internet Advertising|online advertising]]. Yahoo! has lost significant search market share to Google. In January of 2009, Google made headlines by overtaking Yahoo! in unique users per month. However, Yahoo! recently released a next-generation online advertising platform system called Panama. Their system will in theory optimize advertising profits by increasing the average revenue per search click and has returned modestly successful results so far. Yahoo!'s recent acquisitions of RightMedia and BlueLithium [http://www.bluelithium.com/] further solidifies its position in display advertising. Finally, Yahoo!'s perceived role as a community-based entertainment site may also give it a slight edge over Google in entertainment-based advertising. However, Google's MySpace-YouTube advertising alliance may be poised to challenge the company.+*[[Google (GOOG)|Google]] is Yahoo!'s biggest competitor in search advertising. Its recent acquisition of popular [[Online Video|video]] site YouTube put it directly against Yahoo! in media streaming, and the two already have a long-standing rivalry over search-based [[Impact of Internet Advertising|online advertising]]. Yahoo! has lost significant search market share to Google. In 2009, Google made headlines by overtaking Yahoo! in unique users per month. However, Yahoo! recently released a next-generation online advertising platform system called Panama. Their system will in theory optimize advertising profits by increasing the average revenue per search click and has returned modestly successful results so far. Yahoo!'s recent acquisitions of RightMedia and BlueLithium further solidifies its position in display advertising. Finally, Yahoo!'s perceived role as a community-based entertainment site may also give it a slight edge over Google in entertainment-based advertising. However, Google's MySpace-YouTube advertising alliance may be poised to challenge the company.
- +
-*[[Microsoft (MSFT)|Microsoft]], with the introduction of Windows Live and adCenter, [[Microsoft]] is also a growing threat. Microsoft's acquisition of LiveJournal gives it a significant foothold in the webblog scene, and along with Google, it has been steadily gaining ground against Yahoo! in the European Internet services market. However, by itself Microsoft remains less a threat than Google. In 2009 Microsoft announced its new search platform Bing this reinvention of its previous search platform MSN search is a future threat to Yahoo!'s search market share.+
- +
-<!--Commented out because the information is out of date+
-[[Image:YHOO_v_GOOG_2002-2006.jpg|thumb|500px|center]]+
- +
- +
-The table below tallies the numbers of searches made through Yahoo!, Google, and Microsoft for select months, November 2005 - November 2006. It also shows the percent share attributed to each company of the total US search queries for that month.+
- +
-{| class="wikitable" +
-|- bgcolor="#ececec"+
-| colspan="1" Width="150" | || width="100" align="center" | '''Nov 05''' || width="100" align = "center" | '''Mar 06''' || width="100" align = "center" | '''Jul 06''' || width="100" align = "center" | '''Nov 06''' +
-|-+
-| colspan="1"| '''Yahoo Sites''' || align="center" | '''1,520''' || align = "center" | '''1,790''' || align = "center" | '''1,800''' || align = "center" | '''1,890''' +
-|-+
-| colspan="1" align="right" | ''market share'' || align="center" | 30% || align = "center" | 29% || align = "center" | 30% || align = "center" | 30% +
-|-+
-| colspan="1"| '''Google Sites''' || align="center" | '''2,050''' || align = "center" | '''2,740''' || align = "center" | '''2,740''' || align = "center" | '''3,150''' +
-|-+
-| colspan="1" align="right" | ''market share'' || align="center" | 40% || align = "center" | 44% || align = "center" | 45% || align = "center" | 49% +
-|-+
-| colspan="1"| '''Microsoft Sites''' || align="center" | '''730''' || align = "center" | '''850''' || align = "center" | '''800''' || align = "center" | '''740''' +
-|-+
-| colspan="1" align="right" | ''market share'' || align="center" | 14% || align = "center" | 14% || align = "center" | 13% || align = "center" | 11% +
-|}+
--->+
-{{clr}}+*[[Microsoft (MSFT)|Microsoft]], with the introduction of Windows Live and adCenter, [[Microsoft]] is also a growing threat. Microsoft's acquisition of LiveJournal gives it a significant foothold in the webblog scene, and along with Google, it has been steadily gaining ground against Yahoo! in the European Internet services market. However, by itself Microsoft remains less a threat than Google.
==References== ==References==

Revision as of 16:06, November 7, 2011

Yahoo! Inc. (Nasdaq: YHOO) is a global internet services company that operates the Yahoo! Internet portal. It provides varied products and content, from email and search to media streaming and downloads, while its main revenue sources come from advertising and marketing services. In fiscal year 2010, Yahoo reported revenues of $6.3 billion and net income of $1.2 billion. While Yahoo's main presence is in the United States, its well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. 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 users.


Company Overview

Founded as a web directory by two Stanford graduates in 1994, Yahoo! has since become a dominant player in the field of Internet services. While the company has experienced healthy growth in top-line revenue year over year for the last four years, net income has fallen year-over-year due to increased costs of doing business in the increasingly competitive sphere of internet advertising. Specifically, Yahoo!'s year over year cost of revenue is increasing faster than their revenue growth.

Business Segments

In fiscal year 2010, Yahoo reported revenues of $6.3 billion and net income of $1.2 billion. Yahoo's operations are divided into several main segments--marketing services, fees, product-based offerings, and content-based offerings.

Marketing Services

Yahoo!'s primary revenue stream is from the sale and facilitation of internet advertising and related services, generally referred to as "marketing services." This segment has remained at a steady portion of the company's' income year after year.[1]

Fees

Yahoo! gets the remainder of its revenue from fees for premium services such as music downloads, small business services, and data storage. As with the Marketing Services segment, fees have accounted for a consistent percentage (11-12%) of Yahoo!'s total revenues year after year.[2]


Offerings

Yahoo!'s offerings can be divided into two categories, product-based and content-based. In addition to these basic offerings, Yahoo! has expanded into mobile advertising, content, and services.

  • Product-based offerings include Yahoo! web mail and Messenger, Maps, and classifieds/personals options. In addition, Yahoo! 360° offers a blog/web community that tries to rival MySpace, small business solutions (online stores, business-grade email, web hosting/domains), and commerce opportunities (Yahoo! Shopping, Autos, Auctions, Travel). Yahoo!'s flagship product remains its search engine, recently revamped and renamed OneSearch. OneSearch tries to deliver an integrated search experience, letting users benefit from the convenience of hybrid search types while also leaving the option of type-specified search (e.g., image search).
  • Content-based offerings are focused on entertainment and media. Yahoo! boasts an extensive collection of video and music for streaming/download, and its 2005 acquisition of Flickr also gives it a strong presence in the photo upload/sharing niche. Yahoo!'s news offerings include finance, news, movies, and sports information.

Yahoo! has also recently reorganized its company structure around three areas of focus: Audience (general web traffic), Advertisers and Publishers (those paying to advertise through Yahoo!), and Technology (new platform/product development).

Trends and Forces

Microsoft Partnership

Following Microsoft's aborted attempt to buy Yahoo!, the company has explored other partnership opportunities with two of its biggest competitors. In 2008, Yahoo! and Google announced a plan that would allow Yahoo! to place Google ads on its web site. Google and Yahoo! together control 80% of the search advertising market, and, as a result, the plan has been opposed by U.S. public interest groups on grounds of antitrust. [3]Inevitably, in order to avoid further antitrust law complications, Google backed out of the deal.[4]

In 2009, Microsoft and Yahoo! announced a 10-year collaboration in internet search and online advertising. Microsoft's search engine Bing will also be used by Yahoo!, and Yahoo! will spearhead advertising sales efforts for both companies, with Yahoo! obtaining 88% of the ad revenue generated by search results on Yahoo!'s web sites during the first 5 years of the agreement. The partnership will help Yahoo! cut costs, while enabling Microsoft to become a powerful force in Internet search.[5]

The two companies hope to achieve better efficiencies of scale by a division of labor, with Microsoft focusing on search engine development and Yahoo! focusing on advertising sales. With a greater critical mass of viewers, prospective advertisers may be more amenable to utilizing their search resources.

Increase in Online Advertising

Advertising spending continues to show a disproportionate skew in favor of newspaper, TV and direct mail. However, the Internet channel has grown at approximately 18% per year--faster than any other channel--taking share from stagnant channels such as newspaper, which has been flat over the same time period. Continued growth in quality and availability of Internet access means that the Internet services sector--particularly Internet advertising--will remain lucrative for some time to come. An increasingly pronounced trend of replacing print directories and classifieds with virtual alternatives will also create a push for online search use as well as increase demand for online classifieds.

Online Video Advertising Growth

Video advertising promises to be a particularly lucrative area of rapid growth in the online advertising sector as online video viewership continues to rise. In research released by comScore, data shows that 175 million U.S. Internet users watched online video content in October for an average of 15.1 hours per viewer.[6]. In terms of video property and viewership, Yahoo ranked second with 53.8 million viewers, behind Google Sites's 146.3 million unique viewers and ahead of Viacom Digital, VEVO, and Facebook[6].

  • Branded vs. Search Advertising

Branded advertising is often image-based and usually priced on an "impressions" basis--the more times it shows up, the more the advertiser pays. Search advertisements are primarily text-based and usually rely on click-through; the more times a particular link is clicked, the more Yahoo! is paid. Together, the two constitute a good balance of different kinds of online advertising. However, branded advertising tends to depend very heavily on the economic situation of the brands in question.

  • Mobile Advertising

Mobile advertising is in its nascent stages and is currently growing at more than 20% per year, making it a powerful source of potential growth for Yahoo! On its end, the company 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 users.[1]

Expanding International Markets

Strong expansion in Internet connectivity and activity in Asia and Europe means that Internet service companies will have to consider much more than just the domestic advertising scene. Yahoo! is well-positioned for a rise in Asian traffic and advertising. Asian companies exhibit a tendency to stick with familiar, well-known, tried-and-true options, both for search and for advertising. Yahoo!'s well-established name and solid partnerships in Asia make international expansion a promising opportunity for the company. China's Internet demand has risen dramatically and now has the second largest number of Internet users in the world.

But in Europe, Yahoo! may face more challenges, losing significant search share there to Google and Microsoft.

Yahoo! owns a roughly 40% stake in Alibaba, a Chinese internet company that IPO'd in 2008.

Competition

  • Google is Yahoo!'s biggest competitor in search advertising. Its recent acquisition of popular video site YouTube put it directly against Yahoo! in media streaming, and the two already have a long-standing rivalry over search-based online advertising. Yahoo! has lost significant search market share to Google. In 2009, Google made headlines by overtaking Yahoo! in unique users per month. However, Yahoo! recently released a next-generation online advertising platform system called Panama. Their system will in theory optimize advertising profits by increasing the average revenue per search click and has returned modestly successful results so far. Yahoo!'s recent acquisitions of RightMedia and BlueLithium further solidifies its position in display advertising. Finally, Yahoo!'s perceived role as a community-based entertainment site may also give it a slight edge over Google in entertainment-based advertising. However, Google's MySpace-YouTube advertising alliance may be poised to challenge the company.
  • Microsoft, with the introduction of Windows Live and adCenter, Microsoft is also a growing threat. Microsoft's acquisition of LiveJournal gives it a significant foothold in the webblog scene, and along with Google, it has been steadily gaining ground against Yahoo! in the European Internet services market. However, by itself Microsoft remains less a threat than Google.

References

  1. 1.0 1.1 Yahoo! Inc. Form 10-K for Fiscal 2008, Section 1a
  2. Yahoo! Inc. Form 10-K for Fiscal 2008, Section 7
  3. Consumer group opposes Google, Yahoo partnership (Reuters) news.yahoo.com released October 29, 2008
  4. Google scraps ad deal with Yahoo - November 5, 2008
  5. Microsoft, Yahoo! search pact cleared in Canada, Australia (November 24, 2009).
  6. 6.0 6.1 "Hulu Generated 1.1 Billion Video Ad Impressions in October," Rao, Leena, TechCrunch, November 15, 2010
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