Yahoo Inc.

Prepared by: Yuchen Zhang (Jessica) Prepared for: Rolf Butz BADM 364 E-Commerce September 27 2011

CONTENTS
Executive Summary............................................................................................................................ 2 Company Overview ............................................................................................................................ 3 SWOT Analysis ................................................................................................................................... 4 Yahoo! sales strategy ......................................................................................................................... 6 Competitors ....................................................................................................................................... 7 Industry analysis ................................................................................................................................ 8 Derived recommendations................................................................................................................. 9 Long term recommendations ........................................................................................................... 10 Conclusion ....................................................................................................................................... 12 Methodology ................................................................................................................................... 13 Statistics .......................................................................................................................................... 14 Bibliography..................................................................................................................................... 15

EXECUTIVE SUMMARY
Yahoo! is a global Internet communications, commerce and media company, founded in 1994. Providing a wide range of online services includes: Media, Search and Marketplaces, Communications and Communities, which is available to more than 50 countries in more than 25 languages worldwide Yahoo! grew rapidly in 1990s, transferring from a search engine site to a web portal. Yahoo made many successful acquisitions to expand their range of services. In 2008, Yahoo had difficulties competing with industry search leader Google and began to grow slowly. The top three competitors of Yahoo! are Google, AOL, and Microsoft (MSN). Recently, Yahoo formed an advertisement selling strategic partnership with AOL and Microsoft. In future, yahoo will combine user experience to a single vision in the three year future strategy. In order to have a clear understanding of Yahoos business model, I did a lot of research. After that, I used SWOT analysis tools to find out Yahoos strength, weakness, opportunity and threats. According to the business model and the SWOT analysis result, I summarize Yahoos sales strategy and the top three competitors. I used Porters Competitive Forces Model to observe the competitions inside the industry. By studied each factor that may have huge impact on Yahoo!s strategy formulation, I came up to several recommendations may be useful to Yahoos future development.

HISTORY
Yahoo! was founded in January 1994, by Jerry Yang and David Filo. They were both graduate students from Stanford University. In 1990s, Yahoo! grew rapidly developed into a Web portal. It also acquired many companies to expand their range of services, in hope to attract more users. In January 2000, Yahoos stock price once skyrocketed to $118.75 a share. However, after the dot-com bubble burst, it reached an all-time low of $8.11. In order to compete with Google, Yahoo developed its own search technologies in 2002 and improved its mail services in 2007. On January 29, 2008, Yahoo! announced that the company was lying off 1,000 employees as the company had suffered severely in its inability to effectively compete with industry search leader Google.
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COMPANY OVERVIEW
CURRENT & FUTURE PROFILE
In February 2008, Microsoft made an unsolicited bid to acquire Yahoo! for USD $44.6 billion. Yahoo! subsequently formally rejected the bid, claiming that it "substantially undervalues" Yahoo! and was not in the interest of its shareholders. Three years later, Yahoo! had a stock market capitalization of USD $22.24 billion. 2 According to the latest news, Yahoo! has formed an advertisement selling strategic

Kopytoff, Verne (2008-01-30). "Yahoo to lay off 1,000". San Francisco Chronicle. 2008-07-24. "Yahoo rejects Microsoft approach". BBC News Online. 2008-02-11. 3

partnership with AOL and Microsoft, which considered as two of its most top competitors. According to Yahoo's chief product officer Blake Irving, Yahoo! will update its products in short cycle and Pay more attention to combine user experience to a single vision in the three year future strategy.

SWOT ANALYSIS
STRENGTH
1. Stable advertising revenue As Yahoo! developed early in portal website and search engine sites, it has the very high click ratio. Yahoo!s page advertising and search engine advertising income hold large amount of its total revenue in 2010. 2. Early global expansions into different countries Early in 1996, Yahoo! began expanded into global market. It established the first branch in Japan, which is considered as the most successful overseas company. After that, Yahoo! established branches in France, Germany, and UK using local language. To build a global network of brands is always Yahoo's strategic objectives. Now Yahoo! is available for more than 20 languages worldwide. 3. The diversity of products and services Yahoo! provides diversify services including search, shopping, information, finance, entertainment and communication, which becoming more competitive.

WEAKNESS
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Existing packaged services are offered by competitors. The packages and the services that Yahoo offers are also offered by other competition providing sites such as MSN & Google. For example, Free E-mail accounts are available from Hotmail (MSN) or G-Mail (Google).

OPPORTUNITY
1. Develop strategic partnerships with suppliers Yahoo! has developed partnerships with different broadband providers such as AT&T, Verizon Communications, offering a range of free and premium Yahoo! content and services to subscribers. Strategic partnerships enable the company to reach out to a broader audience, which gives great opportunity to long-term of Yahoo!s development. 2. Growing mobile advertising market The mobile advertising market is growing rapidly today. As more and more individuals are available to access the Internet through devices such as Smartphone other than a PC, which provide new opportunities for Yahoo.

THREAT
Privacy regulations With the development and popularity of the Internet technology, the right of privacy is facing huge challenges. Yahoo collects great amount users data through its services such as email, governed by Federal, state and international laws and

regulations. Any failures to comply with the privacy policies could result in public criticism and limit Yahoos business practices.

YAHOO! SALES STRATEGY

FOCUS ON DEMANDS FROM EXISTING CUSTOMERS
My Yahoo! is a personalized start page that will give registered users the ability to customize their own pages with information that interests them most from around the Web.3 Through the "My Yahoo", the user can enter their own web pages at any time, watching their customized news, stock price index, weather and other information. "My Yahoo" learned from the user's hobby to make precise ad targeting.

DEVELOP ELECTRONIC BUSINESS APPLICATIONS

Yahoo! provides commerce services such as Yahoo! Shopping, Yahoo! Autos, Yahoo! Real Estate and Yahoo! Travel, which enables users to gather relevant information and make commercial transactions and purchases online.
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CONTINUOUS IMPROVEMENT OF CUSTOMER SERVICE

Yahoo!s Integrated Consumer Experiences offerings include the Yahoo! Home Page, My Yahoo!, Yahoo! Toolbar, Yahoo! Local, and Connected TV all are entry points to the Yahoo! experience. These services are provided to users free of charge.

FOCUS ON THE CONTENT AND FORM OF THE WEBSITE

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"2010 Form 10-K, Yahoo! Inc.". Yahoo.com. United States Securities and Exchange Commission. 2011-02-28. http://www.sec.gov/Archives/edgar/data/1011006/000119312511050000/d10k.htm. 2011-04-04.
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"Yahoo to close North American auction site". msnbc.com. 2008-10-28. 6

Compared to other competitors, Yahoo has the least content of advertisements in its page, which provides users a very clear and concise website content and form. Yahoo's navigations design plays an important role that users can easily reach the main page of the website.

COMPETITORS
Yahoos most significant competitors are Google, AOL, and Microsoft (MSN).

GOOGLE
Google was founded in September 1998, which is the Internet's largest search engine. Google's core competency is search service. The company also includes advertisers, content publishers and site managers, including the corporate customers to provide targeted advertising services, and provide them the tools can measure advertising effectiveness. Google provides advertising services to generate revenue, so that advertisers can publish and Specific content-related, important and economic effectiveness of online advertising.

AOL
American Online (AOL) is a United States subsidiary of time Warner, the famous Internet service provider. In 2000, United States online and Time Warner (Time Warner) announced plans to merge on January 11, 2001, the deal by the Federal Trade Commission (Federal Trade Commission) confirmed.

AOL provides services including an E-mail, news groups, education and entertainment services, and support for Internet access.

MSN
MSN (Microsoft Network) is a collection of Internet sites and services provided by Microsoft, which can be used on chatting, video meetings, dialogue instantaneous communication with family members, friends, and working partners. Through this software to you can see who is available online. Microsoft's MSN mobile Internet services including cell phone MSN (instant messaging Messenger), will be mobile search, mobile phone SNS (the largest Windows Live online community), Chinese information, mobile entertainment and mobile innovation such as discount mobile services, meets the user of the Internet era in mobile communication, social, travel and entertainment, and many needs. China has a large number of user groups. From this, one may conclude that Yahoo!s services are mainly about attracting and retaining users. Whereas, Google considered search service is their primary objective.

INDUSTRY ANALYSIS
THREAT OF ENTRY OF NEW COMPETITORS
Yahoo! has occupied large portion of market share in the portal websites market, which creates high barriers for new competitors to entry. The reasons are following: first, the market capacity is limited. Second, the loyalty of the Internet users is difficult to change, unless the new entrants provide much better or differentiated products than the former.
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THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Compared with Yahoo! extensive coverage of information, vertical professional web sites process to the depth of the information and constantly to upgrade their products and services, which is becoming one of its substitute threats.

BARGAINING POWER OF SUPPLIER

As a giant e-commerce platform, Yahoo needs to purchase a large amount of software and hardware products from its suppliers. Hardware such as servers, which are standardized products. Yahoo! either can outsource or lease where a lot of suppliers to choose from. Most of Yahoos software products are developed internally in Product Development organization includes Yahoo! Labs5. Therefore, in the software and hardware product supply field, the supplier's bargaining ability is very low.

BARGAINING POWER OF BUYER

In recent years, with the popularity of internet and diversity of online products and services, users are becoming more and more willing to pay for online services, which will stimulates the development of Yahoos online value-added services.

DERIVED RECOMMENDATIONS

"2010 Form 10-K, Yahoo! Inc.". Yahoo.com. United States Securities and Exchange Commission. 2011-02-28. http://www.sec.gov/Archives/edgar/data/1011006/000119312511050000/d10k.htm. d2011-04-04.[ 9

DEVELOP THE MEDIA MARKETING STRATEGY

With the rapid development of media, yahoo can carry out marketing activity on interaction, and multimedia advantages to gain public attention. In 2008a famous Chinese portal site Sina held a "Network Fashion Ceremony. After the Ceremony, the traffic and the number of users have registered in Sina reached tens of thousands of times higher than usual. I believe Yahoo! can promote the media marketing strategy to reach more internet users, and create business profits.

ENHANCE CORE COMPETENCIES AND DEVELOP NEW SERVICES

Yahoo! s ore competitiveness is to hold tens of thousands of Internet users at the same time enjoy diverse land information service, E-mail functions and search engine service, etc. Compared to Google, Yahoo! has a lower speed of new technology development. Yahoo! Mail, one of Yahoos competencies, is not as many as functions Google served.

ACQUISITION
In order to stay competitive and always provide user with new and professional services, Yahoo make acquisitions to other companies. In the past years, there were many successful acquisitions which created great opportunities for Yahoo!. In the future, Yahoo can make acquisitions with small enterprises those have differ services.

LONG TERM RECOMMENDATIONS

DEVELOP VALUE-ADDED SERVICES STRATEGY.
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Yahoo should pay attention to the importance of developing value-added services. For example, Yahoo can provide Value-added services in membership system, SMS customized, financial services charge extra fee just for prime. Value-added services can increase the organizations profit, while gaining customers loyalty. Value-added services also can improve the user's cogitations of interests, where they can gain from the service Yahoo provide to them.

COMBINE GLOBALIZATION WITH LOCALIZATION STRATEGY

To develop the combination of globalization and localization strategy will help Yahoo! rapid expansion. Not only can Yahoo! meet users requirements, but also gain big amount of revenue. In 2010, Yahoo! provides services to more than 50 countries in more than 25 languages. Through the global popularization, yahoo can establish its brand image.

DEVELOP STRATEGIC ALLIANCE STRATEGY.

Strategic alliance is a two or two or more companies formed an alliance in order to achieve common strategic goals. The alliance members produce their competitive advantage, mutual cooperation, risk-sharing, therefore to better serve users. According to the "opportunity" observed by SWOT analysis, which mentioned in the previous part, Yahoo has develop alliance with Microsoft and AOL. But in rapid development of highly competitive internet market, Yahoo must continuously develop the strategic alliance strategy in different aspect of its business such as with suppliers in order to be competitive.

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CONCLUSION
After studying Yahoo!s business case. I come up with some conclusions. First of all, from the SWOT analysis, I think Yahoos early business strategy has a great impact on it todays strength, for example global expansion, which lays a foundation for Yahoo!s global development. Second, according to the industry analysis, I think Yahoo! has a stable industry environment as Yahoo! dominates the portal site market holding a large amount of market share, which creates high barriers for new competitors to entry. Third, there is still room for further development in search engine site. Although Yahoo!s market share is much smaller than Googles, it formed an advertisement selling strategic partnership with AOL and Microsoft. Moreover, excellent Yahoo! mail service and well-design navigation, as long as some marketing activities can be carried out in the future, I believe Yahoo! will be able to act as a leading role in e-commerce to achieve the evergreen.

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METHODOLOGY
In this Yahoo! Inc. case study, I used Porters Competitive Forces Model to observe the competitions inside the industry.

Porter's Five Forces is a framework for industry analysis and business strategy development. Three of Porter's five forces refer to competition from external sources. The remainder is internal threats. Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.6

This five forces analysis is just one part of the complete Porter strategic models.

1. The threat of the entry of new competitors 2. The threat of substitute p 3. roducts or services

3. The bargaining power of customers (buyers)

4. The bargaining power of suppliers

5. The intensity of competitive rivalry

Porter five forces analysis. http://en.wikipedia.org/wiki/Porter_five_forces_analysis. 13

STATISTICS
Direct Competitor Comparison YHOO Market Cap: 18.57B Employees: 13,600 Qtrly Rev Growth -23.30% (yoy): Revenue (ttm): 5.57B Gross Margin (ttm): 64.32% EBITDA (ttm): 1.43B Operating Margin 15.16% (ttm): Net Income (ttm): 1.17B EPS (ttm): 0.88 P/E (ttm): 16.68 PEG (5 yr 1.45 expected): P/S (ttm): 3.17 AOL = AOL, Inc. GOOG = Google Inc. Pvt1 = MSN (privately held) Industry = Internet Information Providers AOL 1.27B 5,860 -8.40% 2.25B 33.40% 463.00M 8.69% 230.00M 2.16 5.51 5.62 0.53 GOOG 169.68B 28,768 32.30% 33.33B 65.18% 12.78B 33.62% 9.01B 27.72 18.96 0.76 5.04 PVT1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Industry 147.35M 360 15.40% 81.06M 57.24% 6.07M 3.49% N/A 0.02 16.8 1.06 1.58

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BIBLIOGRAPHY
BOOK
Electronic Commerce: A Managerial Perspective, E. Turban, 2010

INTERNET SITES
1. 2. Kopytoff, Verne (2008-01-30). "Yahoo to lay off 1,000". San Francisco Chronicle. 2008-07-24. "Yahoo rejects Microsoft approach". BBC News Online. 2008-02-11.

3 . "Yahoo to close North American auction site". msnbc.com. 2008-10-28. 4. "2010 Form 10-K, Yahoo! Inc.". Yahoo.com. United States Securities and Exchange Commission. 2011-02-28. http://www.sec.gov/Archives/edgar/data/1011006/000119312511050000/d10k.htm 5. Porter five forces analysis. http://en.wikipedia.org/wiki/Porter_five_forces_analysis.

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