Analysis

                     Yahoo! Incorporated: 

        Building a business brand on the internet

   by 

Cenk Tolunay 

A) Strategic Direction

 

Strategic Objectives

Ÿ         Gather eyeballs by creating useful information.

Ÿ         Become the hub of internet

Ÿ         Attract more advertisers to increase profits

Ÿ         Aggressive marketing to build a brand name

Ÿ         Move in a direction from a search engine into a internet media company.

Ÿ         Become a global company with operations in other countries out of US

 

Differentiation Strategy

Ÿ         More human labor in categorizing the internet sites and delivering information.

Ÿ         Target  people with no web knowledge

Ÿ         Easy to use but not simplistic

Ÿ         Offer new features such as stock quotes, maps, news, yellow pages and classifieds

 

Innovation Strategy

Ÿ         Classification of web sites in different categories and sub categories that made it easier to reach to information

Ÿ         Adding attractive features and offering free e-mail in its search engine

Ÿ         Integrating many different services

Ÿ         One Yahoo ID to access different sites and services

 

Growth Strategy

Ÿ         Going after the competitors such as Infoseek which was the search engine of Netscape

Ÿ         Adding more and more in to its categories as internet grows

Ÿ         Making acquisitions to enter new areas on the web

Ÿ         Operating in many different languages in other countries out of the US

 

Alliances

Ÿ         Became Netscape’s one of five search engines.

Ÿ         Co-marketing deals and partnerships with other companies

Ÿ         Technology alliance with Compaq

 

Yahoo Successes

Ÿ         People use Yahoo more than they any other portal each month

Ÿ         As a search engine, it gets twice as many visitors than its nearest competitor

Ÿ         Market capitalization equals many established big companies’

Ÿ         Became a brand name on the web

Ÿ         First to generate profit on internet

Ÿ         Astonishing growth

 

Yahoo’s use of technology

Ÿ         Servers

Ÿ         Workstations

Ÿ         Mainframes

 

Problems to overcome

Ÿ         It has slow response time compared to other search engines

Ÿ         It is in a new environment where there is Microsoft with MSN and AOL

Ÿ         Not diversified enough, all the eggs are in internet basket

Ÿ         Offering free services are not helping the bottom line

Ÿ         Severe management problems, charismatic CEO Koogle has resigned recently

Ÿ         Invested in internet media companies such as broadcast.com where there is still shortage of bandwith

Ÿ         Future of portals and advertisement on internet is questioned

B) Analysis

 Business Strategies and Uses of Technology

Strengths

Ÿ         Integrated services such as news, shopping, maps, chat rooms, email etc. in one portal

Ÿ         Many services including my-yahoo personalizing feature to lock its customers

Ÿ         Infrastructure that covers many countries

Ÿ         Easy to use portal

 

Weaknesses

Ÿ         Lower respond time in the searches

Ÿ         Internet is still slow compared to other media channels

Ÿ         Do not have any control of Internet’s back-bone telecommunication technology 

Ÿ         Easily exposed to hackers all over the world

Business Strategies and Success

Strengths

Ÿ         Its brand

Ÿ         Being first

Ÿ         Market penetration

Ÿ         Number of visitors

Ÿ         Massive growth with acquisitions

Ÿ         Integration of services and different web sites

 

Weaknesses

Ÿ         Too much focus on internet, not enough differentiation

Ÿ         Could not convince people to pay a fee

Ÿ         Management turmoil

Ÿ         Not enough fire power against deep pocked Microsoft and AOL

 

 

C) Recommendation

 

Ÿ         Start charging a fee for the Yahoo citizenship, consider it as a tax

Ÿ         Yahoo is not a search engine or a technology company anymore.  It is a media company and everything in the company including mission statement, goals and strategies should be directed in this direction

Ÿ         Realize the mistake of not following AOL’s footstep. All the eggs are in one basket, lower the risk of being tied only the web

Ÿ         More than 75% of revenue is coming from advertisements, diversification is needed. Since e-commerce is not what it was expected, Yahoo should move to other areas to generate revenues.

Ÿ         It was first to implement new features at its portal and integrate them but competition has caught up already. Step up the innovation which has been quiet since 1999.

Ÿ         Management turmoil caused some damage to Yahoo Inc. A company with a billion dollar revenue should be managed more professionally

Ÿ         Since technology and speed of the internet is its vital organs consider gaining more control of it. Some acquisitions or vertical integration to get a hold on to broadband technology can help to speed up the process where the promised  investment is moving too slow

 

 

D) Yahoo! Today

 

Today, Yahoo is going through a major change in management. Charismatic CEO Timothy A. Koogle is out  of the company and a co-CEO of Warner Bros Terry S. Semel is on board since May 1.

 

The dot.com crash and following advertisement cut has hurt the company deeply. Its stock went down from all time high of a split-adjusted $237.50  on Jan 3,2000 to $        today.  Accordingly its market cap plunged from $128 billion to $ . Although more than 190 million people worldwide still visits Yahoo, its sales are down 42% in the first quarter at $180 million. 40% of its business came from dotcoms that pulled down the company as they went out of business.

 

Yahoo is suffering the result of its wrong strategic move when it failed to follow AOL’s move which acquired  a old economy media giant. This diversification helped AOL to maintain its market value in a environment like today.  Now Yahoo is a take over target with its very low market value.

 

Yahoo’s competitors AOL and Microsoft are developing new features to be the dominant player in the next generation of the internet. They are expecting customers to demand more services such as access to new music and online game playing.

 

Computer makers will sell nearly 160 million PCs next year and Microsoft is rolling out Windows XP,  the next generation software due on October 25. It will add a service into its operating system that offers text messaging, voice conversation, video conferencing and document sharing. This is a strategy to lock out its competitors.  Also Microsoft announced a new internet strategy called .Net. It lets unrelated Web sites communicate each other. With this feature a user can purchase stock, transfer funds and update his personal finance software with just one click. This is further integration of internet services that Yahoo started at its portal with e-mail, messenger etc.

 

Obviously, the new Yahoo CEO has to do a lot of strategic thinking and overcome the competitors rivalry, customers and  suppliers bargaining powers.