Yahoo

ADMN 404: Assignment 1

Alexandra Kaun 3021656

Yahoo

Executive Summary
Yahoo is one of the World Wide Webs (WWW) leading search providers, and most prominent web portal. It was established in April of 1994 and was originally called Jerrys Guide to the WWW (Hill & Jones, 2008). Today Yahoo employs around 11,000 people and, in 2006, averaged 144 million views per day (Hill & Jones, 2008). The company has achieved its success by offering its users a variety of different services including: email, instant messenger, search, news, sports, stock quotes, and entertainment. Currently, analysts are unsure of Yahoos actual role as it functions as a myriad of purposes (Hill & Jones, 2008). Despite Yahoos past success, the future is unclear about what success they will have as they seem to have lost sight of their mission and original business model the search function. Also, with Google garnering more advertising revenues and popularity among both internet users and companies wanting to advertise, it seems as though Yahoo will have an increasingly more difficult time competing.

Yahoo

Introduction
Yahoo is one of the top search providers of the WWW and most prominent web portal, with over 144 million views per day (in 2006) (Hill & Jones, 2008). However, due to the competitive nature of the dot-com industry, and the emergence of Google, Yahoo is in need of a clearer business model that will take them through the next decade. This review will look at Yahoos past and current situation beginning with a brief overview of the company. This will be followed by an evaluation of the external forces at play, specifically the macro and competitive forces that shape the competitive dot-com search engine industry. Lastly, the internal environment will be analyzed. This document is based on the case Yahoo (Hill & Jones, 2008, p.C102-C114) with no access to financial statements.

Company Overview
Yahoo originally started out as a way for David Filo and Jerry Yang, the founders of Yahoo, to remember their favourite sites more or less how we currently use the bookmark feature today, but on a much larger scale; as the list grew they categorized the websites, and later into subcategories. In 1994 Filo and Yang published their website so as to make it available to their friends (Hill & Jones, 2008). In the beginning, Yahoos business model was to capitalize on renting advertising space on their web directory pages. With the growth of their company they soon needed to invest in sophisticated IT infrastructure and found backing with Sequoia Capital, who insisted that they hire experienced executives to take control of developing Yahoos business model further. Filo

Yahoo and Yang hired Tom Koogle as their Chief Executive Officer (Hill & Jones, 2008). Koogles vision for Yahoo was to turn it into the most useful and well-known web portal by making it a global communication powerhouse, enabling users to connect with anything or anyone on the internet, linking people to information. Koogle also envisioned Yahoo as being a retail channel which would link buyers and sellers, facilitating the new idea of internet shopping. Over the course of a decade, Yahoo acquired many services including: email, instant messaging, stock quotes, news, personal ads, and job ads. Later, they enabled advertisers to better target their advertising to specific demographics, which increased the amount of users who were clicking on their ads. The targeted advertising translated into more profits for the advertiser. These features increased Yahoos stock price to $237.50/share in 2000 (Hill & Jones, 2008). However, in 2002 their stock was valued at only $9/share (Hill & Jones, 2008). This was due in part to the dot-com bust, but also the poor managerial skills of Tom Koogle he had spread the investment of the company out, focusing on nothing in particular. Due to poor performance, he was replaced by Terry Semel. Semels business plan was to revamp Yahoo by introducing new content and services and improve their search engine technology. These would increase their users and thus their advertising revenues. As time passed, and Googles popularity and revenues increased, Yahoo found that they needed to imitate Google and offer more customizable advertising services that were of high-quality. Despite Yahoos success, their future remains uncertain. This is because of their direct competition with Google. Googles market share is almost double that of Yahoos search engine users 49% in 2006. Questions have also been raised about Yahoos content driven strategy and how it would drive future revenues with competition increasing. Moreover, analysts are questioning if

Yahoo Yahoo has lost sight of their original business model as it is no longer clear exactly what the company is today.

Mandate
According to Yahoos investor FAQ page, their mission is as follows: Yahoo! creates deeply personal digital experiences that keep more than half a billion people connected to what matters most to them, across devices and around the globe. That's how we deliver your world, your way. And Yahoo!'s unique combination of Science + Art + Scale connects advertisers to the consumers who build their businesses. (Yahoo Inc., 2013) Yahoo strives to be a global company that allows users to have access to particular information, organized in a hierarchical fashion. There is little material available regarding the Core Values of Yahoo; however there is some support to the following: Services offered: Yahoo values their users and wants to offer them exceptional tools that will make their life easier and more entertaining through innovations in their products. Profitability: they seek to increase their revenues by finding unique ways to create growth, including creating more customized advert services. Knowledge: Yahoo seeks to inform its patrons by providing them with a myriad of services from entertainment to news and beyond, offering their tools both on personal computers and smartphones. In Yahoos Corporate Governance Guidelines document they state that the board of directors goals are generally to build long-term value for the Company's stockholders and to assure the vitality of the Company for its

Yahoo customers, employees and the other individuals and organizations that depend on the Company. (Yahoo Inc., 2012) Based on this document it seems evident that the most important stakeholder in Yahoo is their stockholders, for if it was not for them, Yahoo would not be able to invest in new services. Their next greatest stakeholders are their employees. The employees of Yahoo receive many benefits including such things as: health care, retirement plans (401k), health club memberships, and employee stock purchase plans (ESPP) (Yahoo Inc., 2013, Benefits). Lastly, of course, is their commitment to their users to keep creating valuable tools for their use.

External Analysis
Competitive Forces
The search engine industry does not have many competitors the key industry players are Google, Yahoo, Microsoft Bing, and MSN, with Google having the largest market share. The industry is between the shakeout and mature phase, having intense rivalry but the market is becoming saturated. The rivalry has stayed between these four key companies because the cost to enter into the search engine industry is high. Algorithms must be developed; additionally, many servers are needed which requires funding; and to run the expanding company, employees are needed. With search engines combing through the same internet information, it became important to the industry players to differentiate themselves from one another, to offer features that others do not. Google offers Gmail, Google Maps, Scholar, news search, YouTube, and many other features. Yahoo took a similar but different approach. Their Search is based on hierarchy, They also offer a celebrity site OMG!, job search, real estate, and travel.

Yahoo However, like Google they also offer an instant messenger service, photo sharing, and game site. Users of search engines tend to flock to one particular site as that is what they are comfortable with. A user of Google, which offers a simple website, might find Yahoos website cluttered. Conversely, a Yahoo user might like its many various uses, and would therefore choose to stay with Yahoo rather than another search engine. For these reasons it is safe to say that the search engine industry is not an attractive industry to break into at the moment. Barriers to entry are relatively high: Google, Yahoo, Bing, and MSN have an oligopoly on the market, and rivalry to steal market share is intense. Additionally, the search engine industry is particularly unattractive because most users are comfortable with the search engine they know, they do not want to move to a new platform.

Macro Environment
Yahoos future is dependent on macro environmental forces, specifically technological, global, and demographic forces. Because there are several prevalent search engines Google, Yahoo, Microsoft Bing, and MSN Yahoo must continue to advance their technology or they will fall behind in what their competitors are offering. Yahoo has been able to remain in the forefront of search engine providers by offering many different services to its users. Global forces are also at play because some countries require search engines to block certain information, this can cause a barrier to entry as there may already be a country specific search engine in place that residents are more comfortable using. This is also difficult for search engines to accommodate as they would have to tailor make each restrictive countrys access as each country is different in which information they wish to block.

Yahoo However, the biggest threat to Yahoo is the demographic forces at play. Dependent on a persons age, race, or social background they may prefer one search engine over another. A university student may use Google because it offers Google Scholar, while a post-grad or middle-aged person may prefer Yahoo as they have a search engine specifically for finding jobs. Specific search engines may also be seen as more trendy to the younger generation. Yahoo must continue to develop ways to cater to all demographics through their offered services in order to remain one of the leading search engines.

Internal Analysis
Yahoo is one of todays best known gateways into the internet. The web portal allows users to access specific information gathered from, what seems like, an almost infinite amount of web information through their many useful websites. For example, like Google, Yahoo offers webpages specific to general search, news, finance, email, and photo sharing. However, Yahoo offers other, more unique, search functions such as: dating, jobs, TV, horoscopes, and realty. Internally, Yahoo offers its employees many added benefits of working for the company such as: 401(k), dental/medical, on-site fitness, adoption assistance, employee stock purchase plan (ESPP), and community service day off (Yahoo Inc., 2013, Benefits). They also offer a Hack Day which is an event where they bring in their best designers and developers to innovate and create: Yahoo! will provide you with everything you need to have fun, be creative and productive, and impress your peers with what you can do with a computer and the wealth of technologies and data available on the Web. (Eventbrite, 2012) By offering these services to their employees and investing in them, the employees feel rewarded and work harder, enriching and strenghting the company.

Yahoo Because Yahoo offers a wider variety of webpages and search functions they have an opportunity to take market share away from other leading search engines (Google and Bing). If Yahoo continue to invest its efforts in creating additional distinctive websites and search functions, its market share will continue to increase. With that being said, there is always the threat that Google, and Bing, could create more of their own unique search functions, encroaching on Yahoos territory. However, because it is known that Yahoo has these features, and has created a generally loyal user-base, it may be difficult for other search engines to take market share away from Yahoo. According to Hill and Jones (2008, p. C113), there are some analysts that suspect that Yahoo has lost sight of its original business model and mission, spreading itself too thin. Because of this, it is no longer clear what the actual function of Yahoo is, whether it is an entryway or a search engine. Another weakness of Yahoo is that it must constantly invest resources to advance its vast content as new start-up companies appear often, offering new services (Hill and Jones, 2008, p. C113).

References
Eventbrite. (2012). Yahoo! Open Hack India 2012. Retrieved February 28, 2013, from Eventbrite: http://openhackindia2012.eventbrite.com/ Hill, C. W., & Jones, G. R. (2008). Strategic Management: An Integrated Approach, Eighth Edition. Boston: Houghton Mifflin Company. Yahoo Inc. (2012, December 11). Corporate Governance Guidelines. Retrieved January 6, 2013, from Yahoo! Investor Relations: http://investor.yahoo.net/documentdisplay.cfm?DocumentID=11713 Yahoo Inc. (2013). Benefits. Retrieved February 28, 2013, from Yahoo! Careers - United States: http://us.careers.yahoo.com/benefits/all/lang/en

Yahoo Yahoo Inc. (2013). Investor FAQs. Retrieved December 29, 2012, from Yahoo! Investor Relations: http://investor.yahoo.net/faq.cfm

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