Antonio Baptista Lopes - Francisco Javier Yuste

Kevin Franois Follonier - Kai Schildhauer

Lakshay Suri - Shreya Agarwal - Yesol Won

Group G

IE |

BUSINESS | SCHOOL
January
22, 2015
Overview:
Yahoo was created in 1994 as a customized database to serve different users. It grew
rapidly throughout the 1990s and today it is the second largest search directory on the web
by volume at 5.45%. It generates revenue from display, search advertising and fee-based
services. Although, Yahoo developed its own search engine, it was later obliged to use
Google based technology in 2000 in order to provide equal quality search results.
Microsoft Corporation attempted to make a bid to acquire Yahoo for $44.6 billion in
February 2008. However, Yahoo officially rejected the offer but it turns out that Yahoos
value is far below the sum that Microsoft offered. Moreover, the company suffered from large
layoffs. The new CEO in 2012 led Yahoo to acquire Tumblr in a $1.1 billion acquisition and
that purchase was just one in a series that took place since the new CEOs appointment.
The defining criteria we used to choose Yahoo as our strategic case study are the problems
that the company is currently facing and how they can be resolved.
Strategic Issues:
The main strategic problem faced by Yahoo since the start of the
millennium, was the inability to efficiently aggregate their search engine
capacities with the new unorganized advertising model. It evolved from an
initial search engine tool into a cluttered one-stop portal with complex
links to advertisements, news, sports and mail. The diversification process
into a portal, search engine and media website resulted into a clear loss of
identity and focus; which in turn had an impact on the customers as well
as the internal stakeholders. Moreover, Yahoos aggressive competitive
vision proved unsuccessful as they tried to take on established players in
different industry segments such as Microsoft for Email and Google for
Search. It showed an unclear strategic focus, consequently suffering from
the many incompatible acquisitions that followed. Googles powerful
search engine became more efficient and attracted more users. This loss
of power arose from Yahoos unformulated strategy, which could not bring
up a strong competitive advantage for Yahoo.
The main source of revenues for Yahoo was the monetization of
advertising, which was correlated with the customer base. In 2006,
Yahoos inability was visible from the fact that they could only generate
$4,5 Billion from a 500 Million average user visits, against Googles higher
revenue and less users. This resulted from Yahoos ineffective advertising
strategy. The kind of strategy formulated by Yahoo, which included
analysis, planning and implementation should have been complemented
with reanalyzing and repositioning. As price is defined by the value of

Antonio Baptista Lopes - Francisco Javier Yuste

Kevin Franois Follonier - Kai Schildhauer
Lakshay Suri - Shreya Agarwal - Yesol Won

Yahoos advertisements and as price is a function of value, Yahoo could

not establish sustained value and a competitive advantage relative to
competitors such as Google, as the former was able to yield higher value
to advertisers.