Yahoo

Yahoo!, Inc. Case Analysis

Note to the Board of Directors

Per your request, the following analysis provides a comprehensive look at Yahoo!'s current state, as well as marketing recommendations that should be used when formulating Yahoo!'s overall strategic plan. It will provide you not only with a summary of Yahoo!'s competitive environment, but also with specific strategies for marketing Yahoo! as a worldwide multimedia leader.

Introduction

Since 1994, Yahoo! has flourished into a global brand that has drastically altered communication channels, information accessibility and purchasing techniques. Yahoo!'s mission is "to be the most essential global/Internet service for consumers and businesses," (Yahoo! Inc, 3). In fulfilling its mission, Yahoo! provides offerings in fifteen languages in more than 20 countries, regions, and territories (Kessler, 2006). The three primary areas for its services are Search and Marketplace, Information and Content, and Communications and Consumer Services. Worldwide users currently total greater than 411 million (Yahoo! Inc., 4-8).

Situation Analysis

Market Profile

According to Scott Kessler, an analyst with Standard & Poors, the dot-com crisis that began in 2000 ended in mid-2003. Since then, many Internet companies have eliminated unprofitable businesses, cut costs, and streamlined business processes. These important business changes have led to better margins and greater capital preservation. The current health of the industry is strong especially given the economic rebound of late. Forrester Research estimates that online advertising and marketing spending will more than double to $26 billion in 2010, equivalent to a 14% annual growth rate (Kessler, 2006). Additionally, the number of Internet users is continually rising. Fewer surviving search facilities and dot-com corporations along with increasing demand suggests Yahoo!'s potential for improved revenue is great, although not without fierce competition.

Competitive Forces

The market for Internet services is a highly competitive industry characterized by rapid change, converging technologies, and increased competition from companies integrating communication, information and entertainment services with other media properties. The most significant competition for Yahoo! comes from Google Inc., Microsoft Corporation or MSN, and Time Warner's America Online. Each of these firms is increasingly utilizing its financial and engineering resources to compete with Yahoo!. Yahoo! does not have a direct billing relationship with its users like AOL or MSN, which may inhibit Yahoo!'s effectiveness in targeting services and advertisements to the specific preferences of its users. If any of the competition is more successful in attracting users and customers, Yahoo! risks losing revenue. Yahoo! also faces competition from other Internet service providers, including destination websites and Internet access providers, as well as other providers of sponsored search advertising services and traditional media companies (Yahoo! Inc., 10).

According to data from comScore Media Metrix, Yahoo! is believed to be the United States market leader in unique monthly visitors, ranking ahead of MSN, AOL, and Google's websites. In the online search category, Yahoo! ranks second behind Google but ahead of MSN and AOL. Yahoo!'s competitive advantages include its global presence, advertising relationships with agencies, partnerships with broadband service providers, large financial resources, and focus on Internet content and advertising. However, the competitive forces threatening Yahoo! include Google's strong advertising and technology, anticipated product introductions on the behalf of Microsoft in 2006, and the creation of Fox Interactive Media which includes the popular MySpace website (Kessler, 2006).

Problems and Opportunities - SWOT Analysis

Strengths

As previously mentioned, Yahoo!'s strengths include its incredibly profitable Internet advertising business and international business presence. Yahoo! pays particular attention to its affiliate advertising for large advertising accounts. Affiliate advertising is the primary income source for the firm. Second, Yahoo! services over 350 million users with it offerings and has one of the most popular websites in the world. Its brand represents an extremely powerful marketing firm and is known around the world. Yahoo! currently has strategic business units, or SBUs, in Asia, Europe, and Australia, placing it in a favorable position to capitalize upon international opportunities. Finally, Yahoo!'s "Yahoo! Directory" is an original and effective source of structured information. Unlike mainstream search engines, Yahoo!'s search engine moderates the content of the search results before returning them to the user. Despite these strengths, however, weaknesses are evident within the firm's operations.

Weaknesses

Perhaps the biggest weakness of Yahoo! is its lack of differentiation. Almost all of the service and solution packages offered by Yahoo! are available from other sources. MSN and Google also provide search facilities, and a multitude of alternative free e-mail account options exists. Shopping occurs all over the Internet and news can be obtained via CNN or BBC, amongst other sites. Second, as previously mentioned, Yahoo!'s main income stream is from online advertising. Because online advertising is a fairly new phenomenon, the future profitability is uncertain as new unforeseen advertising media emerge with developments in technology. Finally, another key source of income for Yahoo! is derived through partnerships with telecommunications providers. These partnerships allow users to purchase an Internet connection package via their local telephone company that includes a fee-based Yahoo! package. The risk exists that this avenue could become obsolete, which would certainly affect Yahoo!'s revenue generation.

Opportunities

Yahoo!'s greatest opportunity lies within the international landscape. The sheer population sizes of both China and India offer tremendous growth potential. Yahoo! could capitalize upon that potential by taking over businesses in and around Asia and the Middle East ahead of competitors like Google and Microsoft. Next, Yahoo!'s Directory represents a great opportunity for new business and