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TRANSCRIPT
INTRODUCTION Yahoo! Inc. is an American multinatioal Internet corporation
headquartered in Sunnyvale, California. Yahoo was founded by Jerry Yang and David Filo in January 1994 and was incorporated on March 1, 1995.
It is globally known for its Web portal, search engine, Yahoo search , and related services, including Yahoo Directory, Yahoo Mail, Yahoo News, Yahoo Finance, Yahoo Groups, Yahoo Answers, advertising, online shopping, video sharing, fantasy sports and its social media website. It is one of the most popular sites in the United States. According to news sources, roughly 700 million people visit Yahoo websites every month. Yahoo itself claims it attracts "more than half a billion consumers every month in more than 30 languages
JERRY YANG Taiwanese native who moved to California at the age of 10 Raised by his widowed mother and grew up in San Jose Completed both his bachelor’s and master’s degrees in electrical
engineering in Stanford Opted to stay at Stanford for a PhD degree in electrical
engineering
DAVID FILO Native of Moss Bluff, Louisana In 1988 finished undergraduate program and enrolled in
Stanford’s master’s program in electrical engineering Opted to stay at Stanford and try to his PhD in electrical
engineering Extremely competent in the electrical arena
DAVE AND JERRY AT STANFORD
Yang and Filo met each other in the electrical engineering department at Stanford
Filo was Yang’s teaching assistant for one of his classes
Worked in the same design automation software research group
Became close friends while teaching at the Stanford campus in Kyoto, Japan
Their individual personalities perfectly complemented each other
CREATING JERRY’S GUIDE TO THE WORLD WIDE WEB
They started their business that they could transform their Internet hobby into a viable business
Filo and Yang, along with thousands of students began devoting large amounts of time to surfing in the Web and exploring the vast content available
Focused on bookmarks They discovered interesting sites and they wanted to return
directly to a page that they had visited without having to navigate through several different links
According that problem, they wrote software using Tcl/TK and it’s allowed them to group their bookmarks into subject areas
Named their list of sites Jerry’s Guide to the World Wide Web and developed a WEB interface for their list
CREATING JERRY’S GUIDE TO THE WORLD WIDE WEB People all around the world started sending Jerry and Dave email,
saying how much they appreciated the effort Yang and Filo considered their choice of name. Jerry hated
‘Jerry’s Guide’ so he and Filo opted for YAHOO YAHOO (Yet Another Hierarchical Officious Oracle)
YAHOO’S GROWING POPULARITY
Yahoo was accessible by Yang and Filo who studied engineering in Stanford.
They created a Web interface that spread by word of mouth and e-mail, more people began using their site.
COMPETING SERVICES None offered the same service that Yahoo! Did, Yahoo
could definitely provide potential competition to any new business that Yahoo would start.
Webcrawler at the University of Washington, Lycos at Carnegie Melon, the world wide web worm, and Infoseek, founded by Steven Kirsh. AOL and Microsoft in 1995 represented larger competitors who could enter the market either by building their own capability of the other start-ups
LEAVING STANFORD AND STARTING THE BUSINESS
Yang and Filo had been in Silicon Valley long enough to realize that what they really wanted to do was to start their own business.
A few months later after they started their project, they received over two million hits a day on their site.
Unexpected overturns from AOL and Netscape caused them to raise their sights, although both companies wanted to turn Filo and Yang into employees.
Filo and Yang had three options: 1. Sell Yahoo! 2. Partner with their sponsor 3. Start an independent business
THE SEARCH FOR FUNDING
The first people who contacted Yahoo! Is Reuters, Reuters wanted to be a partner but their progressed was too slow.
ISN also wanted to join Yahoo! but the contacted was not success.
Netscape Communications offered Yahoo! to join them by using some space on site and come to Netscape network. By early 1995 Yahoo! Was running on four Netscape workstation
CORPORATE PARTNERSHIPS
AOL(American Online) is the company that offered Yahoo! With the carrot of money, stock and management positions, AOL said “if Yahoo! Say no with this deal they want to be the big competitor with them” but in the end Yahoo! dedined the offer.
Yahoo! was approached by KPCB that had an exellent reputation as the best venture capital firm in the silicon valley.
KPCB offer fund to Yahoo! If they agreed to merge with Architext.
ANSWER In 2005, it was easy for Yahoo! to find some capital
from outside because of its attractive opportunity as a
business. There were several uniqueness of Yahoo!
among Internet search providers:
“The Yahoo! hierarchy is a handcrafted tool in that all
of its…categories were designated by people, not
computers. The sites that they link to are
likewise deliberately chosen, not assigned by
software algorithms.
ANSWER In this, Yahoo! is a very labor intensive product.
But it is also a guide with human discretion and
judgment built into it - and this can at times make
it almost uncannily effective….
In addition, Yahoo! offered a central place where people
could go to just to see what was out there. This made it
easy for people with little previous exposure to the Web
to start searching through Yahoo!’s lists of links, often
just to see if they could find something of interest.
ANSWER• This is the essence of Yahoo!’s uniqueness and (let’s say it)
genius. It isn’t especially interesting to point to information that
many people are known to find interesting. TV Guide does this.
So do phone books, and countless Web sites that cater to well-
defined interest groups….
• But Yahoo! is able to build intuitive paths that might be
singularly, or even temporarily important to the people
seeking it. And it does this in a way that no other service
has truly replicated.
HOW WILL YAHOO! MAKE MONEY?
Through targeted advertising based on enormous following
New premium service Explore broad-band service (from 2004)
SELL ADVERTISING Yahoo! sells advertising (This is not the
auctioned search advertising that Google has become known for, although Yahoo! also does this).
This advertising is the banner ads that you see when you use all their compelling services. (chatting, email…).
The ads can be very specifically targeted such as a movie ad that is shown for a few hours on a Thursday and Friday afternoon to a specific demographic.
BUSINESS MODEL- YAHOO! CREATED ENORMOUS FOLLOWING
• Generate following through its strong brand and
momentum created
• The interest-area based structure of Yahoo! made it an
easier and more enjoyable way for users to find
relevant information, generate following
• Through its editorial efforts, it provided a combination
of comprehensiveness and high quality.
QUESTION 3
Identify the major risks in each of these categories:
Technology, market, team and financial. Rank order them.
TECHNOLOGY RISKS
Any failure to scale and adapt existing technology architecture to manage expansion and respond to rapid technological change could adversely affect business.
The technology architectures and platforms utilized for the services are highly complex and may not provide satisfactory support in the future.
New technologies could block display advertisements or search marketing listings.
Changes in regulations or user concerns regarding privacy and protection of user data, or any failure to comply with such laws.
MARKET RISKS Yahoo! face significant competition for users, advertisers,
publishers and distributors, principally from Google, Microsoft, and AOL.
In markets, Yahoo! compete with local Internet service providers that may have competitive advantages. Especially those in Asia, Europe, and Latin America, Yahoo!
face substantial competition from local Internet service providers and other portals that offer search, communications, and other commercial services.
International operations are subject to increased risks which
could harm Yahoo’s business, operating results, and financial condition.
TEAM RISKS Employees of the company responsible for making the business
model work.
Weak management team impact on instant credibility to outside investors.
A strong management team may not be able to salvage a weak business model, but should be able to change the model and redefine the business as it becomes necessary.
Changes in Yahoo’s management or leadership, competitors’ hiring practices, and the effectiveness of compensation programs
FINANCIAL RISKS
Fluctuations in foreign currency exchange rates affect to operating results in U.S. dollar terms.
Yahoo! may be required to record a significant charge to earnings if our goodwill, amortizable intangible assets, or investments in equity interests become impaired.
Yahoo’s stock price has been volatile historically and may continue to be volatile regardless of operating performance.
Yahoo! may have exposure to additional tax liabilities which could
negatively impact to income tax provision, net income, and cash flow.
Adverse general economic conditions have caused and could cause decreases or delays in marketing services spending by the advertisers and could harm to ability to generate marketing services revenues.
Yahoo! rely on the value of our brands, and a failure to maintain or enhance the Yahoo! brands in a cost-effective manner.
QUESTION 4What are the advantages and disadvantages of each of the funding options that Yahoo! Could pursue?
Which one do you recommend?
FUNDING OPTIONS [1] Accept Sequoia’s offer and launch Yahoo! As their own company. [2] Accept corporate sponsorship. [3] Merge with an existing corporation. [4] Postpone their decision. [5] Selling their company
OPTION 1: ACCEPT SEQUOIA’S OFFER AND LAUNCH YAHOO! AS THEIR OWN COMPANY
ADVANTAGES
[1] More capital/money.
[2] Can manage business
better.
[3] Strong brand.
DISADVANTAGES
[1] Yang & Filo loses
25% share.
[2] Possibility of
disagreement.
[3] Betrayal of a
partner.
[4] Invaluable
resource.
OPTION 2: ACCEPT CORPORATE SPONSORSHIP
ADVANTAGES
[1] Receive funds.
[2] Development of
their site.
DISADVANT
AGES
[1] Company
may be sold
out.
[2] May
destroy the
company’s
image.
EXHIBIT 1 YAHOO! FOUNDERS AND POTENTIAL INVESTOR
Jerry Yang: He co-created the Yahoo! Online guide
in April 1994.
David Filo : Co-created the Yahoo! Online guide in
April 1994.
Michael Moritz, Partner, Sequoia Capital : Moritz
was a general partner at Sequoia Capital since 1988
and focused on information technology investments
BUSINESS STRATEGY Yahoo!’s goal is to remain the most popular and widely
used guide to information on the Internet.
The internet is in a period of making development
characterized by extremely high rate of both user
traffic growth and entry of new companies focused on
various products and services.
YAHOO’S ENORMOUS HAS BEEN GENERATED BY THE FOLLOWING LIST:
Yahoo! was first company to create a fast,
comprehensive and enjoyable guide to the Internet.
The unique interest-area based structure of Yahoo!
makes it an easier and more enjoyable way.
Yahoo! has continually built a guide which is
noticeably better than its competition.
MARKET ANALYSIS Approximately 40 million users of the Internet use
email only.
About 8 million people have access to the Internet and
World Wide Web.
The comparable penetration rate might be has high as
25 percent and 40 percent respectively.
MARKET SEGMENTATION AND DEVELOPMENT
Three principal user groups driving the growth of the Web:
Large businesses using the Internet for both internal
wide area information management and
communication.
Small home based business using it for retrieval of
information relevant to the business.
The individual user-consumer using it initially to
find and access information which is relevant to
their personal entertainment.
INTERNET MARKET SIZE
Estimates of the amount of current projected revenue
for Internet related business vary.
The total served market for Internet hardware,
software, and services will total approximately $1 in
1995, up from approximately $300M in 1994 and
might grow to a total of $10B by the year 2000.
MARKET TRENDS
There is large scale adoption of enabling
technology in the areas of network hardware and
software, as well as communication hardware and
software.
Telecommunication companies and newly entering
Internet access providers are rushing to put in place
basic “hook-ups” in high bandwidth form.
The price for high-speed computer and
communication “port” hardware and software of
adequate bandwidth to support acceptable levels of
transport and display is still somewhat high.
With the availability of 28.8K baud modems, ISDN
lines and high performance/low price personal
computers, home adoption of Internet access is on
the rise and slated to have extremely high growth
over the next five years.
YAHOO!’S SUSTAINABLE ADVANTAGES
The Internet is in a period of market development characterized by extremely high rates of both user traffic growth and entry of new companies focused on various products and services. Yahoo! has developed is current position as the leader in its segment. Yahoo!’s ability to sustain and grow its position will depend on a number of things.