65298 yahoo case analysis
TRANSCRIPT
Yahoo Case Analysis
May 9
2007 The strategy of implementation of an established dot com company struggling to leverage current advertising methods with business objectives
Jason Drohn Bradley Bierer Carol Woods Michelle Victory Paul Rapela
2
Table of Contents Forward 3
Executive Summary 5
History 7
Problem 9
Competitive Analysis 11
Yahoo Financials14
Economics 21
Demographics 25
Market Analysis32
CPM 36
SWOT MATRIX38
QSPM 40
Space Matrix 41
Strategic Issues 44
Strategy Implementation 49
Works Cited 54
Consumer Price Index Summary 54
3
Forward
This document was written for a Business Policy Class that I took in 2007 The reason I chose
Yahoo for the project was because they were in turmoil (and still are) with Googlersquos spectacular
rise in search based on their ad platform Adwords
At the time I was getting into Internet marketing and was intimately familiar with how search
engine optimization and pay per click marketing worked ndash so it was an easy correlation for me
You will see some of that come through in the following pages
Google is intimately linked to their search advertising platform making almost 99 of their
total revenue Something that Yahoo had the capability to duplicate but didnrsquot
Since this report I have helped small businesses and million dollar organizations implement
Internet marketing into their day to day operations so that they could beat their competition in
this lsquonew worldrsquo of web based commerce
If you are interested in learning about Internet marketing ndash Irsquove set up a training course free
report on one of my sites Just click the link below
httpmarketinghackzcomfree-report
In it I discuss things like
Search engine optimization
Media Buys
Pay per click
Traditional marketing
Basically how you can implement all those things into your existing marketing mix for reduced
ad spend and maximum ROI
I hope you enjoy this report It was a lot of fun to write and I hope you learn something from it
Sincerely
Jason Drohn
jasondrohngmailcom
jasondrohn
4
All the data contained in this report was taken from Yahoo Stock analysis research and best
practice implementation We tried to compare what Google did right with what Yahoo should
be doing
Understandably the info is a little outdated but this document gets read by hundreds of
people every day still I just wanted to take a minute and explain the reasons for which the
report was created
None of us (the authors) work for Yahoo have any interest in Yahoo or were paid by
Yahoo to create this report It was merely an assignment we chose to work on and publish
online
5
Executive Summary
Yahoo has grown up as a portal company They learned early on that by being sticky by
having a web presence that forced users to stay on their site they could find ways to profit
from the page views This has led Yahoo astray though Not only has Yahoo given up overall
profits in search of ever expanding user acquisition they have allowed their search product to
fall behind
Google Yahoorsquos chief competitor has mastered the art of monetization namely
through contextual advertising Contextual advertising is when a small piece of programming
code is inserted into web pages which actually interprets the text and serves advertising based
on keywords Googlersquos offering Adsense and Adwords produces 99 of the companyrsquos profits
This advertising network is built into both their search and branded sites Web publishers are
also growing to adopt Googlersquos version of website advertising to gain monetization for their
own traffic
Yahoo has adopted this model of contextual advertising that has been so profitable for
Google but have yet to refine it enough to make a serious impact on the market The program
is still in beta (the internetrsquos way of saying under-construction) and has not made any headway
at attracting new publishers or advertisers
The primary disconnect in the Yahoo model has been the lack of precision because their
search algorithm needs to be updated The ad network fails to interpret that an article is
written about cars and serves ads about entrepreneurs Money is only made if a user clicks on
the advertisements This is an interesting dilemma
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
2
Table of Contents Forward 3
Executive Summary 5
History 7
Problem 9
Competitive Analysis 11
Yahoo Financials14
Economics 21
Demographics 25
Market Analysis32
CPM 36
SWOT MATRIX38
QSPM 40
Space Matrix 41
Strategic Issues 44
Strategy Implementation 49
Works Cited 54
Consumer Price Index Summary 54
3
Forward
This document was written for a Business Policy Class that I took in 2007 The reason I chose
Yahoo for the project was because they were in turmoil (and still are) with Googlersquos spectacular
rise in search based on their ad platform Adwords
At the time I was getting into Internet marketing and was intimately familiar with how search
engine optimization and pay per click marketing worked ndash so it was an easy correlation for me
You will see some of that come through in the following pages
Google is intimately linked to their search advertising platform making almost 99 of their
total revenue Something that Yahoo had the capability to duplicate but didnrsquot
Since this report I have helped small businesses and million dollar organizations implement
Internet marketing into their day to day operations so that they could beat their competition in
this lsquonew worldrsquo of web based commerce
If you are interested in learning about Internet marketing ndash Irsquove set up a training course free
report on one of my sites Just click the link below
httpmarketinghackzcomfree-report
In it I discuss things like
Search engine optimization
Media Buys
Pay per click
Traditional marketing
Basically how you can implement all those things into your existing marketing mix for reduced
ad spend and maximum ROI
I hope you enjoy this report It was a lot of fun to write and I hope you learn something from it
Sincerely
Jason Drohn
jasondrohngmailcom
jasondrohn
4
All the data contained in this report was taken from Yahoo Stock analysis research and best
practice implementation We tried to compare what Google did right with what Yahoo should
be doing
Understandably the info is a little outdated but this document gets read by hundreds of
people every day still I just wanted to take a minute and explain the reasons for which the
report was created
None of us (the authors) work for Yahoo have any interest in Yahoo or were paid by
Yahoo to create this report It was merely an assignment we chose to work on and publish
online
5
Executive Summary
Yahoo has grown up as a portal company They learned early on that by being sticky by
having a web presence that forced users to stay on their site they could find ways to profit
from the page views This has led Yahoo astray though Not only has Yahoo given up overall
profits in search of ever expanding user acquisition they have allowed their search product to
fall behind
Google Yahoorsquos chief competitor has mastered the art of monetization namely
through contextual advertising Contextual advertising is when a small piece of programming
code is inserted into web pages which actually interprets the text and serves advertising based
on keywords Googlersquos offering Adsense and Adwords produces 99 of the companyrsquos profits
This advertising network is built into both their search and branded sites Web publishers are
also growing to adopt Googlersquos version of website advertising to gain monetization for their
own traffic
Yahoo has adopted this model of contextual advertising that has been so profitable for
Google but have yet to refine it enough to make a serious impact on the market The program
is still in beta (the internetrsquos way of saying under-construction) and has not made any headway
at attracting new publishers or advertisers
The primary disconnect in the Yahoo model has been the lack of precision because their
search algorithm needs to be updated The ad network fails to interpret that an article is
written about cars and serves ads about entrepreneurs Money is only made if a user clicks on
the advertisements This is an interesting dilemma
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
3
Forward
This document was written for a Business Policy Class that I took in 2007 The reason I chose
Yahoo for the project was because they were in turmoil (and still are) with Googlersquos spectacular
rise in search based on their ad platform Adwords
At the time I was getting into Internet marketing and was intimately familiar with how search
engine optimization and pay per click marketing worked ndash so it was an easy correlation for me
You will see some of that come through in the following pages
Google is intimately linked to their search advertising platform making almost 99 of their
total revenue Something that Yahoo had the capability to duplicate but didnrsquot
Since this report I have helped small businesses and million dollar organizations implement
Internet marketing into their day to day operations so that they could beat their competition in
this lsquonew worldrsquo of web based commerce
If you are interested in learning about Internet marketing ndash Irsquove set up a training course free
report on one of my sites Just click the link below
httpmarketinghackzcomfree-report
In it I discuss things like
Search engine optimization
Media Buys
Pay per click
Traditional marketing
Basically how you can implement all those things into your existing marketing mix for reduced
ad spend and maximum ROI
I hope you enjoy this report It was a lot of fun to write and I hope you learn something from it
Sincerely
Jason Drohn
jasondrohngmailcom
jasondrohn
4
All the data contained in this report was taken from Yahoo Stock analysis research and best
practice implementation We tried to compare what Google did right with what Yahoo should
be doing
Understandably the info is a little outdated but this document gets read by hundreds of
people every day still I just wanted to take a minute and explain the reasons for which the
report was created
None of us (the authors) work for Yahoo have any interest in Yahoo or were paid by
Yahoo to create this report It was merely an assignment we chose to work on and publish
online
5
Executive Summary
Yahoo has grown up as a portal company They learned early on that by being sticky by
having a web presence that forced users to stay on their site they could find ways to profit
from the page views This has led Yahoo astray though Not only has Yahoo given up overall
profits in search of ever expanding user acquisition they have allowed their search product to
fall behind
Google Yahoorsquos chief competitor has mastered the art of monetization namely
through contextual advertising Contextual advertising is when a small piece of programming
code is inserted into web pages which actually interprets the text and serves advertising based
on keywords Googlersquos offering Adsense and Adwords produces 99 of the companyrsquos profits
This advertising network is built into both their search and branded sites Web publishers are
also growing to adopt Googlersquos version of website advertising to gain monetization for their
own traffic
Yahoo has adopted this model of contextual advertising that has been so profitable for
Google but have yet to refine it enough to make a serious impact on the market The program
is still in beta (the internetrsquos way of saying under-construction) and has not made any headway
at attracting new publishers or advertisers
The primary disconnect in the Yahoo model has been the lack of precision because their
search algorithm needs to be updated The ad network fails to interpret that an article is
written about cars and serves ads about entrepreneurs Money is only made if a user clicks on
the advertisements This is an interesting dilemma
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
4
All the data contained in this report was taken from Yahoo Stock analysis research and best
practice implementation We tried to compare what Google did right with what Yahoo should
be doing
Understandably the info is a little outdated but this document gets read by hundreds of
people every day still I just wanted to take a minute and explain the reasons for which the
report was created
None of us (the authors) work for Yahoo have any interest in Yahoo or were paid by
Yahoo to create this report It was merely an assignment we chose to work on and publish
online
5
Executive Summary
Yahoo has grown up as a portal company They learned early on that by being sticky by
having a web presence that forced users to stay on their site they could find ways to profit
from the page views This has led Yahoo astray though Not only has Yahoo given up overall
profits in search of ever expanding user acquisition they have allowed their search product to
fall behind
Google Yahoorsquos chief competitor has mastered the art of monetization namely
through contextual advertising Contextual advertising is when a small piece of programming
code is inserted into web pages which actually interprets the text and serves advertising based
on keywords Googlersquos offering Adsense and Adwords produces 99 of the companyrsquos profits
This advertising network is built into both their search and branded sites Web publishers are
also growing to adopt Googlersquos version of website advertising to gain monetization for their
own traffic
Yahoo has adopted this model of contextual advertising that has been so profitable for
Google but have yet to refine it enough to make a serious impact on the market The program
is still in beta (the internetrsquos way of saying under-construction) and has not made any headway
at attracting new publishers or advertisers
The primary disconnect in the Yahoo model has been the lack of precision because their
search algorithm needs to be updated The ad network fails to interpret that an article is
written about cars and serves ads about entrepreneurs Money is only made if a user clicks on
the advertisements This is an interesting dilemma
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
5
Executive Summary
Yahoo has grown up as a portal company They learned early on that by being sticky by
having a web presence that forced users to stay on their site they could find ways to profit
from the page views This has led Yahoo astray though Not only has Yahoo given up overall
profits in search of ever expanding user acquisition they have allowed their search product to
fall behind
Google Yahoorsquos chief competitor has mastered the art of monetization namely
through contextual advertising Contextual advertising is when a small piece of programming
code is inserted into web pages which actually interprets the text and serves advertising based
on keywords Googlersquos offering Adsense and Adwords produces 99 of the companyrsquos profits
This advertising network is built into both their search and branded sites Web publishers are
also growing to adopt Googlersquos version of website advertising to gain monetization for their
own traffic
Yahoo has adopted this model of contextual advertising that has been so profitable for
Google but have yet to refine it enough to make a serious impact on the market The program
is still in beta (the internetrsquos way of saying under-construction) and has not made any headway
at attracting new publishers or advertisers
The primary disconnect in the Yahoo model has been the lack of precision because their
search algorithm needs to be updated The ad network fails to interpret that an article is
written about cars and serves ads about entrepreneurs Money is only made if a user clicks on
the advertisements This is an interesting dilemma
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
6
On the positive side Yahoo has a brilliant banner serving system Since Yahoo still sees
itself as a portal it still leverages Yahoo Money Cars Email etc Each of those sites has
products or services that provide value to the user A user shopping for cars is later targeted
with banner ads reflecting the cars that they were viewing online
In our estimation Yahoo needs to focus on core content by improving exactly what it is
that makes them money They should focus on improving their ad networkrsquos efficiency and
allowing all publishers admittance They should leverage their banner serving software with
the contextual market and provide growth that way
Google the market leader is simple and built around search Yahoo needs adopt a like
philosophy to remain competitive in their market
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
7
History
Yahoo Incorporated is an Internet service provider that serves both users and business
globally The company was founded in 1994 by David Filo and Jerry Yang who were attending
Stanford Universityrsquos PhD program (The History of Yahoo) Yahoo Inc began as a hobby for
Filo and Yang and has now evolved into a multifaceted brand that serves internet users
worldwide (The History of Yahoo) Yahoo Inc has become the worldrsquos largest global online
network of integrated services (The History of Yahoo) According to the Yahoo Inc website
they have become one of the leading search engines on the World Wide Web (The History of
Yahoo)
Yahoo Currently has 500 million users worldwide that visit the site each month Yahoo
is provided to users in more than twenty different languages (Yahoo Inc) The company also
has office locations in Europe the Asia Pacific Latin America Canada and the United States
(Yahoo Inc) Yahoo Inc is currently headquartered in Sunnyvale California (Yahoo Inc)
Yahoo Inc was incorporated in California in March of 1995 (Yahoo Inc) Yahoo Inc
first went public on NASDAQ in April of 1996 At this time Yahoorsquos stock opened for $1300 per
share (Yahoo Inc) At the close of its first day of the IPO Yahoo stock had reached a closing
price of $3300 per share (Yahoo Inc) At this time the company only had 49 employees
(Yahoo Inc) The company was then reincorporated in Delaware in May of 1999 (Yahoo Inc)
In December of 1999 Yahoo Stock was added to the SampP 500 (Yahoo Inc)
In 1996 Yahoo Inc began entering into joint ventures with SOFTBANK (Joint Ventures)
Through this initial joint venture Yahoo Inc was able to create Yahoo Japan Subsequently
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
8
Yahoo Inc has teamed with SOFTBANK to create markets in Germany United Kingdom
France and Korea (Joint Ventures) Yahoo Inc and SOFTBANK have also created GeoCities
Japan Corporation to create and manage a Japanese version of the GeoCities website (Joint
Ventures)
Yahoo Inc has also teamed in a joint venture with VISA to establish Yahoo
Marketplace (Joint Ventures) This joint venture occurred in August of 1996 and has since then
created a navigational service focused on information and resources for the purchase of
consumer products and services over the internet (Joint Ventures) This joint venture alone
created a new market for Yahoo Inc (Joint Ventures)
Most recently in January 2006 Yahoo Inc and Seven Network Limited also known as
SEVEN have teamed in a joint venture as well (Joint Ventures) SEVEN an Australian media
firm signed an agreement with Yahoo Inc (Joint Ventures) In this agreement Yahoo Inc
(Joint Ventures) contributed its Australian internet business Yahoo Australia and New
Zealand and SEVEN contributed its online assets television and magazine content (Joint
Ventures) Yahoo Inc has a fifty percent equity ownership in the joint venture which will
operate under the name Yahoo7 (Joint Ventures)
Yahoo Inc also operates Flickr a photo sharing and storing website (Yahoo Inc profile)
The company also provides its users with web mail instant messaging music video personals
and much more (Yahoo Inc profile)
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
9
Problem
Yahoo is a master of portals but they have let their search product suffer They have
long built out their offering in such a way to add value to their users through functionality while
they hoped that revenue would be made in the process There was no clear attempt to either
target those users with advertising or extend any real value added services
This portal terminology has run so deep that it is engrained in the Yahoo culture Search
is a product of users making their way through the Internet rather than the core of their
business Yahoo sees their core business as being Yahoo News Finance and Mail They have
made acquisitions such as MyBlogLog and Flickr For what though To extend functionality or
to increase revenue
The all inclusive Yahoo is counting on the traffic to be monetized through private
advertising deals and partnerships Partners usually pay to have their service included in the
Yahoo Directory in one form or another These joint partnerships are encouraged because it
not only brings Yahoo recurring revenue but allows the partner a strategic place in the Yahoo
network The partnering service typically sees a boost in traffic thanks to being networked
with such a big web presence
Private advertising comprises the other side of the revenue deal Private advertising is
such that a company may put their banner in a prominent location of the Yahoo network
Similar to partnerships the private sponsors are limited to the banner placements that are
bought For example Neweggcom a well known computer retailer might put a banner ad on
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
10
the Yahoo home page for $50000 a month This banner ad is then targeted to each and every
user who enters the Yahoo home page
The problem is that web publishers those that own their own websites are not able to
capitalize on this revenue model Yahoo promotions are concentrated to being served on
Yahoorsquos pages Publisherrsquos do not have a chance to leverage Yahoorsquos size and revenue potential
the way that Google has empowered their users through the contextual ad system
Yahoo is the most trafficked website on the planet More pageviews are served from
Yahoo servers than any other company in the world Why is it that they are trailing Google in
revenue then Because Google allows other publisherrsquos to maximize the ad network 82 of
Googlersquos revenue is achieved not on their site but on other web publishers
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
11
Competitive Analysis
As taken from the Yahoo 10K ldquoWe primarily compete with companies to attract users to
our website and advertisers to our marketing services We expect the market to become
increasingly competitive if online marketing continues to grow and gain acceptance on a global
basisrdquo
Yahoorsquos primary
competitors are Google
AOL and MSN All of
which compete in the
industry of ldquoInternet
Information Providersrdquo
However because AOL is
held as a limited liability
corporation and MSN is a
division of Microsoft
data is not readily
available for either section This critique will have elements from both companies including
information taken from Microsoftrsquos 10K report and AOLrsquos few public records
The first key difference to note is the fact that each company differs in its primary
company beliefs Yahoo sees itself as a portal ldquoto connect people to their passions their
communities and the worldrsquos knowledge (Yahoo 10K)rdquo Googlersquos maintains the largest most
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
12
comprehensive index of web sites and other content and makes this information freely
available to anyone with an internet connection Their automated search technology helps
people obtain nearly instant access to relevant information from our vast online index (Google
10K)rdquo Microsoftrsquos offering MSN ldquoprovides personal communications services such as email
and instant messaging and online information offerings such as MSN Search MapPoint and
the MSN portals and channels around the world (Microsoft 10K)rdquo AOL is simply an internet
service provider who combines the leverage of the Internet with its own branded services
Although each of these competitors has aligned themselves in the same sector
investment wise and serve the same relative target markets they define their services
differently In some sense this demonstrates how they align their business model as well
Google lives by its advertiser network also known as the Google Network comprised of
Adwords and Adsense The combination of the two services provides Google with 99 of their
revenue The revenue may be further divided between 18 on site advertisement and 81 off
site advertisement Adwords is an online application that allows businesses to publish their ads
to the many websites that participate in the Google Network Adsense is the destination for
web publishers and site owners who have space on their website for ads The webmasters
make money every time a Google ad is clicked Google is essentially the middleman
Yahoo takes a different alternative to the system Being the most trafficked website on
the planet Yahoo sells ads for its own network of sites But as the 10K notes Yahoo sees itself
as a gathering place for people to connect with their passions Yahoorsquos specialty lsquopre-Googlersquo
has been monetizing its own web pages
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
13
Yahoorsquos ad network has proven effective on the front of intelligent ad serving The
algorithm is built in such a way that it can see where a visitor is going online within the Yahoo
network and serves ads based on those tendencies For instance if you are looking at a car in
Yahoo Autos and travel to Yahoo Money you will see a car advertisement This data is stored
for an indefinite amount of time so in three months a random car ad may show up again
Yahoo has only just recently launched an Adwords and Adsense competitor though
Yahoorsquos service is named Yahoo Publisher Network Yahoo Publisher Network allows the same
functionality that the Google Network does but is currently in beta The company has yet to
solidify its stance in the market concerning the advertising software
As Yahoo states in their 10K ldquoThe principal competitive factors relating to attracting and
retaining users include the quality and relevance of our search results and the usefulness
accessibility integration and personalization of the online services that we offer as well as the
overall user experience on our website In the case of attracting advertisers the principal
competitive factors are the reach effectiveness and efficiency of our marketing services as well
as the creativity of the marketing solutions that we offerrdquo
They also add ldquoWe believe that we are effectively competing in the Internet services
market as we continue to refine our search technology build onto our existing online
properties and services and further improve our usersrsquo experiencerdquo
From this one may conclude that Yahoo services play a key role in attracting and
retaining users Whereas Google has recognized that search is their primary objective
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
14
Yahoo Financials
Yahoo trades on the NasdaqGS under the symbol ldquoYHOOrdquo For slight comparisons to
show where Yahoo needs to be we are going to compare several key statistics with Googlersquos
results
With a 52 week range of 2265 to 2886 and a volume of 21102256 the stock itself is
well traded The current PE of 5557 seems high especially when compared to the much more
profitable Google which has a PE of 4818
Here is a snapshot of the top level financials for Yahoo at the time of writing
Across the top level revenue has been strong as well since 2002 2006 revenues come in at
64257 (in millions) Looking at the company snapshot
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
15
However in terms of Google Yahoorsquos chief competitor there is a discrepancy Google grew
revenues to 106049 (in millions) since the time of IPO offering in 2003 There revenue is as
follows
Key Ratios
Profitability ndash Upon further examination of Yahoo the key ratios include
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
16
Cost of goods sold has increased as one might expect throughout the ten year span of
public trading This is largely due to the increase of server space and supplemental acquisitions
the company has made These acquisitions include services like Flickr and MyBlogLog
Research and development is sitting at 13 in 2006 which is higher than Googlersquos
(which comes in at 116) This is a positive mark for Yahoo
The EBT or earnings before tax as dropped to 171 - from 484 This is a cause for
concern Googlersquos stands at 349 to 378 for the last two years
In dropping to the profitability section Yahoorsquos tax rate is 417 up from 302 This is
not the highest itrsquos been though In 2000 it was 727 Google sits at 233
Perhaps the biggest discrepancy I can see is that Yahoorsquos return on assets dropped from
1895 in 2005 to 673 in 2006 Google remains strong at 2141
Yahoo Growth rates are the most alarming section in this analysis though
Growth Rates-
Yahoorsquos growth rates are as follows
As pictured above Yahoo had amazing growth in the late 90rsquos and in 2003 and 2004
However Google was has stormed on the scene taking the search and advertising market that
previously served with banner ads You can see this reflected in Yahoorsquos falling numbers
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
17
Google introduced pay per click services which are the bread and butter of the new search
giant
Googlersquos growth
Google having their initial IPO in 2004 has grown exponentially 2004 was a big year for
internet adoption and the first year Yahoo had a true competitor Since then Yahoo has fallen
to 471 growth and 222 growth in 2005 and 2006 respectively Even in the last quarter
Google posted a 67 increase while Yahoo sank to a 134 increase
Cash Flow-
Yahoorsquos Cash Flow
Yahoorsquos operating cash flow was down last year -199 and their free cash flow growth
year over year was down -476 This could be because of several high priced acquisitions
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
18
Googlersquos Cash Flow
Google didnrsquot have a stellar year in regards to cash flow and in comparison to their last
couple but they still remained in the positive sitting at 456 That number may have been
reduced because of the YouTube acquisition
Financial Health-
Yahoorsquos financial health is a point of concern because their cash and short-term
investments have been decreasing year after year Accounts receivable inventory has remained
constant and their current assets has been around 2 for the last five years
In regards to total current assets the company has noticed a drop year over year in Total
Current Assets landing at 326 in 2006 Intangibles and Long Term Assets are at 293
though I would imagine these stem largely from their offices and datacenters spread around
the world
The largest concerning factor in this financial analysis is the debt of Yahoo as compared
with Google Yahoo has 9 Accounts Payable but 91 of Accrued Liabilities and 28amp Short
Term Liabilities Their Long Term debt is at 65 which they just picked up in the last 4 years
Altogether Yahoorsquos liabilities total is 204 leaving the stockholderrsquos equity at 796
This might seem like an advantage to some because they are leveraging debt to magnify
earnings but if you continue further down the current ratio is 254 and the quick ratio is 24
The company isnrsquot going bankrupt but has been trending down badly in the last four years
Google on the other hand demonstrates only 78 liabilities allowing the other 922
to be owned by the stockholders They have a Current ratio of 10 and a quick ration of 963
The following two pages offer printouts of the full financial statistics
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
19
Yahoorsquos Financial Health
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
20
Google Financial Health
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
21
Economics
Economics is defined as ldquothe social science that deals with the production distribution
and consumption of goods and services and with the theory and management of economies or
economic systemsrdquo There are many factors and indexes that are tracked to gauge the health of
the economy These include gross domestic product consumer price index and strength of the
dollar interest rates and disposable income
Yahoo Inc relies heavily on accurate information pertaining to all these factors
associated within our economy Not just what the consumer is spending more importantly how
the economy is doing as a whole Yahoorsquos expenditures by advertisers tend to be cyclical
reflecting overall economic conditions and budgeting and buying patterns Since Yahoo derives
most of their revenues from advertising any decreases in or delays in advertising spending due
to economic conditions could reduce their revenues or negatively impact their ability to grow
their revenues Yahoo relies on the value of their brand and a failure to maintain or enhance
the company brands in a cost-effective manner could harm their operating results (10K) Yahoo
believes that maintaining and enhancing their brand specifically those that contain the Yahoo
name as well as those that do nothing is an important aspect of their efforts to attract and
expand their user and advertiser base
Yahoo has spent considerable money and resources to date on the establishment and
maintenance of their brands in which they anticipate spending increasing amounts of money
on and to devote much greater resources strictly towards advertising marketing and other
brand-building efforts to preserve and most importantly enhance the consumer awareness of
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
22
their brands The success of Yahoo is depended upon us the consumers and much money we
are willing to spend on the Internet
Spending and the availability of monies is not just a major concern with Yahoo it is with
all other Internet Service Providers The fear is the increase of CPI indexes and the possibility of
inflation The consumer price index (CPI) is a tool used to gauge the economy The CPI is most
commonly used to measure inflation and businesses use it as a guide in making economic
decisions The CPI is an index of prices used to measure the change in the cost of basic goods
and services in comparison with a fixed base period(American heritage dictionary) The CPI
includes all goods and services purchased by urban households The prices that are used to
calculate the CPI are taken from 87 urban areas throughout the country
The CPI is computed as a percentage of the cost of certain products as compared to a
base year (The American Heritagereg Dictionary) The current base year is 1982-84 which equals
100 percent Any number above 100 indicates that prices for that year are higher than in the
base year The most current CPI statistics from the Bureau of Labor Statistics (BLS) are for
February 2007 During February 2007 the CPI rose by 5 percent to a level of 203499 This
figure means that consumer prices for February 2007 were 103499 percent higher than in the
base year This was an increase of 24 percent since February 2006 The CPI is divided into
several different sections Sections include housing food and beverage transportation and
energy The index for food and beverage increased 8 housing 4 transportation 1 and energy
9 during the same time period
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
23
When consumer prices rise everything else seems to follow The increases will affect
Yahoorsquos business relationships with the third-party content providers which will become
critical to their success As competition for compelling content increases the prices at which
they offer their content to them and potential content providers may not offer their content to
Yahoo on terms that can be agreeable to them An increase in prices charged by the third
parties to them could harm their operating and financial condition Further many of Yahoorsquos
content licenses with the third parties are non-exclusive Accordingly other webcasters and
other media such as radio or television may be able to offer similar or identical content This
increases the importance of their ability to deliver compelling editorial content and
personalization of this content for users in order to differentiate Yahoo from Google and MSN
If Yahoo is unable to license or acquire compelling content at reasonable prices if Google or
MSN broadcast content that is similar to or the same as that provided by Yahoo or if they do
not develop compelling editorial content or personalization services the number of users of
their services may not grow as anticipated or may decline which could harm their operating
and financial results (10K)
Interest rate changes will affect the operating expenses of Yahoo their third- party
affiliatesrsquo and their competitors Interest rates are controlled by the policy makers of the
Federal Reserve Board(FED) The rates established by the FED are used by banks and lending
institutions to set the interest rates for loans and credit cards By manipulating the federal
funds rate the FED tries to control inflation and keep the economy strong while preventing a
recession The FED sets this rate at a level to keep the financial and monetary conditions of the
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
24
economy in line and adjusts the rate for changing economic conditions A change in these rates
by the FED or the expectation of a change can trigger changes to the short term and long term
interest rates the foreign exchange value of the dollar and stock prices Changes in these rates
affect the spending decisions of both households and businesses(federalreservegov)
The FED raises the federal funds rate to slow down economic growth and curb inflation
They lower the rate to stimulate a sluggish economy and encourage growth Since June 2006
the federal funds rate has been stable at 525 percent During the prior two years the FED has
raised the federal fund rate 17 times Should we be concerned Should Yahoo Google and
others be concerned Yes as noted earlier when the cost of items increases so will others soon
to follow The increase in interest rates will affect the anticipation of Yahoorsquos much needed
expansion into the world of cyberspace
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
25
Demographics
Internet World Stats (2007) reports as recently as March 10 2007 Yahoo has a
potential global customer base of 1114272426 people who access the Internet The usage
growth period charted is for the years 2000-2007 Of the data presented Asia Europe and the
Untied States are the three top users of the Internet globally Africa Asia Middle East and
Latin AmericaCaribbean reflect the largest usage growth while North America reflects the
lowest growth percentage rate globally in the charted period
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2007 Est)
Population
of
World
Internet
Usage
Latest Data
Population
(
Penetration
)
Usage
of
World
Usage
Growth
2000-
2007
Africa 933448292 142 33334800 36 30 6384
Asia 3712527624 565 398709065 107 358
2488
Europe 809624686 123 314792225 389 283 1995
Middle East 193452727 29 19424700 100 17 4914
North America 334538018 51 233188086 697 209 1157
Latin AmericaCaribbean 556606627 85 96386009 173 87
4334
Oceania Australia 34468443 05 18439541 535 17 1420
WORLD TOTAL 6574666417 1000 1114274426 169 1000
2087
NOTES (1) Internet Usage and World Population Statistics were updated on Mar 10
2007 (2) CLICK on each world region for detailed regional information (3)
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
26
Demographic (Population) numbers are based on data contained in the world-gazetteer
website (4) Internet usage information comes from data published by NielsenNetRatings by
the International Telecommunications Union by local NICs and other other reliable sources (5) For
definitions disclaimer and navigation help see the Site Surfing Guide (6) Information from
this site may be cited giving due credit and establishing an active link back to
wwwinternetworldstatscom Copyright copy 2007 Miniwatts Marketing Group All rights reserved
worldwide
Internet World Stats (2007) illustrates that North America had the lowest usage growth
rate by world region but does reflect the highest Internet global penetration
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
27
Internet World Stats (2007) presents the following pie chart of the world Internet user
The World Bank Group (2007) charts internet user data The user data can be
disaggregated into many forms of information such as gender age frequency and household
income The available information on the use of the Internet globally is inadequate in scope
due to the limited number of countries which collect information and communication
technology making it difficult to ascertain the market for global Internet industry (pg 1)
The United States provides the most information on the use of the Internet in the North
American Region The following World Band Group graph was last updated January 11 2007
Demographics of Internet Users
Below is the percentage of each group who use the internet according to our
December 2006 survey As an example 69 of adult women use the internet
Use the internet
Total Adults 70
Women 69
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
28
Men 71
Age
18-29 83
30-49 82
50-64 70
65+ 33
Raceethnicity
White Non-Hispanic 72
Black Non-Hispanic 58
English-speaking Hispanic 69
Household income
Less than $30000yr 49
$30000-$49999 75
$50000-$74999 90
$75000 + 93
Educational attainment
Less than High School 36
High School 59
Some College 84
College + 91
The Pew Internet Organization (2007) provides valuable information on the
demographics of Internet users in the United States The information reveals a large block of
the US populace which actively uses the Internet The largest segment of the US populace is
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
29
the 18-29 age groups with an 83 usage rate Following closely behind are the 30-49 age
groups with an 82 usage rate and the 50-64 age groups reflecting a 70 usage rate Race and
ethnicity reflect percentage rates of Whitersquos as the largest users of the Internet (pg 1)
American demographics (2007) says the Hispanic race is the fastest growing population
in the United States Changes in the Hispanic race have increased by 33 between 2004 and
2005 (pg 12) Combing the American demographics (2007) and the information drawn from
the World Bank Group (2007) chart data reveals the Internet segment for the Hispanic
populace is expected to grow as Hispanicrsquos trail only slightly in the percentage rate of White
users
The World Bank Group (2007) chart reflects nearly half of the households with less than
$30000 in household income use the Internet The usage rate does rise upward as the
household income increases The income level tops out with a 93 usage rate for household
incomes of $75000 plus According to American demographics (2007) the average family
income is $46326 per year (pg 2) Combining the American demographics (2007) data and
that of the World Bank Group (2007) reflects that the Internet user rate in the United States is
at 75 as of January 11 2007
The World Bank group (2007) charts shows Internet usage increases dramatically with
the amount of formal education the user possesses The users with less than a high school
education are the lowest Internet users with only a 36 participation rate More than half of
those with a minimum of a high school education 59 use the Internet Usage of those with
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
30
some college has an 84 user rate The chart tops out with users with a college plus education
have an impressive Internet usage rate of 91
According to the iNetShops (1998-2005) information page over 55 of the users access
the Internet from their home computers The 50 plus group is the highest age group which
pays for their Internet access at home other users are more likely to gain access to the Internet
at work or at school Interestingly this reflects why the internet usage is 20-30 slower on
weekends and the busiest days are Monday-Thursday About 72 of the female and 87 of
the male Internet users will access the web everyday Nearly 45 use the web 1-4 times a day
while 41 claim more frequent use and 15 say they use it less
The iNetshops (1998-2005) research also reveals that the martial status of the Internet
user is 40 married and 41 unmarried The age group of 25 and under is about 75 single
whiles the age group of 50 plus is 75 married The political affiliation of the American Internet
user leads towards the Democratic Party 25 over the Republican Party 21 of those
surveyed
In summary the demographics of the World Bank Group (2007) Internet chart reveals
there is very little disparity between the male and female Internet users This information
reflects a trend for the gender of the American Internet user is shifting from a largely male
percentage to a more equal gender usage percentage when comparing the data from iNetshop
(1998-2005) to the World Bank Group (2007) data The trend in the Internet market continues
to change as faster technology is made available to more users Leslie Taylor (2006) reports
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
31
ldquobroadband penetration grew 13 percent last year to 955 million homes which means 68
percent of active home Internet users now use a broadband connection according to a study
released last week by NielsenNetRatingsrdquo Taylorrsquos information also discloses the Internet is
becoming a central medium in the daily lives of those who have internet access Internet user
habits are changing as the speed of broadband has increased the average personrsquos usage of the
computer at home Last year the average user used their computer 305 hours a month
compared to 255 hours a month just two years prior The increase in the number of hours of
Internet use corresponds with the American demographic (2007) report home internet users
with broadband spent on average 33 more time on line that those using narrow band
connections (pg 2)
As broadband continues grow in the Internet marketplace the trends will be for the
gender differential to continue to equalize The growth in broadband customers will lead to
more hours spent using the Internet which by extension should result in a growth in sales for
the Internet providers
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
32
Market Analysis
The Yahoo 10 K report (2007) states Yahoo promotes their marketing services in a
highly competitive and rapidly changing global Internet market Yahoo considers developing
world-class marketing is their competitive advantage in the volatile market of cyberspace
technology The services are offered to advertisers and their customers in over 20 different
languages and countries Recognizing the different marketing needs of each distinctive market
is a fundamental approach for Yahoorsquos marketing strategies Segmenting each distinctive
market into an individual geographic group Yahoo can manage and measuring each segment
geographically This enables Yahoo to target the segment with customized marketing services
unique to the particular geographic market Yahoorsquos commitment to providing specialized
marketing services to a diverse global advertising populace is evidenced through their staffing
the international offices with indigenous personal By utilizing the input of indigenous personal
Yahoo represents good global corporate citizenship Yahoo can offer better customer service
by providing for the unique cultural idiosyncrasies of each geographic market segment
The Yahoo brand is a highly recognized service on the Internet both in marketing and
search services The marketing strategy to retain customer loyalty and to continue to build
brand recognition is to provide top quality customized marketing services through three
primary channels of communication direct online and telemarketing The direct sales teamrsquos
focal point is selling Yahoorsquos marketing services and solutions to large advertisers Online sales
are directed toward self-service programs which enable advertisers to tailor their websites to
specific target markets by attaching links to the websites which directs customers to
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
33
advertisersrsquo products Telemarketingrsquos focal point is providing marketing services to medium
and small advertisers
Yahoo recently combined the management of Yahoorsquos marketing services with their
search services to better meet the demands of the customers Combing the management
teams under one managerial umbrella facilitates collaboration between the two services
Collaborative communication will synthesize Yahoorsquos internal strengths with new technological
advancements to adjoin value-added components to their services The combining action
promotes Yahoorsquos competitive advantage strategy of continuing to provide customized
advertising to attract retain and engage users while experiencing demographic changes in the
geographic market segments
Yahoorsquos fundamental marketing approach is the continuance of product development
and properly managing each market segment to ensure the Internet user is experiencing the
best services Yahoo can offer Yahoo ascertains their marketing sector is involved in each step
of product development management to understand our services and the best method to
convey the services to the advertisers and the Internet user Yahoorsquos marketing program
utilizes all forms of media to convey their products to the geographical audiences of existing
and potential users The media consists of online television print radio and outdoor
advertising The use of all forms of advertising is ldquoto bring the right service to the right people
at the right timerdquo (pg 12)
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
34
The customized marketing strategy is consistent with the development under ldquoYahoo
Fusion Servicesrdquo according to Joan Raymond (2001) The ldquoFusion Servicerdquo integrated an
additional service in 2001 called ldquoYahoo Buzz Indexrdquo The Buzz Index ldquogives a snapshot of
whatrsquos hot and whatrsquos notrdquo with daily updates on data drawn from the visited websites which
Yahoo informs the advertisers with the derived data (pg 1) The advertisers are enabled to
make critical marketing amendments to adapt quickly to the changes taking place in their
particular market share By informing advertisers to the website visiting habits of their
customers Yahoo continues to market their services to the Internet users (pg 2) Yahoorsquos
information pool is derived from another source Yahoo has crafted into their marketing
strategy Yahoo requires their users to register for their search services A user in the
registration process gives their ldquodemographic DNArdquo away to the information data bank
Allowing Yahoo to aid the advertisers with additional data for their website designs (pg 3)
The data and service additions coincide with the customized marketing strategy centered on
the geographical target markets established by Yahoo
As Yahoo strives to provide world-class marketing to the Internet user Yahoo has to
adapt to the changes in demographic trends being experienced in the United States market
The marketing strategies which Yahoo has in place at present will enable them to react quickly
to geographic target market shifts At present according to statistics by the Demographics of
the Internet User (2007) North America has the highest Internet usage penetration by
population than any other global market To provide for the customized service for the United
States in particular Yahoo staffs sales offices in eleven major cities dispersed throughout the
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
35
states (Yahoo 10K 2007 pg 12) Target marketing the United States as one of their
geographical market segments Yahoo should experience an increase in the user population as
broadband technology reaches a larger high-speed Internet audience Leslie Taylor (2006)
states monthly user time increases by 30 after the installation of broadband connections are
made available to users Yahoorsquos customized geographic market segment approach will be
able to handle the emerging market trends and integrate the pooled data for advertisers to
implement advertising tactics to increase market penetration
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
36
CPM
Competitive Profile Matrix
Yahoo Google MSN
Critical Success Factors Weight
Ratin
g
Scor
e
Ratin
g
Scor
e
Ratin
g
Scor
e
Strong Brand Recognition
015 4 060 4 060 4 060
Talented Employee Base
010 3 030 4 040 3 030
Culture of
InnovationAccountability 010 2 020 4 040 4 040
Advertising
015 3 045 4 060 3 045
International Markets
020 4 080 2 040 3 060
Powerful Business
Relationships
005 3 015 3 015 4 020
Customer Loyalty
015 4 060 4 060 3 045
Market Share
010 3 030 4 040 2 020
Total
100
340
355
32
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
37
Yahoorsquos competitive profile matrix (CPM) weighs international markets 20 as the most
important item on the list of critical success factors Yahoorsquos score on this factor is the
highest in comparison to their two chief competitors Google and MSN reflecting a distinctive
competitive advantage in the Internet market Strong brand recognition has a weight 15
assigned which replicates a high level of importance on the CPM Maintaining strong brand
recognition to retain market share is rated and scored highly in the industry by all three
companies on the matrix The customer loyalty factor weight 15 discloses Yahoorsquos ranking
and score as second to Google yet remaining ahead of MSN The advertising factor weight
015 rates Yahoo and MSN equal yet behind Google the industry leader for this factor
Talented employee base weight 10 rates and scores equal to MSN yet lags behind Google
Yahoo lags behind considerably in comparison to Google and MSN on the culture and
innovation and accountability factor The factor weight 10 on Yahoorsquos CPM does not reflect
a high level in ranking the critical success factors but does release valuable information in
comparison to their competitors on the CPM Yahoo rates and scores the lowest on this
factor Market share weight 10 shows Yahoo is second to Google yet leads MSN Weighing
the powerful business relationships factor the least 05 Yahoo ranks and scores evenly with
Google yet MSN holds the top score and rating on this factor
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
38
SWOT MATRIX
STRENGTHS
1) Yahoo Inc has beaten Google in the mobile market
2) Yahoo Inc has many more auxiliary products compared to the competition
3) Yahoo Inc has strong brand recognition
4) Access is available to anyone with internet access
5) Partnerships with
MLB VISA and
NFL
WEAKNESSES
1) Yahoo is ranked 5th
in visitors among video sites YouTube which is owned by Google is ranked 1
st
2) Yahoo image search has been declining 3 per year
3) Google search results generate twice as much revenue as Yahoo
4) Advertising
revenues are
falling due to
Google and other
competitors in the
market
OPPORTUNITIES
1) Internet video advertising spending expected to increase by 82 to $410 million by 2006
2) Yahoo Inc has purchased Flickr
3) Broadband
expansion
4) Yahoo has a strong and talented employee base
5) Yahoo Has penetrated markets that are still untouched by competitors
SO STRATEGIES
1) S3 O1 Revamp the current video site and encourage advertising on the site by using the strong brand strength and recognition of Yahoo
2) S5 O2 Use Flickr as a new means of advertising for the partnerships with VISA MLB and NFL
3) S4 O5 Use Yahoorsquos current expanded to market to target advertisers in these countries
WO STRATEGIES
1) W1 O1 Use internet video advertising boom to strengthen Yahoo video sites
2) W1 O2 Use Flickr as a tool to developing a better video site
3) W2 O2 Increase Flickrrsquos capabilities in order to reverse the decline in mage search on Yahoo
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
39
THREATS
1) Google commands about 50 of all online searches and Yahoo has only 24 according to NeilsonNetRating
2) Consumer attitudes towards online advertising may become more negative
3) Increasing strength of competitors
4) Social websites such as MySpace and Facebook are now breaking into the online advertising market
5) Google is
surpassing Yahoo
in revenues
ST STRATEGIES
1) S3 S5 T1 Use Yahoorsquos brand recognition and its partnerships with MLB NFL and VISA to promote searches on Yahoo
2) S3 T4 Use Yahoo brand recognition to build a social website through Yahoo Inc
WT STRATEGIES
1) W4 T1 Increase advertising for Yahoo search engines to increase users
After developing the SWOT matrix it seems to be in the companyrsquos best interest to pursue a
strategy that focuses on increasing their advertising revenues Yahoorsquos most predominant
strength is their brand recognition In developing a strategy for Yahoo the company should
use their strong brand recognition to entice more advertisers for their site They also must
concentrate their efforts on upgrading and advancing their target advertising capabilities
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
40
QSPM
KEY FACTORS WEIGHT Strategy 1 Strategy 2
OPPORTUNITIES
AS TAS AS TAS
Internet video advertising expected to increase by 82 02 4 08 3 06
Yahoo Inc has purchased Flickr 01 4 04 4 04
Broadband expansion 02 4 08 4 08
THREATS Google command about 50 of all online searches and Yahoo
has only 24 02 na na na na Consumer attitudes towards online advertising may become more negative 005 2 01 1 005
Increasing strength of competitors 01 2 02 1 01 Social websites are no breaking into the advertising market (MySpace) 005 2 01 1 005
Google is surpassing Yahoo in revenues 01 1 01 1 01
1
STRENGTHS Yahoo Inc has beaten Google in the mobile market 005 2 01 1 005
Yahoo Inc has many auxiliary operations 01 4 04 4 04
Strong brand recognition 01 4 04 4 04
Access available to anyone with internet access 02 4 08 4 08
Partnerships with MLB NFL and VISA 05 4 2 4 2
WEAKNESSES Ranked 5th in visitors among video sites YouTube owned by
Google is 1st 01 1 01 1 01
Image search has been declining 3 per year 01 2 02 2 02 Google search results generate twice as much revenue than Yahoo 01 2 02 1 01
Advertising revenues are falling due to competition 02 2 04 2 04
1
71
655
Strategy 1 Google search results generate twice as much revenue per year than Yahoo
Strategy 2 Google Commands 50 of all online searches and Yahoo has only 24
Conclusion Both strategies are desirable for the company However Strategy 1 is slightly higher in desirability at this time Yahoo Inc should consider implementing a strategy that increases the desirability of their video site
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
41
Space Matrix
Conservative FS Aggressive
3
2
1
0
CA -2 -1 0 1 2 3
IS
-1
-2
-3
Defensive
Competitve
ES
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH ENVIRONMENTAL STABILITY
Market Capital Technological Changes
Return on Equity Rates of Inflation
Current Ratio Demand variability
Gross Profit Margin Competitive pressure
COMPETITVE ADVANATAGE INDUSTRY STRENGTH
Market share Growth potential
Customer loyalty Profit potential
Website quality Financial stability
Technological know how Ease of entry into the market
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
42
FINANCIAL STRENGTH RATING
The market capital for Yahoo is 3725 billion Google is 15003 billion and 2
the industry is 2967 million
The return on equity for Yahoo is 85 Google is 2326 and the industry 1
is 121
The current ratio for Yahoo is 254 Google is 10 3
The gross profit margin for Yahoo is 375 billion and Google is 638 billion 3
9
INDUSTRY STRENGTH
There is unlimited growth potential in the industry due to the increasing use 5
of the internet
There is an increase in the amount of advertiser spending on the internet 5
which will create high profit potential
The industry is stable due to the increasing use of the internet 5
New internet companies are not as lucrative as Yahoo and Google so 5
therefore the ease of entry into the market is relatively low
20
ENVIRONEMENTAL STABILITY
Technological changes are occurring rapidly -3
Inflation will hinder profit in overseas ventures -5
Demand is relatively stable for advertising on the internet -1
There is an increase in competitive pressure between Yahoo Google -4
MSN and other well known companies
-13
COMPETETIVE ADVANTAGE
The market share is increasing globally -1
Customer loyalty is very low -5
Websites are increasing in quality and ease for all users -1
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
43
Technological changes are increasing the demand for technological experts -3
-10
CONCLUSION
ES Average is -134 = -325 IS Average is 204 = 5
CA Average is -104 = -25 FS Average is 94 = 225
Directional Vector Coordinates X-axis -25 + (+5) = 275
Y-axis -325 + (+225) = -1
Yahoo should pursue conservative strategies
The SPACE matrix has shown that Yahoo Inc should pursue a strategy that is conservative
rather than aggressive defensive or competitive This along with the SWOT matrix shows that
Yahoo should pursue a strategy that increases their advertising revenue by upgrading their
target advertising capabilities
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
44
Strategic Issues
As demonstrated in the QSPM CPM and SWOT matrix Yahoo has significant issues in
the category of search As discussed in the previous sections of this report though Yahoo sees
itself as a portal company A website whorsquos primary motive is connecting the world with itrsquos
information
This is a fantastic goal but one that Yahoo needs to abandon Yahoorsquos search product
has suffered considerably because of expansion into other areas They grew up a purveyor of
portals but began to feel content in their search forgetting that it was the reason people
visited their site Instead the company focused supreme effort in the realm of content Yahoo
tried to remain lsquostickyrsquo so that users would have incentive to come back
This precise area was long thought to be Googlersquos weakness The lack of a lsquosign in
featurersquo would permit users to go elsewhere Instead it has brought more people to the site
because Google is easy to use and not feature laden The search feature is straightforward and
simple In addition Google has added the advertising network marketing the ads as a further
enabler
There are four basic problems which are the source of Yahoorsquos falling revenue and
reduced cash flow Those issues are
Googlersquos Search results generate twice as much revenue as Yahoorsquos search results
Advertising rates are falling due to Google and other competitors
Google commands about 50 of all online searches and it is increasing every quarter
Increasing strength of competitors in the portal market
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
45
Googlersquos search results generate twice as much revenue as Yahoorsquos results
In 2006 Yahoo generated $64 billion in revenue This total was up from $53 billion in
2005 Google on the other hand had revenues of $106 billion In 2005 Googlersquos figures came
in at approximately $61 billion The reason Search
Google has consistently honed its search algorithm to include the advertising network
This has led to very tight connections between keywords and ad placements Advertisers pay
when their ads are displayed next to relevant content and only when they are clicked by a user
Furthermore Google has opened up their advertising network to outside publishers
namely webmasters with smaller sites buy who still generate traffic When an ad is click on
their site the webmaster shares in the profit
Yahoo has begun development of a similar ad network which will take advantage of the
large base of independent website owners The problem is Yahoo will need to take these
publishers away from Googlersquos products This lsquobetarsquo program has been in development for over
a year and it is rumored that Yahoo pays a higher share of those ad dollars than their rival The
system is still flawed though because advertisements which are displayed are not cohesive
with the content provided
Therefore Yahoo needs to invest time and money into perfecting the algorithm which
serves those ads Until then they will remain in second place
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
46
Advertising rates are falling due to Google and other competitors
At the time of this writing Yahoo has hundreds of competitors in the PPC and web
advertising market but none are as uniquely positioned except for Google Each of these minor
competitors have less identifiable brands and little to no traffic to capitalize on
With the minor competition though the average cost of a pay per click advertisement
has fallen The keywords which are the anchor for the advertisement process are starting to
decrease in price because of increased competition through the entire sector Google and
Yahoo offer a premium service so they charge more Their competitors charge less so that
they may capture customers hence lowering the overall revenue of the larger companies
With Googlersquos prevalence and the minor competitors Yahoo needs to clean up their ad
serving algorithm before they will recognize a shift in their revenues
Google commands about 50 of all online searches and it is increasing every quarter
In order for Yahoo to challenge the quickly growing Google they need to refocus on
what their users are there for - search It isnrsquot Yahoo Finance Autos or Groups it is search
Plain and simple
When that search is cluttered irrelevant or wrong it drives users away
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
47
Increasing strength of competitors in the portal market
A portal is defined as ldquoa starting point for Web activitiesrdquo Yahoo has done a brilliant job
conveying this role to its users They have spent millions of dollars to build out the site and
acquire web commodities all so their visitors will stay longer
The major weakness of this strategy is that there are competitors doing better These
competitors are social networking sites Social networks are the sites that allow users to
connect They are wrought with user generated content uploaded images mailing capabilities
etc They allow users to connect Yahoorsquos strategy of providing content which users sift
through is being challenged
In Summary
Yahoo is being challenged on four fronts all tied closely to search These include lower
revenues in the advertising networks due to competitors Googlersquos dominance in the search
and advertising space inefficient search results and the changing face of portals
The company needs to come to the realization that search is their future with
advertising intertwined Once their core competencies have shifted successfully from a portal
strategy to a company relying on its search algorithm they can begin to implement the
advertising strategies that have proven useful in banner ad integration for the contextual
advertising market
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
48
The first step is refining their search algorithm though Yahoo may even combine their
intense focus on portals to deliver more focused results in their queries For instance they can
leverage the power of social networks and blogs quantifying the links and keywords in a format
that Google has yet to recognize In short Yahoo can be the dominant search engine by
applying a new age search algorithm to its rankings
Coupled with this algorithm they can deliver smarter text advertising Yahoo is the only
search engine that not only quantifies the linking text or anchor words which transport you to
another site but also the surrounding keywords For example if a user is reading an article
about spyware removal and the link is placed in the word spyware then Yahoo would be able
to distinguish that three words before lsquospyware removalrsquo was the brand name of a piece of
software Then if a user clicked on the link they would instantaneously be served an ad for
that spyware solution
This new advertising structure will need to be expanded to meet the demands of the
independent webmasters in charge of various niche sites Payouts should be slightly higher
because they are breaking into Googlersquos area
By Yahoo focusing on improving its search algorithm they will be directly addressing
their diminishing user base People are leaving because the search results arenrsquot as relevant as
Googlersquos So change the algorithm to account for more factors than Googlersquos does
Advertisers are advertising with Yahoo because their implementation is faulty their
search engine is flawed Clean up the search results and that problem will disappear
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
49
In the end Yahoo needs to deliver a more value added product Not in the form of
more portal pages or more section to their website but a more flawless search engine The
rest can be harnessed from that
Strategy Implementation
Yahoo will move forward with one core competency which is search They will focus
their resources on developing the algorithm necessary to key in on social networks and portals
because of their background in the history They will design and implement a better solution
Their ad network will be integrated into the search algorithm to pick up related
keywords in linking text and content This will be coupled with webmaster utilization so that
outside publishers may benefit from Yahoorsquos resources and advertising network All in all the
outside influence will increase Yahoorsquos revenue
The strategic implementation will follow this path
1 Redirect Employees
2 Refine the Algorithm
3 Implement the Algorithm
4 Refocus the Advertising Network
5 Expand the Ad Network
6 Implement Outside Publishers
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
50
Redirect Employees
The strategic implementation will be such that no employees will be laid off They will
simply be redirected The core mission of Yahoo for over a decade has been to focus as a
portal They were told to expand the network not make it better Their new initiative will be
to forget about expansion and refine the search capabilities of the site Hence forming the
foundation of the new company strategy
The first thing that needs to be done is alert everyone of the change This will take place
in a top-down manner First the upper level managers will be met with then down from there
The first day each of the 10000 employees will need to be notified in one form or another
Depending on the shift patterns or whether the managers believe it is necessary to alert them
individually they will all be contacted In charge of the project will also be two individuals one
task oriented and one more inclined to deal with the emotional side
The next step will be redirecting employees work habits For those who will be
switching groups (going from the portal philosophy to the search initiative) they will be moved
to different offices Their desks computers etc will be switched They will have a new cubicle
or office with the search team Once there it will be possible to start separating the individuals
into team so that the search strategy can be attacked Some will work through code while
others will research
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
51
Refine the Algorithm
This team will then come together under the two project managers or under their
supervision to some extent They will apply the research and programming knowledge to plan
out and refine a new algorithm for Yahoo This will entail the variables of a groups who have
been tasked with research They are the ones who will provide the ideas and thoughts on the
setup The programmers will begin to put their thoughts into something a computer can
interpret otherwise known as coding
After the algorithm has been coded it will be tested thoroughly Those same
researchers will be responsible for trying to break it They will test for the validity of the page
ranking techniques and make sure that everything is on par If there are discrepancies they will
alert the managers and the programmers and come up with a solution as soon as possible
In traditional coding projects up to 90 of the time is put into the planning stage
Therefore the emotionally oriented leader will be the one coaching this session The task
oriented will issue objectives but will play a sub-crucial role in the projects development He
will instead focus on the design aspects and how they relate to the coding He will not be
pushing the researchers to extraordinary limits
After the search is sufficiently refined it goes to the implementation phase
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
52
Implement the Algorithm
This phase is simply the rollout of the new search algorithm The algorithm should be
soft launched without any real marketing behind it initially In order to successfully work the
mass of users need to test out the algorithm before it is marketed thoroughly
This stage will call for lsquoall hands on deckrsquo to combat issues taking place in the algorithm
itself Emergency coding may be necessary as well
Once the launch has been successfully pulled off it is necessary to market it efficiently
This can be done through online ads placed at high traffic sites such as was done when Yahoo
got their facelift six months ago
Refocus the Advertising Network
With the successful product launch it is now necessary to integrate the advertising
software into the search engine This can be done using the techniques used before the new
algorithm but using better keyword data which the new search algorithm is providing
The people who researched the algorithm will be tasked with promoting the new
features on the website They will be the soft touch of the advertisement relaunch and led by
the emotionally oriented leader The task oriented manager will be at the helm of the
advertising network relaunch
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
53
Expand the Ad Network
The expansion of the ad network will include accepting new advertisers and publishers
into the advertisement process Infrastructure needs will be handled by the programmers The
researchers will be encouraging new publishers to sign up and handling the emails while
approving the new publishers
The Implementation of Outside Publishers
As the final step in the relaunch the coders will continue to refine the advertisement
algorithms so that it ensures absolute targeting The other employees will continue to handle
the soft side of the business getting new publishers providing for the existing ones and
handling feedback
The Summary
This search engine relaunch is a difficult and painstaking process but it will refocus the
business in the most profitable way possible Having a good base to establish a advertising
network is the best way to go forward for growth If the search algorithm is failing then an
advertising network built on top of it will be leaking dollars
This strategy will help Yahoo maintain the brand while allowing it to refocus the core of
its business
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
54
Works Cited
American demographics (2007) Advertising Age Retrieved Saturday March 31 2007
from the Academic Search Premier database
Consumer Price Index (nd) The American Heritagereg Dictionary of the English
Language Fourth Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseconsumer price index
Consumer Price Index Summary
httpwwwblsgovcpi
Demographics of internet users Retrieved March 31 2007 Web site
httpwwwpewinternetorgtrendsUser_Demo_11107htm
Gross domestic product (nd) The American Heritagereg New Dictionary of Cultural
Literacy Third Edition Retrieved April 15 2007 from Dictionarycom website
httpdictionaryreferencecombrowseGross domestic product
Hof R (2007 January 24) Yahoos Panama Pleases Investors Business Week Online 6
Retrieved March 15 2007 from Business Source Elite database
Hof R (2006 December 7) Five Steps to Get Yahoo Back on Track Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006` December 15) Did My Space Really Beat Yahoo Business Week
Online 10 Retrieved March 15 2007 from Business Source Elite database
Holahan C (2006 December 26) Why Yahoos Panama Wont be Enough Business
Week Online 9 Retrieved March 15 2007 from Business Source Elite database
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
55
Internet world stats usage and population statistics Retrieved March 31 2007 Web site
httpwwwinternetworldstatscomstatshtm
iNetsShops internet demographics Retrieved March 31 2007 Web site
httpwwwinetshopscominternet_demographicshtm
Monetary Policy and the Economy
httpwwwfederalreservegovpfpdfpf_2pdf
Mannering Virginia H and Hodge Andrew
News Release Gross Domestic Product and Corporate Profits
httpwwwbeagovnewsreleasesnationalgdpgdpnewsreleasehtm
Raymond J (2001) The Engine That Could American Demographics 23(6) 38
Retrieved Thursday March 15 2007 from the Business Source Elite database
Taylor L (2006) ASCENT OF BROADBAND CHANGES HABITS Television Week
25(12) 18-18 Retrieved Sunday April 15 2007 from the Academic Search
Premier database
The History of Yahoo-How it All Started Retrieved March 21 2007 from Yahoo Media
Relations Httpyhooclientshareholdercompresshistorycfm
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom
56
The world fact book Retrieved March 31 2007 Web site
httpswwwciagovciapublicationsfactbookgeosxxhtml
US Census Table DP-1 Profile of General Demographic Characteristics 2000
Retrieved March 31 2007 Web site httpcenstatscensusgovdataUS01000pdf
Whitney D (2007 February 5) Yahoo Looks to Build Upon Its Strengths Television
Week 26 12 Retrieved March 15 2007 from Business Source Elite database
Whitney D (2006 December 11) Web Video in Play in Yahoo Shakeup Business
Week Online 25 3-45 Retrieved March 15 2007 from Business Source Elite database
World Bank Group Millennium development goals Retrieved March 31 2007 from
48b Internet users per 100 population Web site httpddp-
extworldbankorgextGMISgdmisdositeId=2ampcontentId=Content_t48bampmenuId=LN
AV01HOME1
Yahoo 10K Annual Report February 23 2007
httpfinanceyahoocomqsecs=YHOO
Yahoo inc Profile Retrieved March 22 2007 from Yahoo Finance
httpfinanceyahoocom
Yahoo inc Retrieved March 22 2007 from Mergent Online wwwmergentonlinecom