Marissa Mayer must play bigger gamble than Summly to revive Yahoo!


Yahoo

Since Marissa Mayer took over Yahoo, shares are on continuous rise and behave gone from the slightly embarrassing price of $14 to a rather respectable $26. And all credit should go to her quick turnaround approach of product consolidation, management makeover, site revamp, acquiring new-generation start-ups and drive to remain top of the interest graph.

Perhaps it is too early to form an opinion, but recent progress hasn’t shown any real intent from Yahoo to indicate that they would really like to make inroads into the very social media and cloud oriented content generation world, as all these new developments are around enhancing their existing products and linking to Facebook or Microsoft, which rely more on content aggregation than crowd generation.

So let’s look more deeply at Yahoo’s current situation, potential issues and what might help them to overcome these problems and bring old glory back!

Yahoo is consolidating products and services, cutting costs and trying to acquire some new generation start-ups

Marissa joined the company after the Jerry Yang boardroom wrestle and then the very untimely and embarrassing CEO (Scott Thomson) exit, but she is trying very hard to bring focus back to company’s core competence and she and senior management indicated  that Yahoo’s objective is to create personalised and interest-focussed mobile content for users, so that display ads, the prime source of revenue, can continue to grow and give her and the company breathing space to decide their future direction.

One undeniable fact that still hugely favours Yahoo that its home page is one of the most visited and where people spend the longest time, especially in the USA.

But this is not enough

Google has been doing it for many years and the rise of the likes of Facebook, Twitter and the now revitalized AOL as display ad networks means that Mayer knows that display advertising is a very competitive field and she needs some real wow factors to remain in the game long term. Therefore, she has already started exploring other avenues to increase shareholder value, ranging from cost cutting via senior management exits and staff redundancies, to discarding some non-profit products, trying to shed some shares from Alibaba, raising stakes in Yahoo Japan , buying start-ups like Summly, Pinterest-style news startup, Snip.it, video chat startup OnTheAir and Stamped; rumours about Zynga and Dailymotion are also circling around.

Overall, Yahoo, with core competence around content generation and leveraging that via Yahoo Mail, mobile and web and vertical search, are determined to enrich their content factory, which may be a quick fix, but looking at current trends of content consumption or distribution from text, images, music , social network and/or video, Yahoo don’t have any products or services in the top two or three options, which means the future is not that rosy until Yahoo/Marrisa Mayor come up with a product line that can stand out from others in this biz!

What can Yahoo do to become a $10bn company?

If Yahoo wants to regain top spot, they know they have to fight with new content generation tools like Facebook, Twitter, blogs like Huffington Post, and new generation vertical search engines like Kayak.com, TripAdvisor etc. Only acquiring content aggregating companies like Summly or some other start-ups might not be the long-term solution; rather they have to look to more cutting edge and matured companies such as:

Yahoo do an AOL and buy Tumblr/Disqus

AOL’s revival is legendary. Tim Armstrong kept to basics i.e. generating content, but this time did something out of the box and bought new generation blogs like Huffington Post, TechCrunch and Engadget, which means they are very much in the social and interactive world and now in the top five most read categories for politics, sports, technology and others.

If Yahoo buy blog hosting sites like Tumblr with over 200 million blogs, or comment generation tool like Disqus, they would have a very cutting edge solution to integrate their display advertising concept!

Yahoo does a Google and aims for an enterprise presence by buying DropBox

Even though Yahoo Mail is still a huge presence, they failed to materialise that in the enterprise arena and I think that, in the same way that Google drive mail and business apps, Yahoo must expand their offering to businesses. Perhaps buying a company like Dropbox, in the same way that Microsoft bought Yammer, could be the way forward?

Yahoo buy a new generation of vertical search engines like TripAdvisor;

Buy Yelp or FourSqare to provide some real-time location-based mobile services - this will give a huge boost to their mobile push;

Buy WhatsApp or another new generation messaging tool.

Like Microsoft with Skype and Google eying up WhatsApp, Yahoo should also jump into the race, as SKYPE, Twitter and WhatsApp have, and change the way we message now – Yahoo must grab this space before it’s too late!

Yahoo must bring search in-house

Coming from Google, no-one knows better than Marissa that search is the trick to make bucks in the online arena, because search is about intent, not just interest, and intent to buy something can drive more money than just mere interest.

Conclusion: Play big with $4.8bn cash – otherwise slow death

Overall, Yahoo is great company founded on aggregating content and creating a one-stop shop portal along with Yahoo Mail and search. However along the road they missed the social, search and mobile boat which reduced them from one of the web giants to a company struggling to survive, and if Yahoo want to compete with Google, Facebook and Twitter now, they might have to take make some drastic changes like buying Tumbler, Dropbox, Zynga, Disqus, or Yelp, who can help them crowd source content and make inroads into the enterprise market. If they don’t take a major step, some smart tech teamed with old-fashioned aggregation and directory structure will only lead to slow death.

In other words Marissa Mayer is right to push for interest graph and mobile-oriented content but rather than banking on small start-ups, she must make a bigger gamble by buying established cutting edge tech companies and restoring the advertising space that used to belong to Yahoo, who had over $7bn turnover in 2008!

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