Google walked away from its advertising deal with Yahoo! – one that planned to generate an additional revenue of $800mn -- less than two weeks ago. Advertisers on Yahoo! have been steadily pulling out in the face of the economic slowdown. And yesterday, the independence-phillic CEO steps down, holding post only until a successor is found.
Yahoo!, now, is left with limited options. Stakeholders are glad and share prices have swung up after 6 weeks of tumbling. All in the hope of an acquisition by Microsoft. Jerry Yang, co-founder of Yahoo! was probably the biggest hurdle in the way of shareholders getting value for their buck and the once unchallenged tech giant MS gaining a foothold in a web-based world. (An earilier story can be found here)
Little is complained about an anti-competitive market when monies of shareholders are at stake. Even less about the slow death of technology innovation.Once the leader in behavioral targeting for ads, Yahoo! gave up a chance to buy Google in 2002. The then-CEO Terry Semel reportedly balked at the $5bn price-tag. He preferred to divert these funds in making Yahoo! a media conglomerate, planning the original TV shows for the internet – a venture they gave up in 2006 when the rest, such as Google, were only beginning to tap online video.
The drop from dot-com boom share prices of Yahoo! $118 to current $12 can be partially attributed to this lack of identity. But this is exactly what it makes it appealing to non-internet companies such as, surprise, Apple.
Sitting on a heap of cash, Apple has the capacity and reasons for an inclination in acquiring Yahoo!. Yahoo’s mobile offerings are fairly decent and Apple’s Safari already has a 6-7% market share in mobile browsers. Sure, they get a hefty chunk today from Google for being the official search engine on the iPhone and iPod but Jobs’ almost maverick moves is what makes Apple. And with Android in the horizon this only makes sense. Yahoo! has the goods in place – for example integrate Flickr (already storing over 3bn photographs), Yahoo Local for local searches and OneSearch technology with the iPhone.
There is some (lame) speculation about Disney’s interest based much on ancient history. Prospects of marketing theme park vacations or DVD releases to the 250 million Yahoo! Mail accounts and channels such as ESPN advertising online are all nice. But Disney has moved on since Eisner.
But if Yahoo!, decides to stay single, it has to put its eggs in fewer baskets and concentrate. Products such as Yahoo! Finance have beaten competition sore and at the core the staff (desite the upcoming 1,500 layoffs) are purple blooded. Maybe it should turn to cloud computing. The only sure thing is that too succeed Yang’s successor has to be a better day to day manager …and agile.
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