Monday, November 20, 2006

PORTAL BUSINESS://Yahoo! needs to follow Vodafone

Good news is finally happening at Yahoo!. The dramatic October 11 article in the New York Times, saved here, with hindsight pretty much marked the bottom for the stock. Even if Brad Garlinghouse goes out publicly with even more dirt, I believe it highlights potential upside more than it does downside. We are seeing a similiar move at Vodafone: get rid of non-core and overhead, but strenghthen existing operations.

So now we have one or two acquisitions in the Web 2.0 domain, a large scale alliance with seven newspaper groups and an internal memo, leaked Microsoft/Ray Ozzie style.

What could 'Focus the vision' really mean?
  • Exit payments and auctions (and ecommerce, comparison shopping) and partner with eBay, which partially has happened. Could Yahoo! Messenger (with Voice) be folded into Skype?
  • More generally, follow Jack Welch' 'fix, sell or close' in addition to Yahoo!'s own 'build, buy or partner' adage.
  • Sell the 40% Alibaba stake and the 30% Yahoo! Japan stake.
  • Exit certain other countries, presumably in Europe.
  • End any content production efforts. Get rid of Lloyd Braun.

My take on this is twofold:

  • I see no fundamental problem in acquiring non-overlapping entities, especially as in the case of Bix.com, where its Mike Speiser is made VP for all community-oriented sites. The only problem would be that it could create too much overhead (see Vodafone's dissynergies after acquiring too many country operations). This makes Mr. Garlinghouse's job cutting proposal seem very plausible. At Q3, the TTM revenue per employee was $400k at Yahoo! and $678 at Google.
  • By not making acquisitions, Yahoo! risks losing market share, because the web is expanding much faster than any company can match from organic growth alone. Both Yahoo! Q3 and Google's acquisition of YouTube underscore this point.

1 comment:

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