Verizon / Yahoo – Irrelevant challenge.

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With Verizon, Yahoo likely to become irrelevant. 

• Verizon is embarking on building an ecosystem but second rate assets are unlikely to get Verizon very far without inspirational management to make these assets shine.
• On top of the $3bn it is paying for Yahoo’s core business, Verizon also appears to be in advanced discussions to purchase a video streaming start-up called Vessel.
• This would take Verizon / Yahoo’s coverage of Digital Life to 51% putting it ahead of many of its competitors.
• However, Digital Life is only a measure of whether an ecosystem has the right assets and makes no measure of quality or execution.
• This is addressed with RFM’s 7 Laws of Robotics and it is on these measures that Yahoo falls over.
• The problem at Yahoo is simple.
• While it has good assets and good traction in the fixed Internet, it has been unable to migrate any of that traction into mobile.
• Yahoo claims to have over 600m monthly active users on mobile and I suspect that almost all of these only use Yahoo Mail on the phones and nothing else.
• Yahoo has invested large sums of money in digital assets during Marissa Mayer’s tenure but high management turnover combined with very poor execution has meant a very poor return for investors.
• For example, RFM calculates that Yahoo has been able to monetise just 12% of the opportunity presented by the assets that it owns (see here).
• The challenge for Verizon is to take these assets, add them to the others that it already owns and to create a thriving community on mobile devices.
• Verizon has two big problems.
  • First: Second rate assets.
  • The assets that it has purchased are second rate in the eyes of users who prefer the services of Google and Facebook.
  • This means that Verizon has a lot of work to do to make these assets more appealing as well as ensure that they work well on both mobile and fixed.
  • Second: Bench strength
  • Yahoo’s management has shown that it is unable to execute meaning that it is up to Verizon’s team to turn the Yahoo assets around.
  • Unfortunately, I suspect that Verizon’s history as a provider of packets and capacity, means that it lacks the bench strength to make this acquisition deliver any of the potential that it offers.
• Hence, I fear that the net result will be that Yahoo becomes increasingly obscure as more and more of the user’s Digital Life moves from the PC onto mobile.
• Yahoo continues to offer an irrelevant challenge to Google, Facebook, Apple or even Microsoft each of whom are cementing their position in the digital ecosystems of life and work.
• Of these I prefer Samsung, Microsoft and Baidu although Apple looks very attractive for a long term investor happy with the dividends and share buy backs.