Yahoo! – A place in the pantheon?

Yahoo! currently lacks the assets but has the users to be a viable ecosystem.

• Yahoo has completed its first full quarter with Marissa A Mayer at the helm and there are signs of green shoots.
• Q4 results were good with revenues / EPS at $1.22bn / $0.32 compared to expectations of $1.21bn / $0.28 as market share losses have been halted and cost savings have come through.
• Guidance was conservative with Q1 Revenues and adjusted EBITDA expected at $1.07bn-$1.10bn / $340m – $360m compared to estimates of $1.12bn / $392m.
• Guidance for the full year was also quite conservative with FY2013 revenues and adjusted EBITDA expected at $4.5bn-$4.6bn / $1.07bn-$1.10bn compared to forecasts of $4.6bn / $1.67bn.
• Despite this hefty miss on FY expectations, the market did not seem to care, being simply relieved that most of the rot appears to have been stopped.
• The big question now is how will Yahoo! return to growth? and it is good to see that Yahoo! has a CEO that knows how she intends to get there.
• Firstly, the intention is to improve the experiences that users have when using Yahoo! services such as Yahoo Mail, Flickr, Messenger and so on.
• Falling user engagement with Yahoo Mail was a major driver behind some of the weaker areas seen in Q4 and I am hopeful that the recent improvements will help shore up user engagement as this is critical to the long term survival of Yahoo!
• The strategy here is simple. Keep as much traffic and activity on the premises as possible and Yahoo! will learn more about that user and be able to sell targeted advertising more effectively to that user.
• It is basically the same as Google except on a much smaller scale.
• The second area is mobile and I suspect that this will be central to the longer term growth in revenues at Yahoo!
• The idea here is to create an ecosystem that ties together all of the assets that it already has and enrich the digital lives of the 200m unique mobile users that it already has.
• To my mind, those 200m users are a colossal asset and Yahoo! must hold onto them at all costs.
• However, Yahoo! is very short on assets to create a mobile ecosystem as it has no software with which to push its services, no maps, no app. store and not much when it comes to content.
• I have set the bar at 100m users being the lower threshold of being a viable ecosystem and so Yahoo! definitely qualifies.
• If Yahoo has the guts, determination and management depth, then there is a place for Yahoo! in the ecosystem marketplace.
• Only time will tell but so far Marissa Mayer is making the right noises.
• I would still prefer Google for now, which is growing faster and is much cheaper, but if Marissa can pull it off then the long term forecasts for Yahoo! are far too low.