Yahoo! – Slippery slope

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Cuts are a sign of being out of ideas.

• Yahoo! has announced a series of changes and service reductions that further increase my concerns regarding Yahoo!’s ability to execute on an ecosystem strategy.
• Yahoo! has announced on its Tumblr blog that it will cease support of older versions of OSX and iOS (sensible), close its maps offering and close down many of its regional media consumption offerings in Europe and Asia.
• Yahoo! is also ending support for a number of APIs such as GeoPlanet, PlaneSpotter and Yahoo Pipes.
• While it is always important to maintain strict operational control over individual assets, this move only increases my concern regarding Yahoo!’s ecosystem ambitions.
• Yahoo! monetises its assets through advertising and in this space all of the revenue growth is currently to be found on mobile devices.
• This means that in order to get access to that opportunity, Yahoo! must properly address the smartphone which means addressing the ecosystem.
• An ecosystem is far more than a series of services, it is a place where a user lives his Digital Life, meaning that these services need to be consistent and interconnected.
• More often than not, the value of one of the services will be realised through the monetisation of another.
• A great example of this is Google where YouTube itself barely breaks even but the data gathered is monetised through Google Search.
• Mapping is small in terms of the time that a mobile user spends using the mapping app, but I have long believed that it is a core asset in a mobile ecosystem.
• This is because location is an increasingly important ingredient in many other apps and services and without it, Yahoo!’s other services in mobile are likely to be less useful.
• The closure of maps and localised media consumption assets also implies that Yahoo! has not really understood the opportunity of the mobile ecosystem.
• Yahoo! has a good series of assets that have incredibly robust traction in the fixed line world but it has so far been unable to translate any of that traction into mobile.
• Yahoo! claims to have 600m users of its assets on mobile but its’ revenue generation is very poor when compared to Google (see here).
• This indicates that users attribute very little value or loyalty to Yahoo! on mobile.
• Hence, these cut backs look like the actions of a company that does not know how to get itself out of its current predicament and instead is relying on cut backs to achieve profit growth.
• This is not a sustainable strategy and the much needed revenue growth is likely to remain elusive.
• Yahoo! looks set to continue bumbling along with around $1.1bn in revenues per quarter.
• I continue to prefer Microsoft and Google over Yahoo! as hopes for a recovery grow dimmer and dimmer.