Yahoo! – The missing point

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Yahoo! still fails to address the central issue of its ecosystem.

• Yahoo! hosted its first mobile developer conference last week that barely created a ripple in the newsflow.
• This was because it was devoid of anything really new other than the launch of mobile developer suite that looks a lot like the developer tools that Twitter already makes available through Fabric (see here).
• The new mobile developer suite provides the ability for app. developers to access Yahoo! search and three mobile advertising options directly from within their apps.
• The idea here is that it makes it much easier for app. developers to monetise through advertising and users of those apps to access search without having to leave the app.
• This is all well and good but this hardly represents a big innovation that is going to bring developers flocking to use Yahoo!’s tools.
• In fact, the only kind of developers I can see liking this are those that for some reason do not want to use Google.
• Google is bigger and better in almost every way and in all likelihood offers better opportunities for monetisation.
• This is a good step in Yahoo!’s evolution but it is still refusing to address the central issue.
• Revenues are drifting sideways and despite Yahoo!’s claims of having a significant position in mobile, the facts do not stack up.
• RFM estimates that Google had around 614m users of its ecosystem on Android at the end of 2014A from which it made $6.9bn in revenues (excludes iOS).
• Yahoo! claims over 500m mobile users but it was only able to earn $1.2bn in revenues in 2014A.
• This tells me that Yahoo!’s ecosystem remains an unconnected, unrefined jumble of assets which have not been streamlined and integrated.
• Using Google as a benchmark and assuming Yahoo! has 500m mobile users, it would seem that this lack of execution on its acquisitions and assets have cost it $4.4bn in potential revenues in 2014A.
• Its failure to address this opportunity is why the core business continues to underperform and until it moves to do something about sorting out its ecosystem, this will continue.
• For the last two years Yahoo! has traded on a single investment that was not made by Marissa Mayer.
• Now that the window for that trade has passed, one has to ask hard questions of the underlying business which so far, the company is failing to answer.
• I expect Yahoo! to continue underperforming Google, Apple and Microsoft on its financial performance in 2015E.