Yahoo!

Strategc
Anayss
Group 4 Secton 2

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Index
1) Bref descrpton about
Industry........................2
2) Industry
Characterstcs......................
......3
3) Macros Ahectng the
Industry.........................8
4) Comparson wth Peer Groups
Across....................
5) Compettve Advantage and Sustanabty of
Yahoo............16
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Gve a bref descrpton of your gven Industry. Who are
the served customers, and what "vaue" do the rm
dever
The rse of the nternet snce the 1990s had the consequence of
the massve amount of data avaabe on the Word Wde Web.
But wth a the avaabe data, came the probem of sortng
through the data and access the rght knd of data. Thus came
the age of search engnes. Whe the search engnes were used
ony by the tech-savvy peope, today neary 800 mon
searches are done per day. As the amount of data ever
ncreases, the future growth of the search engne market s a
but assured. Another aspect, onne advertsng, aso receved a
boost aong wth the rse of the nternet.
The boom of the nternet search and advertsng was aso
parae wth the ncreasng market concentraton. Today,
Googe, Yahoo and Bng contro more than 80% of the goba
market. Googe-the market eader- has a current market
captazaton of 390.52 bon US-Doars and receves 69% of
the search queres wordwde. Yahoo!, the thrd argest payer
receves around 7% of the search queres wordwde.
The purpose of the onne search engnes s to make the correct
nformaton avaabe to the correct peope anywhere, anytme.
Googe states ts msson as: "|.| to organze the words
nformaton and make t unversay accessbe and usefu"
(Googe, 2008, p.1). Normay, search engnes dont charge
ther users for the servces provded. In fact, web search turned
protabe ony after the creators started seng the end users
attenton to advertsers. By submttng a search query, the
user reveas prvate nformaton about hmsef/hersef and ther
needs. The advertsers use ths nformaton to precsey target
advertsements to the users. Thus the web search engnes
actuay act as a two way patform connectng the users and
advertsers. The users get what they want and the advertsers
expand ther market exponentay.
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Search engnes are extremey popuar wth the users as they
oher access to contnuousy ncreasng amount of reevant
nformaton avaabe on the web. Search engnes are aso
hghy usefu to the advertsers as they are provded access to
target customers by matchng advertsements to the user
search.
Industry Characterstcs
Size
The ndustry s fary new (ony about 20 years od) but n no
way coud t be caed a sma szed ndustry. Wth a doube dgt
growth snce the ast ve years the ndustry s estmate vaued
at $92.2 bon by the end of 2014.
Competitors
Whe there are a number of payers a over the word, Googe
has emerged as the ndustry eader wth 69% market share
wth Badu as the second n pace wth 17%. Each country, as
depcted beow, has ts own favorte but Googe, as an
aggregate, takes the cake.
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Market Share
Googe; 69%
Badu; 17%
Yahoo!; 7%
Bng; 6%
Others; 0%
Market Share
Googe Badu Yahoo! Bng Others
Threat of New Entrants
LOW
Barganng
Power of Buyers
LOW
Threat of
Substtute
Products
LOW
Barganng
Power of
Suppers
LOW
Rvary
Among
Exstng compettors
HIGH
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Most Proftable
Undoubtedy, Googe s the most protabe company n ths
ndustry. The search engne provders ony have one opton of
earnng revenues (through advertsers) and snce Googe s the
most popuar and user-frendy, the number of advertsers
Googe caters to s far more than Badu or Yahoo!.
Cost Str!tre
A unque feature of the search engne provders s that they
face hgh specc xed costs whe the varabe costs are
neggbe. There are two factors n pay here:
"esear!h a#$ %e&elopme#t '"(%)* Hghy substanta
expendture for R&D s requred to mantan and constanty
mprove the quaty of advertsng toos and search queres and
s essenta to mantan compettve advantage. Googe spent
13.96 bon US-Doars on R&D whe Yahoo spent around 7
bon US-Doars on R&D.
Ser&er I#+rastr!tre* The companes requre taor-made
souton for the server nfrastructure. To factate a good
responsve search engne and to cosey match advertsements
to servce queres, the sze of the servers are qute arge.
Googe, for exampe, s consdered to be the fourth argest
spender n ths category after De, HP and IBM.
Porters 5 Forces Mode
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Threat of New Entrants- LOW
1) Hgh barrers to entry as the exstng payers have
many years of data accumuated through a
wdespread presence of servers.
2) Very dmcut for new entrants to grab market share
from the kes of Yahoo, Googe and Bng.
3) The presence of wde array of portfoos by Googe and
Yahoo whch coud be dmcut to match by the new
entrants.
4) The sophstcated search agorthms, ne-tuned by
Yahoo and Googe are dmcut to repcate.
Barganng power of Buyers- LOW
1) Whe most of Yahoos servces are free, they are
dependent on advertsng whch generates a moderate
PO"-."/s
5 0or!es
Mo$el +or
12HOO
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percentage of ther revenue. If peope stop usng ther
servces (whch s true for any onne busness), ths
coud cause a drop n nterest eves of the advertsng
cents, whch coud n turn ahect Yahoos bottom ne.
2) Buyers are not very powerfu but rms cannot ncrease
prce as there are numerous onne search engnes
avaabe to users.
Threat of Substtute Products- LOW
1) There are no rea substtutes for search engnes.
2) The onne encycopaedas and brares are the
substtutes but cannot match the prowess of search
engnes.
3) The cost of swtchng from search engnes to the
encycopaedas and brares s hgh as these are
accompaned wth subscrpton charges or
membershp fees but the search engnes are free of
cost.
Barganng power of Suppers- LOW
1) Onne search engne rms can buy ther computers
and networkng devces from many suppers, owerng
supper power.
2) Onne search engne rms can buy ther computers
and networkng devces from many suppers, owerng
supper power.
3) Theres no shortage of taented software engneers,
web deveopers and programmers and hence nternet
search engne rms have more avaabe resources to
choose from, decreasng the power of suppers.
Rvary among exstng payers- HIGH
1) The man compettors n the nternet search engne
ndustry are Googe, Yahoo!, Mcrosofts Bng, MSN,
AOL, Ask.
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2) There are numerous other search engnes wth very
ess market share.
3) No customer swtchng cost between search engnes
enhances competton.
4) Forward Integraton by the kes of Googe and
Mcrosoft Bng n the Androd phones and Wndows
Phones where the defaut search engne s Googe.com
and Bng.com respectvey.
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Macros Ahectng the Industry:
PESTLE
Potca:
ECONOMIC
1) Perods of economc
uncertanty ead to
deteroraton of operatng
resuts and reduced
access to capta
2) More busnesses are
movng to nternet
doman, wth ncreasng
transactons across
companes.
3) Boomng economes n
new markets and decnng
economes n US.
POLITICAL
1) Reguatng prvacy over
nternet.
2) Have to accommodate
accordng to potca
pressure from every
country.
3) Govt. decsons on who can
tax whom for transactons
on web and who s
responsbe when
somethng bad happens.
SOCIAL
1) Ehects of uncensored
mages and products for
chdren.
2) Rapd change n nternet
users needs.
3) Changes n the way peope
communcate.
4) Dgtazaton ncreasng at a
rapd pace n Asa and
adoptng to needs n Asa.
5) Due to Gobazaton, gobe
s gettng coset and smaer.
ENVIRONMENTAL
1) Goba Warmng/
Pouton Awareness
2) Hepng at the tme of
caamtes.
TECHNOLOGICAL
1) Busnesses adoptng
teeconferencng and
ntranet for busness.
2) Awareness of securty and
prvacy technooges due
to ncrease n cyber-
attacks.
3) More counter
technoogca nnovatons
such as hackng and
pracy.
LEGAL
1) Restrctons on mergers
wth regards to anttrust
ssues.
2) Law suts and
egsatons for safety.
3) Massve copyrght
nfrngement
management and other
ant-pracy aws.
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1)Reguatng prvacy over Internet
Recenty, prvacy over nternet has rased great
concerns from governments and masses a over the
word. When bg and renowned companes ke Facebook
and Twtter are accused of eakng the user data to
prvate companes, the stuaton wth not so known
webstes coud be ceary seen.
We can ook at the above graphc and ths research has
shown that peope try to avod Advertsers (28%) and
thus vaue and expect prvacy from companes to shed
ther data from advertsers ookng to expot the same.
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Another graphc above once agan speces how much
prvacy s vaued by a the generatons especay the
baby-boomers and the pre-boomers.
Wth ths data n mnd, government a over the word are
concerned and countres ke Chna are eadng the way.
To ensure that the data s not accessbe to the "western
word" or these bg companes they have banned
companes ke "facebook", "googe" and "twtter" etc.
2) Accommodate accordng to potca pressure from
every country
Internet aws are dherent n dherent countres. Countres
are gettng sceptca over the ncreasng power that
Internet s ganng year after year.
For exampe, under the pressure of a corrupton scanda,
Turkey recenty mposed bans on Twtter and YouTube over
tapes aegng corrupton by the countrys Prme Mnster,
Recep Tayyp Erdogan. Athough the YouTube ban remans,
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Twtter servce was restored n Apr ony after the
Consttutona Court overturned the ban.
Durng protests aganst the government n Venezuea n
February, there were reports that the government there
was bockng onne mages from users. In recent years,
Pakstan has banned 20,000 to 40,000 webstes, ncudng
YouTube, sayng they ohend Musms. Facebook was
bocked for a whe n 2010, but s now accessbe.
Russa has what s known as "boggers aw". Ths Russan
measure speces that any ste wth more than 3,000
vstors day w be consdered a meda outet akn to a
newspaper and be responsbe for the accuracy of the
nformaton pubshed.
3) Govt. decsons on who can tax whom for transactons
on web and who s responsbe when somethng bad
happens.
Because of the penetraton of Internet technooges and the
ncrease n the usage of nternet greater number of
transactons now happen onne. The word s smaer now
and a person from Inda can make transactons to a person
n the US.
Governments have a dmcut task to determne who has
the |ursdcton over borderess cyberspace, who can tax
whom for the transactons done on the nternet.
As the number of commerca companes over the nternet
ncreases, the rues that dher among countres w
become very dmcut to track and adapt to.
ECONOMIC:
1) Perods of economc uncertanty ead to deteroraton
of operatng resuts and reduced access to capta
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These search engne companes rey heavy on advertsers
and ther marketng campagns. When there s economc
uncertanty the rst step to contro expenses s to cut down
on the marketng and
promotona actvtes and
hence the search engnes
ke Googe, Yahoo and Bng
suher.
2) More busnesses are
movng to nternet
doman, wth
ncreasng transactons
across companes.
As more and more
busnesses are addng to
ther exstng channes wth
the shft to nternet doman,
competton among
busnesses has ncreased
manfods. For most
busnesses, gettng tramc s
the rst ob|ectve and
hence a presence on the
rst page of a search
engne s very mportant
and hence the popuarty of
advertsng through search
engne s aso ncreasng
whch s good for the
ndustry.
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3) Boomng economes n new markets and decnng
economes n US.
Ths graphc on the rght expans the usage of search
engnes n Asa and why the companes are shftng focus
from the US and Europe to Asa.
Look at the number of peope usng oca search engnes
and the tota market sze n Asa. It s ndeed a very
ucratve market and hence the "Look East" pocy coud
very we work for these companes.
SOCIAL
1) Ehects of uncensored mages and products for
chdren.
Search engnes are usefu f used n a correct manner.
But t aso contans ots and ots of corruptng stuh
whch coud be detrmenta for growth of chdren. The
uncensored mages and vdeos on the nternet and the
usua behavour of chdren to expore ths type of
meda s havng an mpact on the
2) Rapd change n nternet users needs.
The demand pattern and the way nternet s beng used s
changng rapdy. From dong research work on Internet to
onne shoppng, gamng, bookng tckets etc. and hence
the search engnes shoud adapt to the changng
envronment qucky.
3) Changes n the way peope communcate.
Another change has been the way peope communcate.
Yeow pages has been repaced by Onne drectores,
teegrams to SMSs and now WhatsApp etc. To keep up wth
the trend, search engnes must factate the ongong trend
and keep up wth t
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ENVIRONMENTAL:
1) Goba Warmng/ Pouton Awareness
2) Hepng at the tme of natura caamtes.
LEGAL
1) Restrctons on mergers wth regards to anttrust
ssues.
2) Law suts and egsatons for safety.
3) Massve copyrght nfrngement management and
other ant-pracy aws.
Every year Sear engne companes are sued by the
authors of documents and creators of the content that s
made avaabe on these search engne stngs. There
are two types of contenton categores:
a) Meta Tags
b) Mutmeda content
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SWOT
Intensve competton from
Googe and Bng.
Addressng the cutura
ssues whe gong to foregn
market.
The advertsng market
gong to soca networkng
stes ke Facebook, Twtter
etc.
Yahoos presence n the
search engne servces s
decnng very rapdy
because of Googes strong
presence.
Mobe search engnes
Internatona market s a
huge opportunty especay
wth huge potenta n
Chnese and Indan markets.
Deveopment of the Yahoo!
Drectory has potenta for
new busness and ncome
streams. SMEs are potenta
drectory advertsers.
Mobe technooges oher
another opportunty for
Yahoo!
Decnng market share n
search engne market.
Losng market share n
mang servces wth
Googe gettng stronger.
Googe beng the eadng
servce provde s grabbng
maxmum share from
adverts.
Dherentaton very dmcut
for Yahoo. Amost a of ts
ohered servces avaabe
from other sources too.
SWOT Analysis
YAHOO!
SWOT Analysis
Threat
Opportunt
Strengt
Weaknes
Strong Brand Image
Product Portfoo s
dverse.
Internatona Busness
Presence
Over 350 mon users of
ts servces and soutons.
Protabe Internet
advertsng busness.
Partnershps wth MLB,
VISA, NFL strenghten
Yahoo.
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How sustanabe s the compettve advantage of the
company and why?
Ths statement s from the companys 10-k form whch
goes to the nanca payers nvoved tes us about the
"compettve advantage" of Yahoo!
"Yahoo!'s compettve advantage centres on the fact that
we make peope's day dgta habts more entertanng-
ths ncudes day actvtes ke communcatng, searchng,
readng and sharng nformaton. We beeve our prncpa
compettve strengths ncude the usefuness, accessbty,
ntegraton, and personazaton of the onne servces that
we oher; the quaty, personazaton, and presentaton of
our search resuts; and the overa user experence on our
eadng premum content propertes and other Yahoo!
Propertes."
As we can see, Yahoos compettve advantage s not much
dherent from what the compettors are oherng. Googe
makes our peopes day dgta habts entertanng by
oherng a servce ke YouTube. Where Yahoos compettve
advantage es s n the amount of dgta meda content
and the Yahoo ma. But both have wthered away graduay
as the Yahoo ma has been overpowered by the Gma and
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the meda content has been overshadowed by the
specast meda webstes.
A probem for both Googe and Yahoo s the competton t
s gettng from the kes of Facebook and Twtter. It s more
probematc for Yahoo than Googe as the compettve
advantage of Googe es n gvng accurate answers to the
queres posted but for Yahoo, t s a about the rch meda
content.
Aso, another worryng pont for Yahoo s the ow
penetraton of Yahoo apps on mobe. As we have seen the
number of peope who rey on ther smartphones to check
out the meda ncrease manfods n the ast coupe of
years. Yahoo was ate to react and dont have the dverse
portfoo of servces ohered by the kes of Googe on the
mobe patform.
No wonder Yahoos market share has faen to such a ow
eve after beng a top dog for a ong tme n the ndustry.
But we know that nothng can be forecasted about Internet
as t s very dynamc. Ony way Yahoo can get the market
share back s by nnovaton and brngng any a type of
servce not beng ohered by any rvas as of now.
References:
1) http://mobe.nytmes.com/2014/05/07/word/europe/russa-quety-
tghtens-rens-on-web-wth-boggers-aw.htm?_r=1&referrer=
2) http://www.sconnvestor.com/readmsg.aspx?msgd=29523984
3) http://www.sec.gov/Archves/edgar/data/1011006/00011931251407
7321/d636872d10k.htm
4)
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