|Yahoo: Time to Reframe the Debate|
Everybody thinks companies should focus on search. Everybody's wrong.
There's an old adage, when a debate is raging about a topic or when sentiment wanes and apathy sets in, it is time to reframe the debate.
Yahoo must reframe the debate about their business and the marketplace in general. Often times, when a company gets focused on an issue -- one with the magnitude of search that Google (GOOG), Microsoft (MSFT) and Yahoo (YHOO) have -- it's hard for a management team to step away from the issue and re frame the debate.
I've held my tongue on weighing in on the Yahoo, Microsoft, Google, AOL (TWX) debate that has raged for close to a year. I have many friends and associates at all of these companies, and I admire what they’ve done and have watched over -- in many instances with envy -- what they’re capable of achieving.
I also have a vested interest in who the players are and where they’re going - not just as a businessman, but as a personal investor. I have known Roy Bostock for most of my life, and I have worked in the interactive space since the beginning, so I think my perspective is valid.
Microsoft buying Yahoo is potentially one of the worst things that can happen to the market. AOL merging with Yahoo is one of the worst things that could ever happen to the interactive media space.
Here's an analogy: Microsoft buying Yahoo is analogous to ABC buying NBC; the same could be said about merging AOL with Yahoo - it’s analogous to merging CBS and NBC. The fact is, Yahoo is the number one or 2 largest, highest traffic destinations online. Again: Yahoo is one of the largest media properties in the world.
Yahoo is a phenomenal platform, and the marketplace must stop obsessing over search. It's been this singular focus on search and Google's ability to frame this debate with a monstrous market cap and marketplace voice that has driven Yahoo to focus on the wrong thing - it's a classic case of misdirection. Search is a good business for Yahoo. Search is a great business, period - in the same way that the Yellow Pages were the saving grace of RBOCs like US West/Qwest. In 2003, Qwest (Q) sold its DEX business for almost double the market cap of the company itself!
Forbes reported that it sold for $7.05 billion. (Yes, billion with a b - a word that’s certainly become devalued in recent months.) Their market cap at the time was $3.76 billion.
Google is the yellow pages of today. Maybe that’s an oversimplification, but it's pretty much that.
Fundamentally, will Yahoo ever be Google-esque? No! But that’s okay. Will Google ever be a competitor to Yahoo in content and display? Maybe. Google is aggressively pushing into display, and has also recently cut a deal with content creator Seth McFarlane, so they're certainly dipping their toe into that bucket.
Yahoo has proven year over year that they’re the next generation digital network -- Tech Ticker, on finance, is a great example of where they’re going. They’re providers of the best content - not all produced by them, and not driven by search or paid placement advertising. Stick to your knitting.
Yahoo being acquired by Microsoft is not a 1-plus-1-equals-3 proposition. It will be a 1-plus-1-equals-1-and-a-half – if that. Advertisers spending $5 million on Yahoo and $5 million on MSN (of which there are many) won’t spend $12 million on a combined entity - they’ll demand efficiency. They’ll demand the same media for $7.5 million. This marriage will be about as good as Daimler Chrysler!
Yahoo is different from Google. Yahoo must reframe the debate about who they are and where they’re focussed. TV viewing is waning. Dollars are going to continue to move online. Display advertising online may soften, but this is short term.
Yahoo is the network of the future, and should seize these management changes as an opportunity to cement their destiny. Sure, search is a great revenue driver - but it's only one part of the mix. Content and experience is king, and Yahoo is one of the leaders in defining what the new content delivery channel is and should be. You can't argue with close to 400,000,000 eyeballs a month!
It's time to reframe the debate.
Position in YHOO
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