Case About Yahoo Essay, Research Paper

1. Success as a Web Search Engine

a. Why was Yahoo! such an early success on the Web?

Yahoo was an early success due to a combination of factors such as timing, hard work, and a good understanding of Web surfer’s tastes and needs.. In early 1995, Net mania was just flowering. It was a great time to be a young entrepreneur with an Internet idea. Dave Faldo and Jerry Yang saw a consumer need for classifying and differentiating web sights. Resting the urge to automate this process, Yahoo’s founders instead chose to manually perform this search, reviewing and classifying roughly 1000 sights a day. This approach combined with their decision to offer a free service lead to early success.

b. Why was Yahoo! more successful as a search engine than other, more technically superior search engines?

Yahoo!’s search engine was designed to be both reliable and streamlined. The design was simple so it would pop up quickly. Its focus was on quality, not quantity. Yang’s comment that “if you have 13 Madonna sights, you probably don’t need a 14th” rings true. Surfers choosing Yahoo! not only were provided reliable information, but they were not bombarded with 1000 sights to review. Additionally, Yahoo! provided a product that was appealing and fun to use.

c. Why is the fact that “Yahoo! spends money on people, not computers,’ one of the keys to their success?

Yahoo!’s founders business plan was to manually categorize existing web sights and provide a succinct list of quality sights to choose from. This human-created directory was all that distinguished Yahoo! from its competitors as Net euphoria swept the stock market in early 1996. Other search engines were throwing any sight that met the search requirements at the user. Yahoo!’s concept saved the browser the time they would otherwise spend filtering out the garbage to find these quality sights.

2. Building a Web Sight and the Brand

a. Do you agree with Jerry Yang’s two fundamental strategies for the success of Yahoo! as a Web site and business brand? Why or why not?

However, Yahoo! founders realized that without a strong brand name, they would have difficulty attracting both advertisers and users. In order to get people to use your sight the first time, having a recognizable brand name in essential. New users have been bombarded with creative ads that may well lead them to try Yahoo! before a competitor. It is well know that creating brand equity is the surest way to find long-term success in the business world. One has to go no further than Coca-Cola to see the lasting effects of building a recognizable brand name. Once users came in droves, advertisers weren’t far behind seeking to capitalize on this captive audience.

b. Do you approve of how Karen Edwards has promoted the Yahoo! brand? Why or why not? How would you improve Yahoo! marketing? Explain why.

Edwards used an excellent approach in her initial marketing campaign. The majority of web surfers are young. Targeting events and media that are frequently attended/subscribed to by the “Gen X” target market proved quick and efficient way to attract interest.

The next step was to find a way to hold on to current users. This was accomplished with the consistent offering of new services and distributing “freebies” that kept the Yahoo! brand name in the forefront of the minds of its users. As the text stated “The freebies, the branding, and the human touch combined to create a site that was more attractive than any other.”

Yahoo! could improve its marketing campaign in two ways. The purchase of a telecommunications company or other media outlet would provide new/less expensive avenues to reach Yahoo!’s target market. AOL has had great success in doing this with Time Warner. Additionally, Yahoo! could specifically target independent investors. Yahoo! Finance provides a wealth of historical and up-to-the-minute information about virtually any public company. To date, advertisements that specifically target the group that can best make use of this information are not prevalent.

c. Visit Yahoo!’s Web site. Do you like how Yahoo! has built up their site? Why or why not? How would you improve their Web sight? Explain why.

Yahoo! is set up to be friendly to the user. It loads quickly, has a wealth of useful links, and the search engine is more streamlined than its competitors. The only improvement that can be suggested is to allow the home page to be customized rather than offering a personal Yahoo! page. If the content of this home page could be altered to cater to the tastes of the individual user, it would save time and offer a more personal touch the competition cannot match.

3. Valuing the Business and the Brand

a. Why do you think Yahoo!’s stock price rose and fell so sharply in 1996?

Curiosity and expectations are the root cause of Yahoo!’s success the first day of trading. However, once investors took a look at the relative lack of advertisers and listened “Industry Insiders” who were adamant in pointing out the Yahoo!’s technology was not as advanced as their competitors, this initial success did not last. Now that advertisers have jumped on the Yahoo! bandwagon in droves, stock prices are back up and investors are less concerned with technology and paying attention to Yahoo!’s popularity.

b. Is Yahoo! worth its present multi-billion-dollar market capitalization? Why or why not?

Yahoo! is worth in present market capitalization. It’s unique combination of offering its services for free and building its product with ease-of-use as the primary goal, it has left its initial competitors in the rear view mirror. Yahoo! is now considered a chief competitor of AOL and Microsoft’s MSN. Additionally, its 1997 P/E ratio of 171 was an indicator of strong future earnings. The following financial data confirms this:

For the first half of the year 2000, revenues totaled $498.5 million, up from232.4 million in 1999. Net income totaled $143.3 million, up from $1.5 million. Results reflect an increased number of advertisers purchasing space on the company’s media properties, increasing number of event broadcasted, and increased investment income (http://biz.yahoo.com/p/y/yhoo.html)

c. What key business developments is driving Yahoo!’s stock price?

Yahoo! has continued to enlist more and more advertisers that are driving its value consistently upwards. From Amazon.com to Eloan, Yahoo! has shown consistent earnings growth through not only increased advertisement, but also creative promotions that provide additional revenue when Yahoo! users make purchases or even provide marketing information to advertisers. Yahoo! has continued to add to its online services and is beginning to be viewed as a key part of the computing establishment. Now Compaq is attempting to have Yahoo! news and weather on all its PC’s. This will only strengthen Yahoo!’s position.

4. The future of Yahoo!

a. Why have AOL and MSN become Yahoo!’s new Internet competition?

AOL and MSN are the only other comprehensive branded networks available to consumers. Yahoo!’s previous competitors cannot make this claim. Yahoo! has diversified its product to the point it can now compete head to head with the “big boys”.

b. Do you think Yahoo! will succeed in this new competitive arena? Why or why not?

Yahoo! has a tremendous opportunity to succeed in this new arena. They are the only comprehensive branded network that does not charge a subscription fee. While AOL and MSN may have a few “perks” that Yahoo! cannot provide at this point, there will always exist a limited number of essential services users require. That being true, Yahoo! can only fall so far behind the competition and consumers may forgo such amenities to take advantage of Yahoo!’s free service.

Additionally, Yahoo! is far ahead of the competition with regard to the global community. In places such as India, AOL cannot be accessed without making an international call. Yahoo! also caters to foreign nationals with a variety of Yahoo! home sites from China, France, India, and many more. Given the global nature of today’s economy, Yahoo! has done its part to reach out to new markets.

c. What can Yahoo! do to improve their chances for business success? Explain your recommendation.

Yahoo!’s chances for future success would be greatly aided by diversifying their business plan. Currently, Yahoo!’s chief source of revenue comes in the form of selling advertising. Two areas can be improved here. First, Yahoo! should look to attract more traditional companies and not rely solely on “.com” firms. Secondly, Yahoo! would benefit from another, more stable source of income. One suggestion would be to alter their present format and offer a business suite that provides the simplicity and speed of Yahoo!’s traditional service as well as a professional appearance. Such products as business email, videoconferencing, and other telecommunication tools could be packaged and sold for a flat rate that would provide additional income.