Yahoo! Inc. (NASDAQ:YHOO)
Citi Global Technology Conference
September 03, 2013 02:20 PM ET
Ken Goldman - CFO
Mark May - Citi
Mark May - Citi
We're going to go ahead and get started, I am Mark May, I’m the Internet Analyst at Citi. It's my pleasure to welcome Ken Goldman, the CFO at Yahoo!; I appreciate you taking time out of your week to visit us. I think Ken has a few prepared remarks at the beginning and then we'll open it up. One of the things we're going to try to do with this session is make it a lot more interactive than a lot of the other sessions that you probably have been to this morning and this early afternoon. So please prepare, keep your questions ready for Ken and we'll open it up and make it an interactive session.
Thanks Mark, this is always tough to get yourself from a three day holiday. I personally was in fact planning my way back here this morning and then going back to the West Coast this evening and I actually grew up in the Greater Boston area, it's like home for me. Before I make a couple of comments let me just remind you that my answers today in the Q&A may contain forward-looking statements. Any forward-looking statements regarding our business are subject to risk and uncertainties that are better described in our SEC filings and most recently in our Q2 for the second quarter.
I think it's always good to sort of put things in perspective for the company. We have now, many of us now have been in the company little less than a year and this is actually just been a year. Many of us came in towards the very late Q3 and Q4 last year. I was saying as much as you want to get involved in business to learn business it just takes time, I was talking to some friends over the week we all sort of talking to each other at the first year, there is a lot of just understanding as far as the dynamics of the business. When I think about our business, when we got there, we went to a planning process; we went to planning process for ‘13.
The reality is, there is a lot of moving part. The process has already started. We’re reserve doing a lot of listening and challenging, but I’m not sure we were steering the shift and honestly as much as we could have liked. As we have gone through the year, the thing is that I have noticed, and this is somewhat from the financial viewpoint is, we did not necessarily have the metrics that we really wanted to have and the cadence and rhythm to drive the business from a financial point of view.
We have spent nine months getting those in place and I am very-very happy in terms of where we are today and having the metric internally that we need, so we know where to push, where to highlight, where to focus. If you think about the things we worked on, review the term of sort of five principles and you sat with the people and then you do work on the product then you get engaged where they work in the revenue. We are talking about that this past year. I am going to add a (inaudible) is going to be focusing on earnings as well.
So I would say relative to first three the people proxy engagement, we have made a lot of progress. We have more to do a lot more focus now on revenue and I can tell you we certainly are very focused on that in the company. And as we think through and plan for ‘14, we will be thinking about revenue but also about earnings. But if you look at the metrics, we have made a lot of progress on the engagement side, you can see that. We don’t want to push comps score on the other hand I think it’s an indication that we’re making progress on that.
Let me just take us a second to talk about capital structure because I know I’ll get a question so let me just give you sort a bigger picture on capital structure. Through ‘12 and ‘13, I think we have now repurchased something in order of couple hundred million shares roughly. We have brought our average diluted share count going through this morning with about 1.2 billion in 2012. With the repurchases we have made, we have talked about as of our 10-Q of 50 million approximately through third quarter.
We have now brought our share count not quite to a billion but again close to a billion. So over the last two years we have brought our share count down about 20%. We are very focused internally on just that internal company, the core of the company. While I know and I am smart enough to know that a lot of the stock has had a helpful tailwind relative depreciation of Yahoo! Japan and Alibaba and that’s been great. We spent 99.9% of our time internally on core Yahoo! and it’s our foremost hope that will drive the performance of this company and frankly a stock price of the company as we think about balance of this year ‘14 and beyond.
So with that let me take questions.
Unidentified Company Representative
We showed some data at our Q2 where the lines of that in the cross, in other words the engagement in ‘13 has gone up from where it was in ‘12 that’s important to us. I think about the products that we have updated. We have updated the homepage. We have updated mail. And frankly those that are real drivers of our engagement. We have updated weather as you can see. We have updated Flickr. We have updated sports, better movies to screen, OMG, so a number of our properties have been updated. If I try to think about where we spent time, it’s been that area that’s also search, people say, “Jesus, ‘you just work with Microsoft.” That’s true we work with Microsoft on the other hand we are doing all of the work with the user interface and so there is a lot of experiments we do tens of those a quarter in terms of how we vary things and the replacement of search and how do we vary advertising so forth in search.
So all of those things we were controlling, we’re working on. And that’s how we think about how we drive the business. The other thing if I think about, in this year from a growth point of view, we are relatively flattish maybe down to point or so year-over-year. We have got a couple of headwinds, one is current display revenue has been declining; we need to turn that around Americas, we are very focused on that. Search has been going up we think we can even do better in search. We have had small decreases in our international operations, part of that is again we haven’t focused on international, we put a lot more focus on international in ‘14, we purposely want to get the properties and products and people back in place in Americas before we focused on international, we decide on Don (inaudible) to run European operation, so our mail operations, so that’s a new here to be driving that. We just hired Ned Brody, who would be driving America’s sales is a new hire, so we are doing a lot of things to put much more focus now on the revenue side and the financial side not just the people and product side because again I think about the people we have hired up until few months ago we’re really focused on the product side of the business. The 20 acquisitions roughly we have done you know in terms of small acquisitions including Tumblr for that matter they are all during the product side of the business and now we are starting to add we would be much more focused on the financial side as well.
Mark May - Citi
Before I see if there a questions on core Yahoo! you mentioned this declines in display, one of the corporate there has been an issue that’s kind of effecting the lot of companies and internet media which has been pressure on premium tier one inventory, lot of factors driving that exchanges etc, where are we in terms of that being a headwinds to Yahoo!
You know, I always have a saying yes I think there could be a may be some headwinds out there but honestly we control most of our own destiny. So the reality is we know they are (not deterrent), we can see as we were in August (inaudible) few days that haven’t been sold we can compare that to last year, we couldn’t do any of that before. We can see the pricing, we see the pricing every day, we see the revenue now everyday and we look into September we see the days that we sold, we see days that haven’t been sold yet. And so now we have much better clarity and what to focus on. And so, for example, if we have a new movie coming out of the Friday, clearly as we want to focus on the movie ad, so the things you know you can do that we have much better clarity on. And so we’re driving all that. And so I would say yes there is probably a little bit of a headwinds relative to overall price industry, you’ve seen that by us and some of that others in that space but that’s not the primary cause on degradation if you will on our pricing up, our primary cause is basically our focus and managing our pricing and managing our inventory in a much better way. And including sell through, part of it is a sell through again making sure you sell through because you know we now have very good clarity and what has been sold what hasn’t been sold, how long it takes to sell, what’s our backlog, how does Q4 look in terms of what has been sold vis-à-vis how it looks. Last year, this time we have all those data that we did not have before.
Mark May - Citi
So do you think the sell through issue which I think you have talked about on the last earnings call, that’s really more of an internal issue than sort of a demand side issue.
Absolutely, we believe that. If you look at digital advertising, everybody would say it’s probably 15% to 20% per year. Yes I think it’s our own work and I don’t think it’s an industry issue.
Mark May - Citi
Any questions on kind of in respect of Core Yahoo!.
(inaudible) amazingly good progress but the parts that I am worried about is the engagement to revenue because that’s where suddenly another different party, the customer has to get involved more and it also has a lot more to do with the sales force which is not where Marissa Mayer has been focused on and so that part of the organization we haven’t heard as much about, could you focus in a little bit on this product space some of the earliest product that has been refurbished like where the user engagement sound like that they have improving what have you seen on the revenue generation milestones there.
Yes so your question relates to where are we in general, moving to revenue monetization or authorization relative to some of the products. And if you really think about it yes we are seeing definitely higher engagement I think Flickr was up 4x in terms somewhere we started we produce a new product, it’s up dramatically in the mobile mail, so yes we are seeing that. And then I think about the on the revenue side we have done a number of things we went to more of a vertical architecture in terms of how our sales organization works. So that was a change that we have made Q1, Q2ish that’s taken a while to sort of workers play through the system so that’s now starting, we are seeing the benefit to that. If I think about our hiring, our hiring primarily has been focused as I said before on our product, in terms of sales we hired on Henrique as COO and run all our sales globally but really before we are got there some folks have left and people have mentioned there were various folks that had been here, they left. And so we’re beefing that up, and so we’re beefing that up and so far as Ned Brody was coincidently announced today joining us to run Americas’ sales rep. We just hired Don in a primary in Europe he is going to be focused on revenue and selling. Clearly if you think about senior management there is no question that the time all of us has spent has been much more on gaining a shift right if I had to use that term, but getting it where we invested in people and products so without that this company was not going to grow. I always, I think used a word the simple concept input/output. We are focusing output before revenue without doing the hard work on input. We are now doing the work on input, input being make sure you have great products. And now when you advertize we want to make sure the advertizing add to these capabilities and usefulness of the content not contracting from it.
So many ads before frankly detracted from the content, we are much more focus on that. So when you ask where is you guys are spending time I would say up until and several of us for that matter up until maybe a quarter or so it was primarily on getting the people play products, products, products. We shifted in terms of timing and focus putting recently during this quarter if you will much more focus on the revenue side. We are driving the revenue side much more on top of it in a much more heavy metrics, the gains, and so forth. I would say one thing I’ve talked about in my just some stale remarks. If you think about ’14, we now instead of arguing about those powers like I said they were arguing what the measure should be or whether numbers are right and consistent all those stuff, we have that. And seems basic but honestly it wasn’t there and you can’t drive I have been in a number of companies you can’t drive a company’s financial performance unless you have the metrics that CEO wants to use to run the company.
That’s in place, as I think about as we go into ’14 we will be much more focused on here is our financial plan, here is how we get there, as we need to go get that, so it’s a transition. And I think all of us will be in front of advertisers not just Marissa but all of us will spend more time I probably meet, several meetings a quarter I have in front of advertisers and that would be more that as I go forward as well. The other guys pardon me let me say it that way. And then just wondering I should have said we want to be project friendly, and so we would do a number of deals with partners. And so whether we have NBC, CNBC I just mentioned a whole bunch of folks NBC Sports that is. We would do a lot more in terms of working with partners, we will be much more aggressive in acquiring content. We did a deal for Sky Night live a while ago but you will see us much more aggressive for sports content, for entertainment content and so as we really think about how we want to drive video and paid video and so forth.
Mark May - Citi
So we are getting a lot of these questions, it’s unusual. It’s great. For one of your properties let’s say the home page for example, given that you have the metrics. To the extent that you have premium advertisers buying that inventory on a guaranteed basis, how often do you see those same advertisers showing up in that call it home page inventory but not coming on, on a guaranteed basis i.e. through an exchange or network. And since it is happening what tools you have to try to get some of that spend back to the guaranteed segment?
Yes, I am not sure I know exactly how often, your question is how often we see the same advertisers that we are selling on a guaranteed basis, how often do we see that advertiser in a non-guaranteed or exchange basis. I actually don’t know whether we track that we are actually tracking these two very separate businesses where we track the premium guaranteed it is a play expense we have a sales force very focused on that how do we sell, what’s the pricing and so forth. And then we have a very different group that’s worried about what we haven’t sold here put into the exchange or let them go sell it and that’s a very different group. And so I don’t know actually I just don’t personally know how often that just especially because I don’t.
Mark May - Citi
Maybe a question Microsoft as we are remodeling and given the relationship that you have preexisting relationship that you have with Microsoft and all the changes that we have been hearing about coming out of them including the deal today. Is there an opportunity for Yahoo! to expand their relationship for Yahoo! or to do more with Microsoft given all the sort of internal changes there.
It’s hard to tell clearly we have had a good relationship with Microsoft that goes back a few years. I would say the one difference today versus a few years ago there is no question that Marissa sort of grew up in East West breeze so honestly in a core through her thinking so we are spending a lot more time. So it is something we think we can delegate the whole effort to Microsoft that’s not true at all they do that back engine, we do all the algorithms we do all the UI and so forth. So we do a lot of work there and a lot of our ability to both get additional clicks as well as the (price per click) is due to our own efforts, and because so much of our sales come directly from our property, I guess, it’s hard to tell who because no one knows who this success would be and what their perspective would be on search.
But I just know we want to go long on search. Search is core to us, we believe as strongly and we love work with Microsoft but we’ll have to see how that may translate over time in terms of what their interest may and may not be.
As their tradition obviously they have another, they have a Nokia cell phone to see how they have to integrate that and so forth. So the world is changing. Obviously Google has their own, did their thing with Motorola. So, it’s hard to tell how all that’s going to ultimately play out. All I can say is our relationship has worked better, and part of that’s because we normally when we sign the agreement in terms of the guarantee but we actually put finite numbers on it.
So it got us away from this sort of “I give what the right numbers were in terms of guarantee”. So, our relationship is much more positive as well as destructive. That’s good and we’ll have to see where it goes down the road with whoever becomes the (inaudible) successor.
You started out earlier talking about capital and capital allocation that if things go well over the next hand full of months, you may find yourself with a lot more capital. So can you talk just about what is sort of the right amount of cash for a company like Yahoo! To have on hand and how are you thinking about future share repurchases?
What I said in terms of today, now that may change over time if we likely get a whirlwind of cash here in terms of Alibaba. But I do like to have at least $3 billion in bank, I’m not quite sure how scientific that is but it gives us plenty of working capital or gives us the ability if we want to make a reasonably sized acquisition, we can do it.
I do believe that we will continue to be a good cash generator. We have done that for a number of years. I do believe we can be also relatively cash generator very thoughtful in our capital, capital expenditures. People don’t focus on it very much but capital expenditure in the first half is near the price 70% to 80% of what they were if not even less than that first half of last year.
So, we are watching free cash flow and so forth so that’s why I pointed out the fact that in round numbers, we have about a billion shares outstanding today. So it has come down about 20% from what it was on average for us 2012. And so that’s we believe that is providing, or will provide great leverage for EPS down the road.
So, we are on our own have believed that our stock is interactive vehicle for purchase and that’s why we’ve been aggressive last year and half through Alibaba proceeds and beyond Alibaba proceeds in terms of repurchase of stock.
And I would imagine I don’t want to guarantee on this stage right now how much we would buy through Alibaba but I can just assure everyone in this room that we are very thoughtful about being a, looking at our balance sheet, we are not having excess cash just sit there and we do like the idea of buy, at this point we’d like (inaudible) buying back stock.
And you bought on capital efficiency so I have to ask the (obligatory) question around Alibaba. You’ve now been in this seat for while I’m sure exploring this topic in quite a bit of depth. Has anything, have you learned anything through that work that would give you greater or lesser confidence in finding a tax efficient way of disclosing of part or all of this taken there?
I got to be careful on my side. I will just say the fact that we’re still working on a can be good. And I’ll probably leave it there and so we have to working on it and we will continue the work on it. It’s worth of lot to all of us in this room.
So it’s worth spending a little bit of money with outside advisors and I think I assume we have the best advisors out there working with us and we continue to do that and we continue look at what we believe would be tax efficient way to manage the monetization whenever it occurs.
As investors or analyst sort of some of the things that need to happen are milestones so that we can get a sense of what we looking for or timing expectations around that.
On Alibaba you mean?
Yes, in finding the structure. Are there things that need to fall into place?
There are couple of things, one is I can’t speak obviously for when Alibaba may, may not go public, you read that and that’s all I have to leave it to that. But anything that we find out that we feel is known in material we would in some format do a public disclosure.
As you move from product to revenue forecast, what are two or three metrics that you pay attention to daily in terms of change in trend?
I’m sorry, do you mind repeating that?
Yes, sure. What numbers do you, yes, meaning what do you pay attention to daily in terms of numbers that will give you idea about introductions?
Let me answer your question about not please re-ask it for me. I mean, very bluntly we don’t like losing share. We are losing share, we have been losing share both in social display. In marketing, you are looking at different metrics but the overall mark is growing about 15 % I think in both actually roughly in social display.
So we have lost share. The key as where we stay engagement, engagement has been for us has also gone down year-over-year. We think we’re turning the corner obviously getting close to estimate chart we showed at the last earnings call.
As we think about our plans for ’14 and one of the reasons why you have to sort of look at all the pieces of our revenue, again we eliminated, if you will, Korea. So that made it high (percentage) (inaudible) and Korea was more heavily on the search with some other areas. So we have to sort of look at how this is going to grow the business.
And so we will, as we think about growing the business, we’re going to be very focused on getting display instead of declining growing and so that we’ll be putting in place. And by the way the biggest way to do that, the biggest way by far to do that is a mobile. Mobile absolutely needs become a material part of our revenue, just like video needs become a material part of our revenue. So as we focus on that, that is where our growth engine.
At the same time you need to hold your own in PC. So as you hold your own PC and you grow in mobile and grow video and then it allows you to grow the whole business, and that’s one of the display sides. And third if we can hold, do a better job of holding pricing then the number of clicks and the clicks went up by 21% last quarter which was up although even better than Q1.
We can grow the click at any pace we like that and not have pricing go down like it went down like 8% in Q2. Then you have great growth in the (search) side so if you could do both of those like I said then you actually show real growth in business.
And so that’s we’re going to focus on. But again what I’ve been pushing hard on is we’ve done so much work in mobile, we have seen engagement in mobile. I would expect soon it will be giving you at least the engagement numbers in mobile. But again they’re becoming quite real. And we now need to translate that into the revenue side of the business. But it’s a true point. You look at what Facebook; they did it did a great job in mobile. It’s a big piece of their revenue, that’s one of their growth engines; needs to be our growth engine as well.
And by the way all kinds of mobile, it could be the mobile web, it could be apps, it could browser, it could be a variety of different ways you get into iPad and a number of different ways you address the mobile.
It would seem like one of the real opportunities to monetize your mobile engagement would be through Tumblr. There is quite a bit of mobile page view sessions on Tumblr, right?
Yes, there is a number of things we like about Tumblr: one is the increase in audience by roughly 300 million users, monthly average users, which is up about 50% of what we had in terms of traffic increase by about 20%. Younger demographic I believe in terms of the time engaged some like the second largest sites next to Facebook.
So there is a number of great trends, if you will, that Tumblr brings to party. We need now to, and again I think, what we’re very focused on is not just throwing ads up, if you will, it seems very (sick) but creating ads that actually help the user engagement, help the user (affinity) if you will. That’s what we’re trying to work on very closely not just again taking any of that.
So we’re going to thoughtful of how we do it. Sometimes we’ll do it right, sometimes we won’t do it right. We’re doing lot of experimenting. And in many cases Tumblr is still hands off, if you will, and so they’re running the business obviously that’d be part of our planning process and we’ll work with them and (facilities) there is just a number of things in the normal course of business. But it is, we acquired Tumblr on the basis that we looked at a variety of different metrics, trading multiples, DCF, (pressing) transactions. All the debates were predicated on financials. We did say at the time it would be, we expect it to be EBITDA accretive, ’14, we need to make that happen.
So that means turning on monetization on Tumblr in a more meaningful way or something to expect between now and year end?
I think we’ll be, still going to be do some lot more between now and end of the year. But again I think the real metrics got in ’14. When we developed our analysis on Tumblr, it was really predicated on ’14 and beyond in terms of real, you know revenue numbers.
Thank you, I can see the progress that's being made across many areas. I've also observed that leading companies, companies that lead and succeed well over time, tend to be the best at one or two or three things.
Could you say what the three or the top competencies you have now or as you're repositioning so many things where you think you could be the top in and whether it’s people process, products, I don’t know, but say a year from now where would you be the number one in, which of these?
I'll tell you, when I came to Yahoo! as I've seen it in the last year, what separates us fundamentally from all the others in our space is we are all about our own media content. If you think about Google, Facebook, Twitter, they all drive a what they call a UGC - User Generated Content. You know, none of them are really known for their own content.
So, when you, if you go, they don't have per se a finance site. So people don't go for finance; they don't go to a My Yahoo!, they don't have an equivalent My Yahoo! to my knowledge based on it, this is a good friend of mine who lives and dies by his “My Yahoo!” where he has all of his personalization there.
You know some of them have mail, some of them don't have mail, they don't have a homepage generally, they don't have 30 sports present in one bit, so with, so yes we will have UGC, but I think there's fundamental differentiation that we will have versus some of the others and us related space will be, we will be the site that people come for what Marissa said, and if not, just try it a little bit maybe, but the daily habit.
So when you want to look up weather, we'll have weather. If you want a place that puts your pictures of places, we have pictures. You want to look at your sports scores; well I can look at some sports.
When I look at my finance, I get finance. I want to get some news; I go to the home page. (Audio Gap). How many people here do everything on their iPad or their Smartphone? That's how people want it; we didn't have it a year ago in any major way, we now have it. That's how I see Yahoo!
Sort of a transition question along those lines. True there are like companies like a Google, and potentially, eventually a Facebook, also in addition to, this is more on the ad side, in addition to having ad technologies that help monetize their own inventory, leverage that to power ads across the network.
With teams like the Yahoo! at least the former management team sort of had a love hate, were indecisive about how much they wanted to invest in sort of the third party networks business if you will. Can you, you own a number of businesses and technologies be it right Media or Interclick and a number of others that sort of are in that business.
How much are you investing in that side of the business or really allowing that sort of internally focused?
I don't know, I don't know that we've come to a conclusion on how much we’re willing to invest. I mean clearly we are investing internally on that. We have looked from time to time as doing some acquisitions; we've elected not to do those, primarily because I frankly couldn’t see, we couldn't see a proper return on those, I saw revenue but no earnings.
And so I think the thing that does inform us that we were not expecting is we need to have and get into overall (throwaway) and so to be important to advertisers you need to have lot of (throwaway). But extensively think that can help us, in our overall ecosystem if you will, we'll do more.
But again how much more and not, I don't want to say I'm a (inaudible) here, because, until we actually go through some more planning and thought process there I don't have a direct answer there, other than the fact that we do know critical mass (throwaway) is very important at this stage.
In terms of having reach as an example I've got video, if you're looking to drive your video business.
Reach is very, very important, video is very, very important. You know frankly we don't have enough video property right now; we don't have enough to advertise on right now.
Why weren't you more aggressive with something like in a Dot TV, or some of the other video deals that have been done before?
I'd rather not say too much there, we did look at it and we decided not to go forward, that's all, I can't really say much more than that right now.
I have a question, you have this factory you have to sell, I think it's half of your Alibaba shares and that's the deal price at least that's the way I understand it. Can you shed any light on that and you know, we've seen huge improvement in Alibaba's margins, growth rates are really large there, the rumored price, (inaudible) 70 billion. That seems about 50% too low.
Why should I be happy that Goldman Sachs or someone else is going to set the price instead of Ken Goldman where your shares get tolled?
First of all, it is not something that we're going to directly but more indirectly get involved in. They are obviously talking to a number of bankers. We will have the ability to select one of those. I think, again, I don't know what exchange they will ultimately select. To an extent is Honk Kong.
Honk Kong has a particular approach in terms of, I don't know exactly what they refer to it as but basically a price setting mechanism over a number of weeks. I think I would only say that we have a very good relationship with Alibaba today. I don't know if that was the case before. I think from what I read, it was somewhat adversarial and I think that probably came somewhat from Yahoo!, again from what I read.
We have a Board member now; we have constant meetings with folks at Alibaba particularly Joe Tsai. And we have a very good relationship with them. So I am not going to say what the price would be. I don't know, I honestly don’t know.
My only opinion is, there is a couple of things I have said to people over and over again. Alibaba has had a way too under promise and over deliver and surprised people on the positive for a number of quarters. We now show the numbers in our quarterly results just so people can see them. And Alibaba is okay with it, so obviously we got to get the approval to do that.
And I think they want, my sense is that they have been very public about this as well, they want to do a fair offering that they are very proud of doing. So I will just leave it there and I am personally confident that it will be done well.
Mark May - Citi
Can I take another part of that question, if I wasn't wrong, a lot of investors are using this assumption around the 50%? Is there any reason, any other things that we should be considering or taking into account the way the agreement is set?
I think I will leave the 50% (disclosure) for now.
Mark May - Citi
Any other questions?
You can ask one Mark.
Mark May - Citi
I do have a list here. You are on the Board of Yahoo! Japan right?
Mark May - Citi
So as a Board member what are your impressions of that business and are there any potential additional areas for Yahoo! and Yahoo! Japan to work together going forward?
Obviously I can't speak as a Board member, but I would say if you look at their financials, they are on a growth curve. Frankly, if I look at it, they are a year or two ahead of where we would like to be growing, 10% to 15% for the quarter. So they have been growing very, very well.
Again I am only talking about growth numbers; they are ahead of us in the mobile. So they have done a good job in mobile. So they have run a very, very good business. Their stock is appreciated something in the order of 70% I think this year. So their stock is done very, very well, probably because of the whole Japanese growth and their stock market.
Our asset is worth about 10 billion pre-tax, so it's very good. I think the thing that's really important to understand is we think we can do much more with them that would benefit them and benefit us in terms of working together on various products and properties. So take a number of our products either through them, some are through them if you will in the Japanese market we think would be beneficial.
So we think it's much more (easy) between the two companies and again existed before, again I think the theory we have amongst all of us and the management team is we want to be, someone asked a question what differentiates us. We're partner friendly.
So versus very few folks didn't have relationships with Google, Facebook and Apple, we're about the only one who can do that. So others would see these as competitors, we don't have a browser; we’re not in the phone business.
So we can do a lot of things with others in industry and be partner friendly that others in our space would view as competitive, or adversarial. So that's another that we’re going to differentiate is by partnering with many of these folks as opposed to viewing them as competitors.
Mark May - Citi
On the partnership side clearly you have the search partnership with Microsoft in the U.S. Is there an opportunity to strike other partners on the advertising side to either on your class two or class one inventory to some way optimize the monetization or the expense of running the various parts of the display business, or is that something that we should really be thinking about?
I think in display what we want to do is, we want to have richness of content. So, richness of content is a combination of both of your own (generic) content which we need to be very good at. And we have 100s and 100s editors that are working with us.
But in addition to that you need to buttress that with either acquisitions or partnering with other content providers. So you have the richest of sites. So someone comes for Yahoo! Finance because everything is there.
They come to sports because everything is there. They like our weather because you can get the radar and you can get, you can see a picture and you can also get the forecast. Everything is on air.
You get the news and so you want to see the news maybe our old news and also you get news from various (beat lighters) whatever. So you want to have the richness of content internally generated as well as partly generated, and sometimes we may acquire it. We may acquire this sport content.
You will see us through more deals. We have announcement. You will see us through more sport content deals. You will continuously see us through deals like satellite live where we can acquire content; we create richness of library and again create pages and viewership in overall engagement.
Mark May - Citi
It maybe the time for one more question.
Just on the Yahoo! Japan stake against just two part question; one is, are you precluded from exiting that stake prior to exiting your Alibaba stake; and then second, talked a little bit earlier about tax efficiency due to sense that doing something tax efficient with Yahoo! Japan and that stake maybe easier to doing it with Alibaba just given for (inaudible) ownership like that?
The tax efficiency is little different because where we hold again, again I don’t want to go down too far here, but where we hold their shares is different in terms of Alibaba with three of our own Alibaba shares versus where we own Yahoo! Japan.
So it might be of one a different approach to another. So in terms of tax efficiency there are some different angles there. In terms of, honestly it will be hard to monetize Yahoo! Japan before Alibaba since Alibaba the first half approximately will be whenever their IPO is and that could be emitted that we will see, again I am not trying to say what time because they control the timing not me.
But it would be hard to foresee (inaudible) and Yahoo! Japan. Again we have at this stage I think we say at this point in time we have no work going on to monetize Yahoo! Japan rather we have work going on how to maximize the value of that relationship.
Doesn’t mean sometime down the road we might not think about something we might not do something that helps collectively both there expectation in our expectation but right now the goal is to say, how do we, if I have got 10 billion invested in that, how do we maximize the whole value of that 10 billion? Through royalty payments, through cross licensing payments, through search payments we get from them, through other things that we can do with them, how do we maximize that return.
And by the way I have to say the best thing we have done is not do anything because the stock is gone up 70% in the year. Sometimes the best thing you do is nothing.
Mark May - Citi
That’s a good way to end so with that I think we are out of time. Thanks again.
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