With the holidays around the corner, we decided to do a mini series about a few of the tech stocks that we follow all year long. We are the first ones to judge and critique how these companies are run, but as they say, it’s always much easier to criticize it than actually run a company. So we decided to go ahead and write a series about what we would do with these companies.
Management in the past few years
Yahoo (YHOO) is probably at the very top of the list of companies that I think are being run into the ground right now. Comparing any company to Yahoo is as offensive as anything I could say, and there is no doubt that Yahoo has a lot to do to get back in order. Things have been run so badly for years, that one year as Yahoo's CEO would be quite a challenge. Just think about the fact that Microsoft (MSFT) could have paid about twice what the company is worth a few years ago, when the company had not yet fallen off the cliff.
The problem at Yahoo is that it tries to be decent at everything instead of being great at a few things. There are a few properties that have been managed well, and Flickr is certainly near the top of that list.
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General Vision
Become a relevant and innovative player on the web in the social, local and entertainment spheres.
Initiatives I would get started on:
- Get Rid of Carol Bartz: Carol Bartz has been a major disruption. She has lost the confidence of her employees and senior management, who have been leaving the company at a quick pace. I would start by getting rid of her and explaining the new Yahoo to all employees: “We will no longer be a jack of all trades but become the King of just a few”.
- Expand from Flickr: Yahoo is lucky enough to have a hot property that continues to shine, despite everything else. It could be the starting point from which Yahoo gains a decent presence in the crucial social web. Moving slowly is critical to avoid alienating users. I think first on the list would be making it easier for users to share their Flickr content, to give users the ability to build a “profile page” similar to what Facebook has, and make it easier for Yahoo users to communicate from Flickr. Facebook has never been afraid to make changes as it improves and I think Yahoo should do the same with Flickr.
- Stop working on Games: Yahoo has had a good presence in online games for some time but has recently fallen off a bit to players like Zynga. I think the recent alliance with Zynga is the right thing to do. Games are too complex to be a focus for Yahoo, and should be provided through alliances with Zynga and similar players.
- Focus on Yahoo Finance: Yahoo Finance remains one of the leading finance websites on the internet, despite being almost exactly the same that it was 5 years ago-- which is incredible. Yahoo created a powerful website that attracts very valuable users, but has been slowly losing them as the product continues to fall behind competition. Yahoo should use the Yahoo Games workforce to improve the finance website with better charts, data, more social capabilities and an improved look.
- Email: Make it more social, and start innovating. Yahoo Mail has one of the largest user bases of any email service and that should warrant hundreds of engineers working on improving the service. Spam detection, better organization, new features (viewing photos received or shared by email?). While Google (GOOG) has been rolling out improvements to Gmail every few weeks, Yahoo has remained the basic service that it was a few years ago.
- Buy Yelp (cost of approximately $265M): Yahoo’s strategy and focus on local is relevant and should be a major focus in the next few years. Buying Yelp would be a major first step in getting the commercial / business point of view. That could be integrated with what Yahoo is now building in terms of local news and information. Yahoo has a strong community presence in much of the US and the world, and getting strong in hyperlocal websites will help it remain relevant.
- Get rid of Alibaba: Yahoo is not an e-commerce player and should not try to pretend to be one. Buying a stake in Alibaba was a great business move but it should now be sold at the right price. Yahoo shareholders do not want to own a holding company.
- Buy Yodle (cost of approximately $250M): Yodle is a leader in local advertising which should be a major focus for Yahoo in the near future. Local is one of the two critical parts of the future for most internet companies (with mobile) and Yahoo has a major edge in local. Buying Yodle to improve its advertising capabilities and sales force is critical.
- Classifieds: Yahoo’s strong local presence and its strong traffic should make it a much more important player in the classifieds / listings business. I would put the focus on market share through innovation, free listings, and high traffic in order to gain back some market share.
Disclosure: I am currently short Yahoo (YHOO).
