Does the World Really Need Yahoo Anymore?

Yahoo (YHOO) has had an interesting week as far as weeks for Yahoo! go. CEO Carol Bartz dropped in for a disastrous interview at the TechCrunch Disrupt conference on Tuesday before rebounding back to par in a relatively tame analyst day on Wednesday.

Let me start off by saying that I think Carol Bartz is the right person to manage Yahoo!. She is not a visionary like Apple's (AAPL) Steve Jobs, but Yahoo! is not in the vision business. Yahoo! is in the business of being big, and she is a tough cookie that will deliver profits while keeping everyone in line. If there's a blueprint here, it's the turnaround Mark Hurd engineered at Hewlett-Packard (HPQ), which has evolved into a lean, mean profit machine.

And yes, Ms. Bartz did let an F-bomb fly at TCDisrupt, but that's a sign that she has some pride and gives a damn about her work. She might fail, but she's not going down without a fight.

However, what was notable this week for Yahoo! was that it gave a pretty decent forecast for revenue growth and margin expansion through 2013 at yesterday's analyst day... and the stock barely moved.

Given the pessimism surrounding the company and a relatively bearish Wall-Street analyst community, I'd have thought shares would have gotten at least a little bit of a pop.

But it wasn't to be, and that's a sign that nonbelievers won't be converted easily - something that caught Bartz off guard, because she sounded pretty excited to deliver a financial forecast.

I said above that Yahoo! is in the business of being big, and I don't mean that kindly. This is because being successful in the past does not guarantee success in the future. In fact, being big could mean that a company has already exhausted its opportunities.

Look at Microsoft (MSFT) and Nokia (NOK). They are each number one in their respective businesses but are losing ground to a new wave of aggressive competitors that aren't tied to legacy products and business practices. Don't take my word for it, look at their stock prices.

How can Yahoo! grow from 600 million users to one billion or two billion when eyeballs are increasingly heading to social networks like Facebook and Twitter?

A MyYahoo! page really isn't all that different from the Facebook News Feed the kiddies love, while the number of Twitter-based apps is absolutely skyrocketing.

We can sit around and talk about innovation and the user experience and social networking and emerging markets and click-through rates, but there's a much simpler way to frame Yahoo!'s core problem: it is becoming less and less indispensable by the day.

Yahoo! Finance is obviously the crown jewel. It's still the best financial-news aggregation tool on the web.

But beyond needing to replace Yahoo! Finance, my daily life wouldn't change all that much if Yahoo! suddenly disappeared.

Would yours?

Disclosure: Long AAPL

Comments

[muoio]

Yes I do need it---in the real world!!!!!

[muoio]

We sure don't need Carol at Yahoo----she's good for a short at any level-----what a jerk!

[fishluvrain]

The only thing that Yahoo really offers that is hard to replace are message boards and groups. I read and post on Yahoo Finance message boards. I see too much abuse. Whether it being off topic questions, Pumping, or attacks on securities or posters. The worst being the agenda led poster. I recently researched 1 poster 8 weeks 2000 posts 95% on one stock board first pumping for a few weeks then disparaging to the present. The other 5% seemed to be flash news pumps on this persons agenda. The message boards on Yahoo Finance are almost the only item not also on Google or MSN. Since it is so corrupted I could easily do without it, especially since Yahoo shows no interest in cleaning it up. So I change my thought to No we don't need Yahoo anymore. Its competitors have caught up to or surpassed Yahoo.

[FRM]

Michael is spot on about Finance being the only thing unique and worthwhile about Yahoo. In fact, most of the rest of the experience is somewhat annoying. This is a classic example of a company that is literally past its' "sell by" date. The last CEO really screwed that up for shareholders, even though Microsoft would have destroyed yet another acquired business, but it would have been a great liquidity event opportunity and now there's probably not a lot worth selling.

[freshprince]

Yahoo Answers. I still find some good answers until this day when I have an itching question. Also as already mentioned, Flickr...

What about Yahoo Mail? I have a Yahoo email address since 1998. What about Yahoo Games? I still play there occasionally. Yahoo Messenger? The list goes on for other services.

This isn't just about me. It's about everyone else who still uses and needs/wants Yahoo and it's free services.

Yes, life will change dramatically if Yahoo suddenly disappeared.

[GrahamCreative]

Flickr???

[Michael Comeau]

Good point, Flickr is a killer app and I actually have a pro account.

[Tom B]

I love Flickr. I use Yahoo mail-- mostly to keep Goog from reading my messages. A growth company, though, they ain't. And Bartz, whom I was optimistic about initially, showed extremely poor judgment when she jumped into bed with MSFT (Bing-- the failed search initiative).

[LongView2]

Saw this article via RSS on my.yahoo. Which I must admit is still pretty damn sticky. Y! is still one of the few non-ad-network places for online brand advertisers to go for mass reach buys. Until Goog figures out how to move beyond AdSense or FB figures out...anything that looks like a model, Y! matters.

[abuayyoub]

Yahoo still exists? I thought they went down on the same ship as Compuserve and Netzero. Seriously, Yahoo needs a new business model. If they disappeared tomorrow I probably wouldn't even notice. Other than Del.ico.us and yahoo messenger I don't think I use a yahoo services twice times in a month.

The only thing Yahoo has going for it is it's users. Much like China. They don't have much to offer the world but their man-power, and that alone is enough to make them a super power, Yahoo has to find a way get in first on the next new thing and use their user-base to their advantage. Other than that I don't see Yahoo lasting another 10 or even 5 years in this super fast-changing world we live in.

[rdgb2]

Yahoo is the walking dead. The only people who still use it are clueless or somehow locked in (eg I use Yahoo mail for junky stuff, though I aggregate it with Threadsy). But mostly it is the clueless: it is the online equivalent of grandma still searching through the Yellow Pages instead of googling.

@DrGath -- sure, Yahoo used to innovate. Lots of other companies did -- does not mean they are missed *today*

[drgath]

"Used to innovate"? Say what you want about products, my post was about OS projects. What makes you say those innovations aren't continuing today?

Yahoo is opening up more and more as time goes on, not less. The most recent project open-sourced was Traffic Server, which Apache just this month granted "top level" status. They just announced a soon to be open-sourced cloud computing platform. YUI3 (recently out of beta) is one of the best JS libraries out there (it has to be for Y! performance & scalability standards) and is fully open-source. I could go on...

I stick up for Yahoo because I'm a huge open-source/open-web fan and know how important its contributions are to the industry.

[drgath]

"[Carol Bartz] is not a visionary like Apple's (AAPL) Steve Jobs"

Name me one person who is? You can't. How is that even a fair comparison?

You also seem to forget the enormous contributions to open-source that Yahoo provides in areas where Google is closed (distributed data processing). Without Hadoop, the growth & capabilities of social sites using it (like Twitter & Facebook) become very limited. The JavaScript world also loses its biggest advocate if Yahoo disappears, and that's hugely important to an open web.

Bottom line: You might not use Y! Search anymore, and may have outgrown Y! Mail, but every day, on just about every website you visit, you are using something that has been improved by technology & knowledge Yahoo! has given back to the web to make it a better, faster, and safer place.

So, yes, you will miss Yahoo if it disappeared.

[fishluvrain]

There are enough ISP's out there if any few of them disappeared what the difference. I agree Yahoo finance is the best (listen up Google). Everyone is following Google and its innovations Chat, Telephony,Video,Storage. I don't think much of the networking applications like facebook...Too much exposure. Too many things that deserve to be in the background find their way to be on display. Too easy for your cyber life to be compromised. The question though do we still need Yahoo. I vote no but I would hate to lose Yahoo Finance.

[noirblood]

If the question is survival, the answer is easy. Yahoo! will obviously survive, whether on its own or by being bought and merged into a larger company. You gave the example of HP. I don't need HP. I can exist completely without HP with ease. They are still a good company that makes a lot of money. There is room for more than one competitor in these spaces, and even being the lesser one can still be quite profitable.

If the question is, is YHOO a growth stock that investors can buy with confidence, I think it's still too early to tell. Sure Facebook and Twitter have the eyeball stream and buzz (until something newer replaces them...Diaspora?), but Yahoo! still makes staggeringly more money than them. Advertising is a big money game and YHOO is among the best at it. APT could very well provide the type of growth that people have been looking for in 2011-2013.

Beyond that, it's clear that one of the main trends we've seen online is the rise of aggregation tools (e.g. Kayak, Indeed, Meebo, Openbook, Stocktwits, etc.) across all types of online content. People want to go to one place to find everything. There is such a thing as online fatigue and laziness. And I think Yahoo! is trying to become the king of all aggregators, aggregating the aggregators and more.

At the end of the day, if AAPL makes terrible products, people won't buy them. If YHOO makes it easier for people to conduct their online routines, users will come. We put too much stock in the brand and, as you put it, the past. All that really matters is what they do next.

[slyball]

Apparently 600 million + people still need Yahoo!, or at least want it.

[Bob67]

The short answer is no.

Don't get me wrong, I'd be sad if they tanked because I was a Yahoo loyalist for several years. But, Google has lapped them in just about every category in which they compete.

If I had it my way, Yahoo would revitalize itself and become a viable competitor against Google. But, it's more likely that they'll focus on generating and aggregating mainstream content.

My guess is that Yahoo will survive. Carol Bartz will probably be able to stop the bleeding and get the company focused. In a year or two they'll probably be a solid blue chip company. But, I don't think they're going to be indispensable again.

[fjpoblam]

Yahoo! is THE email handler. They have the Gorg and M$ dominated by leaps and bounds. Always will. I don't trust the Gorg as far as I can spit, and as a smoker, I can't spit very far.

If Yahoo! did NOTHING BUT handle email, that'd be enough, but I have Yahoo! set as my home page too, and I'm using Yahoo! Messenger, a Yahoo! contacts sync on my Mac, and iYahoo on my iPod Touch. So there.

[Michael Comeau]

fjplblam, the issue is a shifting of behavior. Where are the eyeballs going?

Y! is dominant in mail, but can email sustain long-term growth and offset areas of weakness?

[fjpoblam]

Your assumption seems to be that "eyeballs are going" toward social networking and away from email. My contention is that there will always be a place for email. FB mishandled privacy. User online privacy is a matter that is desirable and, if nothing else, easily programmable. (I won't go into the ethics involved.) Therefore, I believe, there will always be a place for email.

As regards email, YHOO is and has long been the market leader. While this may not yield the overwhelming growth you see as necessary for existence, I think it provides a sort of sustainability. (...though I have no data correlating the certainty of world population growth with that of email usage growth.)

[rdgb2]

But look at growth in email 'seats' since Gmail launched. Of all net growth, Google has captured 80-90%. Yahoo dominates legacy seats but it is a demographic timebomb. I move in tech circles and NOBODY uses a Yahoo address -- it would almost be comical, like wearing costume dress to a business meeting.

[Joe "G"]

Dude you are wacked out of your skull. When I first heard of Yahoo I laughed, I have since used as my main address for years and would be devastated without it. I jumped on Facebook early thinking it was my space. i loved Face Book, but I began to think too much information...and sometimes you just wish you had not done something. I deactivated my account and it was like breaking up with a girl. i got the sense it was getting out of control. I am a news junky and have been one for 30 years I love Google news first but Yahoo will always handle my email and I like their simple apps.
Yahoo is still cool..aol not cool.. but don't be a hater on my yahoo I like it for it's simplicity. Apple taught me that in the early 90's.
Google is god right now and it is truly mind blowing, you can't help but root against Microsoft. I love word but hey ..uncool

[Michael Comeau]

I'm not trying to be a hater - I'm simply sparking a conversation.