Case Study: Yahoo!

Introduction

In 2019, Yahoo isn’t even Yahoo anymore.

As part of its 2017 merger with Verizon, the company’s brand was folded into a new media conglomerate called Oath. The deal married Yahoo’s content platforms with some remaining AOL brands that survived their own 2016 sale to Verizon.

In January 2019, Oath is no more. Verizon wrote down its online advertising business by $4.6 billion. This is in addition to the 10,400 employees who were extended buyouts in 2018.

How is Verizon’s consolidation of Yahoo’s business units a sign on transformation of the competitive landscape? What lessons can Verizon apply from Yahoo’s own mistakes, especially as the digital landscape grows more competitive?

Timeline

1994: David Filo and Jerry Yang launch “Jerry’s Guide to the World Wide Web” from Stanford. The site is a hand-built directory of other websites, organized in a hierarchy rather than a searchable index of pages. Filo and Yang rename site to “Yahoo!” – an acronym for Yet Another Hierarchically Organized Oracle – to describe how the site is organized according to subcategories (art, business, computers, economy, etc). In March Yahoo! Is incorporated.

1995: Michael Moritz of Sequoia Capital provides Yahoo! with two rounds of venture capital, equaling $3 million. Timothy Koogle comes on as CEO.

1996: Yahoo!, valued at $848 million,goes public, raising $33.8 million by selling 2.6 million shares at an opening bid of $13 each. Yahoo! uses web crawlers and tips from users to find new websites and then human classifiers to sort them into the appropriate category. At Stanford, Larry Page at Sergey Brin develop an algorithm, laying the foundation for a search engine that would become Google.

1997: Yahoo! Mail launches after an acquisition of Four11 (Webmail). Unlike AOL mail, Yahoo Mail does not require a subscription. Yahoo!’s US audience surpasses 25 million users, compared to AOL’s 5 million.

1999: Yahoo! added to S&P 500 Index.

2000: Yahoo hits itshighest valuation at $125 billion. AOL is the nation’s biggest internet provider and is valued at $125 billion, Ebay is valued at approximately $18 billion, and Amazon at $8 billion. Google begins selling advertisements associated with keywords. AOL merges with Time Warner to form AOL Time Warner.

2001: Terry Semel is appointed chairman and CEO of Yahoo! Yahoo! acquires HotJobs and LAUNCH Media.

2002:  Terry Semel puts in a $3 billion bid to acquire Google but it is rejected.  Yahoo! acquires Inktomi, a leading Web search provider. Yahoo! hires new COO, Daniel Rosenweig.

2003: Yahoo acquires Overture, a leader in commercial search services and unveils a new search feature, which is aimed at improving the user’s search experience.

2004:Google goes public at $85 a share. Yahoo! acquires Kelkoo, Europe’s leading online comparison shopping service, and announces a joint venture with SINA in China.

2005: Yahoo invests $1 billion in Chinese e-commerce player Alibaba, a 40 percent stake. Yahoo! launches new services – podcasts, messenger, music unlimited. Yahoo! acquires Flickr.

2006: Yahoo! announces a reorganization to align its operations with key customer segments and capture future growth opportunities. AOL begins to offer email, other web services for free rather than behind an AOL membership.

2006-7: Microsoft and Yahoo discuss merger off and on for 2 years, but never merge. Yahoo! Co-founder Jerry Yang comes back as Chief Executive Officer and hires Blake Jorgensen as CFO. Yahoo! attempts to buy Facebook for $1billion but fails.

2008: Yahoo turns down a $44.6 billion acquisition deal from Microsoft. Jerry Yang steps down as CEO.

2009: Carol Bartz joins Yahoo! as CEO but Yahoo! fails to catch up to Google and Facebook in the display ad market and lags behind in mobile, social and cloud markets. Bartz is fired after two years.

2011: Yahoo pushes into web video, launching Yahoo Screen—a hub of original contentincluding NBC’s Community. Yahoo Screen is shut down in January 2016.

2012: Scott Thompson comes on as CEO, lasting only four months until it surfaces that he fabricated his degree in computer science. Marissa Mayer is hired as CEO in July 2012.

2013: Mayer acquires Tumblr for $1.1 billion, aiming to reach a millennial audience.

2014: Yahoo! sells Alibaba for $9.4 billion.

2014: Mayer launches 11 digital magazines across food, tech, sports and lifestyle. In February 2016, seven of the verticals—health, parenting, food, makers, travel, automotive and real estate—are shut down.

2014: Yahoo acquires mobile app analytics company Flurry and programmatic video player BrightRoll to build up its ad-tech stack.

2015: The company signs a deal with Google to place some adsand search features on Yahoo search listings. It also partners with the NFL on the league’s first online-only livestream.

2016: Tumblr partners with video apps YouNow, Kanvas and YouTubeto power livestreaming on the site. Unlike similar efforts from Facebook, Twitter and Google, Tumblr plugs into existing video apps, so it doesn’t not need to build a platform to power the technology.

2017: Verizon offers to acquire Yahoo! As of January 2017, Just over 3 percent of worldwide internet users use Yahoo! to search the web, while more than 89 percent use Google.

Source: theverge.com

In June, Verizon closed the deal with Yahoo shareholders, acquiring the company for $4.5 billion. Yahoo properties were folded into a new unit called Oath, which included AOL brands like HuffPost, TechCrunch and Engadget. At the point the deal was closed, Oath’s reach included 1.3 billion monthly users and 1 trillion monthly ad requests.

In December, Verizon continued its quest to become the “first screen for live sports,” with a $2 billion NFL rights deal. The investment granted Verizon the ability to stream games on its Yahoo, Yahoo Sports and go90 properties. The deal was expected to raise annual NFL costs from $250 million to $450 million, but for a key business purpose — giving in-game advertisers access to a non-traditional online audience.

2018

Verizon announced the acquisition of Niddel, a startup that uses machine learning technology to identify Internet security issues.

Verizon also announced a similar online expansion with NBA. Rights to “League Pass” games were granted to all of its Yahoo Sports platforms, in addition to the go90 video streaming player. The deal also included original programming options and fantasy basketball features. NBA viewership for the 2017-18 season was up 21 percent at the time the deal was closed, which meant potential for big ad dollars.

Verizon’s 2017 Q4 earnings missed expectations, but sales were up a notch from the previous year. After the passage of tax reform, the company also announced bonuses of 50 restricted stock shares to full-time, non-executive employees.

In April, Verizon announced consolidated revenue rose 6.6 percent year-to-year, as a result of growth in Oath. Revenue from Oath is expected to keep growing as NBA and NFL programming moves to Yahoo, AOL and go90 platforms. Verizon also drew headlines in April for taking steps to strip Yahoo! users of their class-action rights.

2019

In January, Verizon dropped the name Oath from its Yahoo property unit. Shortly thereafter, Verizon Communications Inc. announced that 7% of its media staff would be laid off in an effort to overhaul struggling AOL and Yahoo through consolidation.

For more information on how Yahoo! was affected by rapid change in the digital age, refer to pgs. 85-86 in The Strategic Digital Media Entrepreneur.

Sources for Yahoo timeline:

Tim Armstrong Unveils Oath: AOL-Yahoo Combo Is as Big as Netflix and Looking to Expand

Verizon Seals $4.5 Billion Yahoo Purchase as Mayer Heads Out

https://www.bloomberg.com/news/articles/2017-06-13/verizon-seals-4-5-billion-yahoo-purchase-as-mayer-heads-out

CMO Today: Comcast Drops Out of Fox Talks; Verizon’s NFL Deal; Delivery Services Rethink Marketing

https://www.wsj.com/articles/cmo-today-comcast-drops-out-of-fox-talks-verizons-nfl-deal-delivery-services-rethink-marketing-1513082229

CMO Today: Verizon Expands NBA Deal; Redstone Pushes for Viacom-CBS Merger; MDC Digital Ad Transparency

https://www.wsj.com/articles/cmo-today-verizon-expands-nba-deal-redstone-pushes-for-viacom-cbs-merger-mdc-digital-ad-transparency-1516280547

Verizon acquires autonomous threat detection startup Niddel

https://techcrunch.com/2018/01/05/verizon-acquires-autonomous-threat-detection-startup-niddel/

Verizon earnings: 86 cents a share, vs. 88 cents EPS expected

https://www.cnbc.com/2018/01/23/verizon-earnings-q4-2017.html

Verizon and Disney announce bonuses for employees

http://money.cnn.com/2018/01/23/news/companies/verizon-disney-bonuses/index.html

Bet on Oath content services built around Yahoo acquisition is paying off for Verizon

https://www.wraltechwire.com/2018/04/25/bet-on-oath-content-services-built-around-yahoo-acquisition-is-paying-off-for-verizon/

Verizon layoffs media staff as it revamps troubled business

http://fortune.com/2019/01/23/verizon-to-cut-7-of-media-staff-as-it-revamps-troubled-business/

Supplemental Content Ideas:

Yahoo Finance has a plan to become the Uber of saving money (Jan. 2018, Quartz)

https://qz.com/1183768/yahoo-finance-has-a-plan-to-become-the-uber-of-saving-money/

Former state Senator Jeremy Ring talks about the first days of Yahoo

https://techcrunch.com/2018/02/12/former-state-senator-jeremy-ring-talks-about-the-first-days-of-yahoo/