Transcript Electronic Commerce Strategy: Yahoo

Ecommerce Strategy:
Building a Virtual Conglomerate
Ecommerce Management
September 4, 2003
Anindya Ghose
No. 1 Search Destination In the U.S.
The leading Internet
portal with 220 million
visitors each month
(Source: Nielsen//NetRatings)
2
Brief History (1)
1994-96: Starting business
One of the first online navigational guide to the Web
– David Filo and Jerry Yang began developing the Yahoo! search engine and
directory, attracting thousands of visitors in 1994.
– First million-day hit in 1994.
– Sequoia Capital decided to fund it in April 1995.
– Incorporated the business and started selling ad space on its Web site in
1995. Top Mgt from MOTOROLA and NOVELL.
– Went public (IPO) and teamed with SOFTBANK to form Yahoo! Japan
and Yahoo! Europe in 1996 with about 49 employees.
Yet Another Hierarchical Officious Oracle
3
Brief History (2)
1997-2000: Continuing growth
Expanding services
– Acquired Four11 (Internet directory specialist), Viaweb (ecommerce software), and Yoyodyne (Internet direct marketing).
– International expansion (25 international sites in 13 languages).
– Acquired Geocities ($3.7 bil), broadcast.com ($5 bil), e-mail
communications firm eGroups ($430 mil).
– Launched streaming media application Yahoo! Player.
Wading into B2B waters
– Teamed with TIBCO Software to offer Corporate My Yahoo!
– Launched Yahoo! B2B Marketplace.
– Developed Enterprise Information Portal, teamed with Inktomi,
Critical Path, and TIBCO Software.
4
Brief History (3)
2000 -2002: Struggling for more revenues
As the dot-com bubble burst in 2000, online ad revenue dried up and
forced to re-evaluate its ad-supported model.
Looking for ways to add more revenue from business services and
subscription/listing fees
–
–
–
–
Charging fees to list items on its auction sites
Providing a subscription based music service
Purchasing HotJobs.com (planning subscription-based access to the listing)
Fee-based document search service (partnered with devine)
Adding e-books to Yahoo! Shopping.
Developing a high-speed Internet service with SBC Communication.
5
Selected Web sites features
Communications Properties
– Yahoo! Groups (group e-mail lists)
– Yahoo! Mail
– Yahoo! Messenger
Information
– Yahoo! Education
– Yahoo! Health
– Yahoo! News
– Yahoo! Weather
– Yahooligans (Web guides for
children)
Listings
– Yahoo! Autos
– Yahoo! Careers
– Yahoo! Real Estate
Media
– Yahoo! Broadcast
– Yahoo! Games
– Yahoo! Movies
– Yahoo! Music
– Yahoo! Sports
Commerce
– Yahoo! Auctions
– Yahoo! Classifieds
– Yahoo! Shopping
– Yahoo! Travel
– Yahoo! Warehouse
(marketplace for used items)
Finance
– Yahoo! Finance
– Yahoo! FinanceVision
Enterprise solutions
– Domain name registration
– Web site housing
– Yahoo! Business Mall
6
TODAY - Consumer and Usage Highlights : Good news?
Yahoo! had more than 237 million unique users worldwide during
2002, including Yahoo! Japan, up from 192 million in 2001.
Yahoo!'s traffic increased to a record 1.62 billion page views per day
on average during 2002, up from 1.1 billion page views per day in
2001.
More time is spent on Yahoo! than on any other portal. An average
U.S. Yahoo! consumer spends 113 minutes per month.
(Nielsen//Netratings, February 2002)
98 million active registered members logged into their personalized
Yahoo! services during 2002, up from 67 million in 2001.
Yahoo! enabled approximately $776 million in commerce
transactions during 2002.
7
Business Model (1)
Business profile/strategy
Building a global Internet media company:
– Offering a branded network of comprehensive information,
communications and shopping services.
– Giving away content and communications services for free to attract
“eyeballs” and ad dollars.
– Building an “Internet market mall”.
“Yahoo Everywhere!”
– Continuing expansion of its services geographically, to different
types of services, and to different platforms (e.g., cell phones and
Palm handheld computers).
8
Business Model (2)
Business profile/strategy
Value Creation
– Providing easy and convenient search capabilities, variety of contents, and
communications services to users
– Facilitating direct and personalized marketing activities to advertisers
– Providing a complete set of business solutions to merchants
Providing online business and enterprise services
– To enhance the productivity and Web presence of Yahoo!’s clients.
– Corporate intranets: Corporate My Yahoo!, teamed with TIBICO
Software.
– Building a “Virtual Conglomerate”
9
Business Model: Some Statistics
Marketing and Merchant Services
Yahoo! served 4,175 advertisers and merchants during 2002. Yahoo! clients
include 58 of the Fortune 100 advertisers.
95 percent of the company's top 200 advertisers in 2001 continued
programs in 2002.
Yahoo! Store numbers rose to over 18,000 merchants.
Consumer and Business Services
Yahoo! now has 45 major Yahoo! Portal Solutions customers and Yahoo!'s
Portal Solutions total licensed seats to employees, customers, and business
partners now exceeds one million.
Yahoo! hosted and distributed an average of over 15 million hours of
streamed audio and video corporate events for clients in 2002.
10
Financials (1) Revenue
Major sources of revenue
– banner ad sales
– sponsorship ads
– listing fees
– transaction fees for
facilitating e-commerce
1110.2
1200.0
1000.0
717.4
800.0
588.6
600.0
400.0
203.3
200.0
67.4
0.0
Dec 97
Dec 98
Dec 99
Dec 00
Dec 01
11
Financials (2) Costs
900.0
800.0
700.0
600.0
Costs (mil)
The biggest sources of costs
include:
– Advertising and other
market-related expenses
– Compensation and
and employ-related
expenses
– Sales commissions
500.0
611.5
400.0
300.0
318.7
200.0
100.0
0.0
22.8
3.1
61.5
9.4
126.3
28.8
115.6
1996
1997
1998
1999
Cost of Goods
178.1
2000
SG&A Expense
12
Financials (3) Net Income
In 1998, made
a positive net
income first time
in its history
100.0
80.0
63.7
76.1
60.0
25.6
40.0
In 2001, turned
back into
a big negative
income but got back
(20.0)
positive
in 2002
(80.0)
20.0
0.0
(40.0)
(23.6)
(60.0)
(100.0)
(92.2)
(120.0)
13
Market Competition
Competitors
–
–
–
–
–
–
AltaVista
Amazon.com
America Online
eBay
Microsoft
Terra Lycos ….
14
Market Competition (1)
Top competitors: America Online
The world’s largest Internet access provider
Offers content, communication tools, and online
shopping
Other operations include
– Netscape (browser software)
– Digital city (online community guide)
– ICQ (instant messaging software)
15
Market Competition (2)
Top competitors: Microsoft Corporation
The #1 software company
Continuing to expand its empire
– Online services and e-commerce portal: MSN
– Travel services: Expedia
– E-commerce services: through joint venture Avanade with
Accenture
– Television station: MSNBC
– Video game console: Xbox
Microsoft is targeting web services for future growth,
especially with its .NET initiative
16
Yahoo: Strengths and Opportunities
Early mover advantages
– Large audience reach and strong brand recognition
– Source of scale and scope economies
Rich managerial resources/capabilities
– Yahoo has got a great promotional and marketing machine.
– Large pool of high-caliber people.
– Ready to change
17
Weaknesses and Threats
Web advertising is a very poor revenue generator
Fierce market competition
– Volatile market and New competitors
– Differentiation/Switching cost
Appropriability of business model
– Why do we need portal site in the first place?
Exploring acquisitions of real estate site Homestore.com and online
travel service Travelocity.com.
– If you can do it, so can I!
18
Questions & Discussions
19