Under Verizon, will Yahoo become irrelevant?

Written by on September 27, 2016 in Guest Blog with 0 Comments
REUTERS/Zoran Milich

REUTERS/Zoran Milich

With Verizon, Yahoo likely to become irrelevant. Verizon is embarking on building an ecosystem but second rate assets are unlikely to get Verizon very far without inspirational management to make these assets shine. On top of the $3bn it is paying for Yahoo’s core business, Verizon also appears to be in advanced discussions to purchase a video streaming start-up called Vessel.

This would take Verizon / Yahoo’s coverage of Digital Life to 51% putting it ahead of many of its competitors.

  • However, Digital Life is only a measure of whether an ecosystem has the right assets and makes no measure of quality or execution.
  • This is addressed with RFM’s 7 Laws of Robotics and it is on these measures that Yahoo falls over.
  • The problem at Yahoo is simple.
  • While it has good assets and good traction in the fixed Internet, it has been unable to migrate any of that traction into mobile.
  • Yahoo claims to have over 600m monthly active users on mobile and I suspect that almost all of these only use Yahoo Mail on the phones and nothing else.
  • Yahoo has invested large sums of money in digital assets during Marissa Mayer’s tenure but high management turnover combined with very poor execution has meant a very poor return for investors.
  • For example, RFM calculates that Yahoo has been able to monetise just 12% of the opportunity presented by the assets that it owns (see here).
  • The challenge for Verizon is to take these assets, add them to the others that it already owns and to create a thriving community on mobile devices.
  • Verizon has two big problems.
    • First: Second rate assets.
    • The assets that it has purchased are second rate in the eyes of users who prefer the services of Google and Facebook.
    • This means that Verizon has a lot of work to do to make these assets more appealing as well as ensure that they work well on both mobile and fixed.
    • Second: Bench strength
    • Yahoo’s management has shown that it is unable to execute meaning that it is up to Verizon’s team to turn the Yahoo assets around.
    • Unfortunately, I suspect that Verizon’s history as a provider of packets and capacity, means that it lacks the bench strength to make this acquisition deliver any of the potential that it offers.
  • Hence, I fear that the net result will be that Yahoo becomes increasingly obscure as more and more of the user’s Digital Life moves from the PC onto mobile.
  • Yahoo continues to offer an irrelevant challenge to Google, Facebook, Apple or even Microsoft each of whom are cementing their position in the digital ecosystems of life and work.
  • Of these I prefer Samsung, Microsoft and Baidu although Apple looks very attractive for a long term investor happy with the dividends and share buy backs.

This article was first published on RadioFreeMobile.

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About the Author

About the Author: Dr Richard Windsor is the founder of Radio Free Mobile which is an independent research provider. The research helps clients to understand and evaluate the players in the digital ecosystem and presents a unique perspective on how all the pieces fit together in an easy to read and digest way. The product is available on a subscription basis and counts members of the handset, telecom carrier, Internet, semiconductor and financial industries as its subscribers. RFM is the land of the one man band meaning that Dr. W. also makes the tea. .


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