Company Analysis
Nancy Leyva
Executive Summary
Financial Analysis
After reviewing financial statements that are current, as well as dating back a couple of
years, Yahoo looks to be a financially healthy company. With that said, the company does not
either have revenue that is significantly higher than competitors, nor does it fail compared to its
competitors. Yahoo has a modest place within its competitors. During a period, the company was
having its problems in the market, now; Yahoo seems to only be doing better. The company has
gone to extreme lengths in order to prove that they are making a complete turn-around and they
are coming after their competitors in the market, their increasing numbers are proof of this
challenge.
Yahoo, Inc. has increased their performance over time. The chart (Figure 1.1) shows that,
based on years 2010 to 2013, their revenue has decreased, but so has their total operating
expenses. This shows that the company is taking more precautions on where and how their
money is being spent. If Yahoo begins to come up with innovating new technologies, projects, or
campaigns that are costly they could end up spending more money than they are receiving in
profits. They have to take that in account, and I believe they have realized this and are seeing a
considerable improvement in their financial reports. Yahoo has also been repurchasing stocks
from shareholders in order to gain control. The price of stock has increased nearly 100% in a
years’ time. In December 2012 stock was sold at $19 and by December 2013, Yahoo stock had
nearly doubled in price, selling at nearly $40.
A form of gaining revenue is Yahoo’s search engine and ad services, which it is most
known for. They were able to develop non-exclusive agreements with Google in which Yahoo
would be able to serve ads that were targeted to their users (Yahoo Annual Report, 2013). Yahoo
also created Billboard Ads and Yahoo Stream Ads, which would enhance users experience in a
new way. Their ads also blend in with users’ news streams and they are unobtrusive. This
strategy helps Yahoo bring in revenue to the company.
In comparison to its’ competitors, Yahoo is becoming relatively strong. They are
maximizing the use of their employees and new talent. Thus bringing them to come up with new
products, acquisitions, mergers, and finding new ways to improve the company. Financially,
however, they are no match for Google whose revenue falls into the high millions. Google has
grown over the years. Their revenue has doubled to 59,825 million over a course of four years.
Microsoft also has a slightly higher lead in revenue compared to Google and Yahoo for the 2013
fiscal year. Microsoft has only increased their numbers across the board while Yahoo has seen
many fluctuations throughout the years. Nearly all of Yahoo’s competitors have been more
profitable over time, and it shows when they are laid out in the annual reports. The market has
valued Yahoo as a struggling search engine and advertising website. However, since the 2013
fiscal year, Yahoo has seen a large amount of improvement and I believe for 2014 they will have
been able to maintain a steady increasing incline toward the same level as their competitors.
Figure 1.1 Income Data
Years Ended December 31
Revenue
Total operating expenses
Net Income: common stockholders per share- basic
Net Income: common stockholders per share- diluted
2010
$6,324,651.00
$6,073,623.00
$0.91
$0.90
2013
$4,680,380.00
$4,090,454.00
$1.30
$1.26
Figure 1.2 Change in Financials
Yahoo
Income Statement
Revenue
Total operating expenses
Net Income
Net income attributable to Yahoo! Inc.
Balance Sheet
Assets
Total current assets
Total assets
Liabilities and Equity
Total current liabilities
Convertible notes
Total liabilities
Total Yahoo! Inc. stockholders' equity
Non controlling interests
Total equity
Total liabilities and equity
Current Year 2013 Prior Year 2012
$4,680,380.00
$4,090,454.00
$1,376,566.00
$1,366,281.00
$4,986,566.00
$44,420,198.00
$3,950,602.00
$3,945,479.00
$5,025,857.00
$16,804,959.00
$5,652,713.00
$17,103,253.00
$1,340,312.00
$1,110,585.00
$3,674,362.00
$13,074,909.00
$55,688.00
$13,130,597.00
$16,804,959.00
$1,290,232.00
$2,497,650.00
$14,560,200.00
$45,403.00
$14,605,603.00
$17,103,253.00
% Change
Internal Analysis
To understand what Yahoo excels out internally, I had to look into all its activities it has
performed. This takes into consideration primary and support activities using the value chain
analysis. With research, I was able to create a value chain chart for each respective activity with
main points underneath. Once I determined which activities fall into each category, I could see
why the company excels or is failing in a certain area or activity.
Primary Activities
Inbound
Logistics
Creating
technology,
products,
and services
to facilitate
users’
everyday
activity
Operations
Specialized
team to
execute
product
Ad services
to target to
specific user
Search
engine
optimizing
user
experience

Outbound
Logistics
Acquisitions,
mergers,
and licenses
are used to
serve Yahoo
products,
etc.
Marketing
& Sales
Nonexclusive
agreements
with Google
Sales
Vertical
Structure
Sales team
in various
U.S locations
Service
Teams
adjust to
users’ needs
Employees
are highly
trained
Selective
hiring
process
Marketing
team adjusts
to users’
needs
Inbound Logistics: Creating technology, products, and services to facilitate users’
everyday activity. Yahoo takes into consideration, and makes changes according to the
way users are evolving in their search, product, and advertising use as well as all the
other products they offer. Most of the products and services Yahoo offers are created
internally such as digital magazines, Tumblr, Flickr. Some of their services have also
been acquired or received licenses. I think it is a valuable resource to create services
internally because users feel more connected to the company. This creates more customer
loyalty to Yahoo.

Operations: Yahoo has a specialized team to execute products. They are upgrading a
variety of products. For example, in the next year they are interested in becoming a part
of the mobile platform. They realize it is important to stay up to date in order to maintain
users. They are also behind on this aspect. Many other competitors have already realized
mobile platforms.

Outbound Logistics: The way Yahoo is distributing their services is based on their own
service as well as creating technology, products, and services to facilitate users’ everyday
activity. Mainly what they are distributing is Ads and search engines. A smaller part of
what is being distributed is their digital magazines, news, and blogs, in essence,
entertainment.

Marketing & Sales: In terms of marketing, teams adjust to meet consumers’ needs. For
example, as used earlier, Yahoo has noticed that users are turning to mobile platforms for
daily activities and they are looking into marketing their products in that direction. In the
chart, you can see how this will work well for them, especially since in the past year their
users went up about half of what they had the previous year, and 400 million of them
were mobile users. They can already see a trend to predict future outcome. Sales has been
improving since Yahoo changed their sales strategy to a “sales vertical structure.” Yahoo
has internal sales individuals in various parts of the country but when it comes to
international selling they outsource the work to a local company. Outsourcing
international sales people is working quite well for them because they rarely need
anyone. However, when they start expanding into a larger international market they
should consider hiring a specialized internal sales team to work in their international
market.

Service: This activity can be expanded on in Human Resource Management activity.
There is a selective hiring process and employees are highly trained. When Yahoo
decided to change the hiring process they kept in mind that the best talent in the world
will work as a team in order to evolve their products and services, of course, while
keeping in mind the consumer.
Support Activities
Firm
Infrastructure
Human
Resource
Management
Budget
Hiring using a
rigorous
process
Re-purchase of
stock
Megan
Liberman
2013 New CEO
Mobile
Internally
developed
Technology
Development
Procurement
Acquisition,
mergers
Team of
talented
individuals
Katie Couric

Firm Infrastructure: At the beginning of 2013, Yahoo hired a new CEO, Marissa Mayer.
Since she joined Yahoo, there has been a turnaround of the company. They are currently
doing better and financially, they are stable and will show improvement from now on.
Yahoo is keeping in mind their budget. They are preventing themselves from spending
more money than what they earn in profit, otherwise they will fall into old habits. Yahoo
is also repurchasing stock.

Human Resource Management: As mentioned in Service from primary activity, Yahoo is
now using a rigorous hiring process in order to scout the best talent there is and create
teams that are well suited for the company. The amount of applicants has increased since
the year 2012. Nearly all of the 2013 hires had technical backgrounds. Users of Yahoo
are beginning to take notice of their improvement and turnaround of the company and
more people want to take the opportunity to work for them. Yahoo has hired Katie Couric
to take over as their in-house Global Anchor and Megan Liberman, from the New York
Times, is in charge of Yahoo News. Well known celebrities and talented individuals are
going to give Yahoo an advantage over their competitors in the future.

Technology Development: Yahoo is entering the mobile market and they got a taste of
what it is like in 2013. They improved in the amount of visitors they had monthly. Half of
their monthly users came from mobile access. Mobile network is their main priority and
they focus on this technology first. All of their technology and services are developed
internally. This strategy allows them to tweak and edit their products in order to better
serve their users.

Procurement: In order to complete the activities of Ad services, search engines, digital
magazines and so on, Yahoo has acquired companies and services, signed licenses, and
developed internally. All of those have helped Yahoo get their services and products to
the consumer. Yahoo expects to acquire and make more investments later on.
External Analysis
General environment factors are part of the external analysis. Yahoo has to take in to
consideration all of the factors in order to determine the best way to approach all users.
Demographics are an issue because they are dealing with a new generation of users as well as
existing users who are older. This means Yahoo must find a way to target both generations. In
economic environment Yahoo should consider the unemployment rate as a factor of people who
cannot afford using the Internet which means they cannot use Yahoo or any other websites
similar to this company
The competitive market is changing and upgrading to user friendly technology. In recent
years most competitors have developed their technologies and services to be suited for mobile
optimization. Yahoo is struggling with this market because they currently don’t have outstanding
mobile services and they are trying to develop a team to be in charge of that process.
In order to touch base on all the main points for an external analysis, Porter’s Five Forces
works best. Porter’s analysis is useful in determining what is the risk of having new entrants
enter the marketplace, where and with whom supplier and buyer power lies, if the firm has a
possible risk of having their products and technologies substituted by other competitors, and
where the firm lies in terms of competitive rivalry in the marketplace. These forces will take in
account the external and internal environment in which Yahoo is presently found.
Porter’s Five Forces Model
1. Threat of New Entry- Low
Entering the market of online services is typically moderate. If someone has the
capability to come up with a unique service, money, and a talented team, they can easily
enter the market. However, this takes time and dedication. Until then, the threat of new
competitors to enter the market is low. There is no technology protection when it comes
to the online search, communication and entertainment market. Technology is fairly easy
to imitate or improve to fit the style of the competitors company. New entrants need
experience to enter this market place, but with significant training it is approachable.
There is little product differentiation among existing and new entrants. The products and
services offered are nearly the same with the exception of unique approaches to an
existing service.
2. Buyer Power- Low
There are a high number of customers in this market. There is a mass amount of online
users at a time. There is little difference between competitors, as mentioned in Threat of
New Entry part; the differentiation among competitors is minimal. When the firms’
create a unique approach to an existing service or product that is when there is a
noticeable difference between these competitors. Buyers have the ability to substitute
these products and they will usually find that switching will be at a small cost.
3. Supplier Power- High
Original services are available in some occasions. For example, Yahoo has a web service
called Tumblr in which people who use it can share content as well as create original
work. An example of the possible content users can share includes videos, picture, text
and they can “follow” what they most like using keywords in a search engine. Suppliers
have the capability of offering special technology to improve an existing service the
buyer offers. Yahoo acquired Xobni in order to improve Yahoo’s current e-mail service.
The acquisition served as an improvement of the existing mail service in order to give
users an ease of maneuvering the service and made communication easier. There are few
supplier choices among this specific market. Usually firms in this market end up having
agreements with competitors in order to have, in simplest terms, a trade-off. They use
each other’s services in order to promote one another. Yahoo is also currently looking
into expanding into the mobile market and they will have to rely on suppliers in order to
provide services they need to get started. This shows how supplier power is high
especially when expanding into a new service.
4. Threat of Substitution- High
A large amount of substitute products and service alternatives exist among Yahoo’s
competitors. There is little to no cost for substitution. Yahoo Search can be substituted for
Google or AOL search engines. Flickr can be substituted for Google’s Picasa although,
Flickr could retain many users due to its terabyte free memory, which stores an enormous
amount of pictures. Tumblr is a unique service that I find hard to substitute. It’s not quite
a Facebook-esque social media site; rather, it is a service in which users have the ability
to express themselves with images, videos, text, or by “re-blogging”. Essentially Tumblr
is a blog that anyone and everyone can edit. Yahoo has one thing that their competitors
cannot replicate. Yahoo has done vigorous interviews with potential employees in order
to make sure they will indeed have a group of talent that will go to great lengths in order
to make users happy. Yahoo is investing in their people, and I think that this past fiscal
year, 2013, really shows how they are improving in their talent search.
5. Competitive Rivalry- High
There are a handful amount of competitors in the US but when it comes to comparing
worldwide, Yahoo has a greater amount of competitors. There is a large amount of search
engines available to users and firms must compete for more customer loyalty. Low
switching costs are faced within the market when users are looking to switch providers.
There are exclusive product offerings among each competitor. Yahoo offers different
services and is also well known for their Finance page. They are one of the few or only
sites that offers a financial page that gives stock updates as well as company information.
The finance page is very useful to users who currently own or trade stock. In another
sense, which Yahoo probably didn’t have this in mind, the page is a great tool to use for
students at a higher education institution. Students have projects and reports in which
they must research about companies or financial reports of firms and it is fairly easy to
use. The cost of leaving the market is high because of all the revenue that will be lost and
all the people it can affect.
Yahoo’s Strategy and Competitors’ Strategies
Yahoo’s focal strategy is to engage and obtain more users, specifically in the mobile
platform area. They launched a new mobile version of their services in the third quarter of 2013
and have seen significant improvement regarding consumer usage. Their main priority is to focus
on mobile and move on the strategy accordingly. It is a smart move Yahoo is making because
currently there is a different demographic of online users. A different generation is using mobile
platforms and online services, than 10 years ago.
Online technologies are also becoming more global
Users 2012
and Yahoo wants to keep up with this change. They
have noticed significant changes after launching their
Mobile
25%
mobile strategy. Users have increased by 150 million
through mobile than in the previous year.
Computer
75%
Users 2013
Based on the external and internal
analysis, my conclusion is that mobile is most
definitely their focal point. Since Marissa Mayer
Computer
50%
Mobile
50%
has joined the Yahoo team as CEO, she has
completely transformed the company and made
it more modern. Financial data confirms that
there is slight change, for the better. There is no
longer radical spending on unnecessary items or programs and they have made budgets for the
company in order to lessen spending and keep from using more money than what they have in
revenue and profit. Under Mayer’s control, Yahoo has been able to expand into a younger
generation of users by acquiring Tumblr in the third quarter of 2013.
Yahoo has chosen their respective strategy because they have realized they need to take
in account users wants, needs, and how to satisfy them in those aspects. Mayer coming on board
with Yahoo was the perfect decision for the company because she knows how to interact and
acknowledge these consumers’ needs. An advantage Yahoo’s strategy would be that their user
base will increase to very high numbers, catching up with or surpassing their competitors’
monthly users. Disadvantages of the strategy are that they could get too caught up in mobile
platform that they forget about what else could be working and evolving in their favor. If they
lose sight of their mission of making users lives easier and more entertaining with their services,
it will be easy for them to fall back into their old patterns and become forgotten once again.
Google has more competition than Yahoo, I believe, because they have more products
and services. Their services are more tangible such as cell phones and therefore their competition
has expanded into other industries. Google’s main strategy is to come up with the most popular
item that will strike the attention of consumers world-wide. Google is a very diverse and global
company and they have a reach that most of its competitors will try desperately to reach. Google
has created many services and technologies:

Consumer content and platforms: Google Play, Android, Chromebook, Chromecast,
Google Drive, Google Wallet

Motorola: cell phones, wireless devices and services related

Advertising: AdSense, search engines
Mainly Google chose their strategy because they want to stay ahead of the game. They are
innovators and have achieved much with their strategy. Many of their products and services
seem to be unexpected, for example Google Wallet, is a new way to “bank.” Their uniqueness is
a challenging match for Yahoo and other competitors in the industry. Google’s disadvantages for
their chosen strategy are that they may create too many services and products that they may get
lost in all of them and not have the time to really evolve any of them to their fullest potential.
That is when they will lose a lot of money. Advantages for Google include having a broader
consumer and market base. They will be able to expand in to multiple markets and excel in them.
Firm
Strategy
Reason
Advantages and
Disadvantages
Yahoo
Maintain and grow
To keep up with newer A - increase in users
mobile platform
generation of users
D- Forget about other
services
Google
Creating unique
Keep ahead of
A – larger consumer
services and products
competitors
and market base
D- Too many products
and services. Forget
about others.
Recommendations
After researching, outlining Yahoo’s internal analysis using data analysis, external
environments with SWOT analysis and identifying the firms’ strategy and its main competitors
strategies, I have come up with my own views and recommendations on what the company
should pursue in the future in order to excel further in their endeavors. These recommendations
will be outlined and choose the one that would suit Yahoo best.
1. Yahoo should form a strategic alliance (joint venture) with one of its competitors. A joint
venture with Microsoft would benefit Yahoo because they are one of the top leaders in
the industry and one of Google’s most well-known competitors. If both companies would
create an alliance they would give Google a good run for their money and they would
also share risks, opportunities and knowledge.
2. Yahoo should continue with their current strategy under Marissa Mayer’s supervision.
The new CEO has made significant changes and they have shown progress throughout
2013s fiscal year. She knows what to look for in terms of company opportunities. Yahoo
has put in place a rigorous hiring process that brings in top talent to the company. It has
only been a year Mayer has been a part of the company, but if she has turned the
company around in that short amount of time, who knows what she is capable of in a
span of 5 years.
My recommended strategy would be that Yahoo form a strategic alliance with Microsoft. With
their turnaround in the year 2013 they could bring their knowledge and combine it with
Microsoft’s exceptional company management.
References