Yahoo business model case study

1

Case Study #23:

Is Yahoo!’s Business Model Working in 2011 and Today?

BUS 189 - Prof. Larry Gee

Team # 5 - The A+ Students Aimee Gohil - # 7260

Sean Luis - # 0283 PM - Karin Proven - # 7884

Krysta Sumabat - # 2199

Friday, December 4 2015

2

Table of Contents Appendix 1: History, Development, and Growth ……….………………………………………. 3 Appendix 2: Internal Strengths and Weakness ….………………………………………………. 8 Appendix 3: Nature of External Environment …..……………………………………………... 11 Appendix 4: SWOT Analysis…………….………….…………………………………………. 12 Appendix 5: Corporate-Level Strategy ...………………………………………………………. 18 Appendix 6: Business- Level Strategy …………………………………………………………. 20 Appendix 7: Company Structure and Control Systems………...………………………………. 22 Appendix 8: Recommendations...………………………………………………………………. 24 Case Question 1 ……….………………………………………………………….…….……… 25 Case Question 2 ……….………………………………………………………………..……… 29 Case Question 3 ………………………………………………………………………..………. 32 Case Question 4 ……………………………………………………………………….….……. 36 Conclusion …………………………………………………………………………….….……. 38 Bibliography………………………………….………………….……………………….….…. 40

3 Appendix 1: The History, Development, and Growth

Yahoo! is a global technology company best known and recognized for their search

engine, web portals, email services, and similar technologies. Yahoo! is currently working hard

to stand out from competitors by executing several strategies, including corporate level strategies

such as acquisitions, horizontal and vertical integration. It is clear with the struggles Yahoo! has

faced over the past 7 years that they need to regain market share, expand their demographics,

improve innovation, and build brand loyalty to be profitable. The company’s past strategy of

acquisitions has been costly and has not produced the desired result.

Yahoo! was founded by David Filo and Jerry Yang and the company is based in the heart

of the Silicon Valley in Sunnyvale, California. (McCullough) In 1994, David and Jerry were

graduate students at Stanford University, studying to obtain their Ph.D. in Electrical

Engineering. The World Wide Web was a tool they used, but the user experience left them

extremely frustrated. Thousands of pages would appear which were random and unorganized,

making the tool overly cumbersome and difficult to use effectively. Realizing there was a better

way to organize the information, the pair found a way to manage all these websites by specific

content. What David and Jerry provided was a hierarchically organized index compared to an

index of pages. They named this organized hierarchy “David and Jerry’s Guide to The World

Wide Web” and published it in 1994.

Initially their site was used mainly by their friends and for their own personal

use. However, over time, more and more people came across the time saving website, spreading

the word about “David and Jerry’s Guide to The World Wide Web.” The attention pushed the

once personal organization space into the realm of a viral website. As the number of visitors

4 consistently increased, David and Jerry realized they had a valuable and unique commodity on

their hands. Both graduate students decided to put aside their studies at Stanford in order to focus

on their search engine and build the business. They renamed their website and company to

Yahoo! and it was incorporated in 1995. Yahoo! became the first published web portal.

The team was then joined by the first CEO, Tim Koogle, who worked vigorously in order

to develop the initial business strategies. After recruiting many people in the marketing and

software engineering departments, Yahoo! grew a competent team to accomplish their new

strategies. One of the company’s strategies was to attract and retain various consumers and to

become more than just a search engine. With this goal in mind, Yahoo!’s team created the

following portals: personal, government, cultural, corporate, stock, and internet shopping

portals. Yahoo! benefitted from each of these portals in different ways. The internet or

e-commerce portal brought in revenue through implementation of user (seller and buyer)

transaction fees. In 1996, one year after being incorporated, the company had revenue of $21.5

million. In 1998, after Koogle’s implementation of the new business strategy and model, the

revenue had grown to $203 million. (Hill and Jones)

Over the years, Yahoo! wanted to become a “mega brand” for all online users. (Hill and

Jones) Management put a huge focus on adding more content, which led to adding Rocketmail,

Geocities, Broadcast.com, instant messaging, dating sites, and more retail sites. Furthermore, an

extremely important factor of the new business strategy was the use of a customization

feature. When having a customized website, customers’ needs and wants are specifically

addressed. It’s an understood phenomenon called “switching costs” that prevents customers

from moving to new providers. When people invest time into customizing their profile with

Yahoo!, then it is less likely they will go elsewhere for the same information, unless someone

5 else created a killer application. Attracting people with the option for customization was

successful. We see this success in the early 2000’s when the company’s market value was

approximately $220 billion, with about 15 million visitors a day. (Hill and Jones) In 2015

however, due to no longer being in the dot-com era, increased competition, and other companies

such as Google and Facebook who were offering killer applications, Yahoo!’s market value has

decreased to about $33.02 billion. (Yahoo Finance)

Yahoo’s execute team saw several changes since it originated, including two interim

CEOs Tim Morse (2011-2012) and Ross Levinsohn (2012). Carol Bartz, Yahoo!’s CEO from

2009-2011, had the arduous task to recover from a steep decline Yahoo! experienced in 2008.

(See Figure 1). Bartz had

begun to cut costs and

worked to improve margins.

It was stated Bartz changed

the “organizational

structure, replaced executives

and cut 5% of the workforce.” (Oreskovic) By looking at Yahoo!’s revenue statement, it is

apparent that Bartz’s attempts to turn a profit were unsuccessful as Yahoo! still saw a steep

decline all the way until 2011.

Scott Thompson took the helm in 2012, after the interim CEO Tim Morse returned to his

position as the company’s Chief Financial Officer. Thompson was Yahoo!’s CEO for less than a

year, yet he implemented the filing of 10 patent infringement lawsuits against Facebook resulting

in a partnership between the pair for new advertising. (Yousouf) After a resume scandal

involving Thompson, he was fired from Yahoo! only four months after being hired. (Pepitone) In

Figure 1 Gale Business Insights: Essentials 2015 gale Company Intelligence Database 2015 www.businessinsider.com

6 2012, Yahoo! brought Marissa Mayer, an ex-Google executive, to the team to help Yahoo!

define their vision and stay current in the dynamic environment. Yahoo! showed 700 million

users per month, but the company still struggled with generating revenue. (Perlroth) Since 2012

Marissa Mayer is the youngest person to ever be a CEO of a fortune 500 company. (Leahey) The

mission statement used to be “To be the most essential Global Internet Service for consumers

and businesses.” This has been updated in their 24th revised mission statement that states

Yahoo! is a guide focused on making users’ digital habits inspiring and entertaining.” (Le Ray)

Yahoo has made many notorious acquisitions and has received the reputation that it “kills

startups”. (Pepitone) The World Public Library shows Yahoo! has acquired nearly 90 different

companies globally since 1997. Per CNN Money, some of the notable acquisitions include

Broadcast.com which was acquired in April 1999 for $5.7 billion and GeoCities for $3.6 billion.

Both were deemed unsuccessful with a hefty price tag (Pepitone).

In 2003, under Terry Semel’s leadership, Yahoo! acquired Overture Services for $1.63

billion. SEC records state Overture Services, Inc. was an online advertising service that provided

a “Pay-For-Performance” search which is the main area of Yahoo!’s generated revenue.

Yahoo!’s revenues show that this expensive acquisition was a success because revenue continued

to climb for four more years (See Figure 1). The spending continued under Semel. In July of

2004, Yahoo! acquired Oddpost to improve Yahoo!’s expertise in email services. The cost of the

acquisition was $30 million.

In 2012, under Marissa Mayer’s leadership, Yahoo! acquired Stamped. The Wall Street

Journal stated Stamped was a mobile application company. This acquisition was right in line

toward improving Yahoo!’s mobile realm. In 2013, Mayer also implemented the acquisition of

Tumblr for $1.1 billion which included the acquisition of Tumblr’s founder, David Karp, as well.

7 This strategic move is seen more to obtain the talents of Karp over what Tumbler and their users

have to offer. (O’Donnell) Most recently in July 2015, Yahoo! has acquired Polyvore, a leader in

social shopping. This acquisition is intended to improve “consumer and advertising offerings”.

(Business Wire)

Looking over Yahoo!’s history, we conclude this is a business in constant flux. There has

been a revolving door of leadership and ideas that clearly has an impact on the company’s health,

productivity and profitability. Most acquisitions should have a positive impact on the bottom line

for a business, but it appears Yahoo! is still unable to effectively utilize this realm. While Mayer

has made strides in slowing the decline and leveling off revenues, it’s clear Yahoo! needs to

make headway to compete in the dynamic environment.

8 Appendix 2: Identification of Company’s Internal Strengths and Weaknesses Strengths

One of Yahoo!’s key strengths is their competitive advantage provided by their

increasing user base. Within recent years, Yahoo! has made numerous acquisitions ranging from

small startups, such as Summly, to popular websites, such as Polyvore and Tumblr. According to

forbes.com, Tumblr is one of Yahoo!’s best acquisitions to date, not only for the number of users

but also for its founder, David Karp. (O’Donnell) Through acquisitions, Yahoo! has been able to

not only increase their user traffic, but also expand their demographics to bloggers, photo

enthusiasts, the younger generation, and Millennials.

Another strength Yahoo! is focusing its attention on is the mobile aspect of their

company. They have made great strides in the industry by establishing a mobile presence

through their inorganic growth strategy. Part of the strategy is to acquire smaller companies with

engineering talent and mobile computing specialists, such as Stamped. (Efrati) By doing this,

Yahoo! has been able to broaden and strengthen their expertise in the mobile segment as the

usage of mobile devices such as smartphones and tablets continues to increase.

Weaknesses

While several of the acquisitions stated in “Strengths” have improved Yahoo!’s ability to

compete in the dynamic market, some of the acquisitions have taken billions from the bottom

line, hurting Yahoo!’s overall performance. Costly acquisitions, such as Broadcast.com and

GeoCities have been shut down and the funds used have no return on invested capital. These

9 acquisitions hurt Yahoo!’s overall profit margin. It is clear Yahoo! is relatively weak compared

to its peers when comparing revenues of rival companies. While their competitors, such as

Google and Microsoft, have been increasing their revenues at a quick pace, Yahoo! is unable to

register growth (See Figure 2). The disparity between revenues highlights Yahoo!’s competitive

disadvantage. This disadvantage has led to sluggish revenues.

Yahoo!’s small footprint in

the social media and social

networking segments is also a

weakness. Although the company

acquired Flickr and Tumblr to

develop a greater presence in the

social networking segment, they lack

significant presence compared to

their peers, Facebook and Google.

Figure 3 shows social login

preferences for Facebook was 45%

and Google was 35% while Yahoo!

trailing far behind with only 7%. This

discrepancy is very detrimental to

Yahoo!’s future success and needs to be corrected to achieve profit.

Figure 3- Source: Olson, Michael. "Social Login Trends Across the Web for Q4 2014." Janrain. 2 Jan 2014. Web. 3 Nov 015

Figure 2- Source: Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015

10

Yahoo! also needs to have stability in leadership. There have been seven (7) Chief

Executive Officers leading Yahoo! over the past decade, including two interim leaders, both in

2012. This constant change and shift leads to instability and a lack in confidence from

consumers. Having an executive team that can build consumer confidence will help Yahoo! to

achieve their goals.

11 Appendix 3: The nature of the external environment surrounding the company

The external environment of Yahoo! is highly competitive with several opportunities and

threats that exist in this environment that surrounds Yahoo!. An opportunity that Yahoo! can take

advantage of is making business deals at regular intervals to improve their business. By doing

this, Yahoo! can designate a revenue sharing agreement that benefits them both.

A second emerging opportunity for Yahoo! is the strong growth in display advertising

and mobile ad spending. Advertisers in the United States are expected to spend on various

display ad formats served to desktops and laptops as well as mobile phones, tablets, and other

devices. The rising spend will enable Yahoo! to boost their revenues. As Yahoo! continues to

deliver products that cater to this market, they will be able to enjoy benefits from the positive

trends in the industry.

For external threats, Yahoo! is competing with social platforms that are major players in

the industry. Facebook, for example, although is not the fastest growing social networking site, is

gaining the highest number of visits. It has the potential to emerge as a medium that is cost

effective for advertisers and has been proven to have the potential to emerge as an effective tool

to reach audiences. Yahoo! suffers against better-performing social networking platforms in

terms of user time, engagement, and advertiser interest.

Another threat is the existence of stringent regulations. No matter the level of business,

governments impose regulations and restrictions on companies and Yahoo is no exception. When

the government passes new laws or makes changes, normal business processes can be affected,

which can lead to legal ramifications, including fines and fees.

12 Appendix 4: A SWOT analysis

After evaluating Yahoo!, we identified strengths that give them a competitive advantage

in their industry. Ever since being appointed CEO of the company in 2012, Marissa Mayer has

implemented changes that have made a positive impact and has allowed Yahoo! to gain some

leverage.

Firstly, as previously mentioned, Yahoo! enjoys a strong customer base as well as a

significant reach. Various acquisitions contributed greatly to this. For instance, the acquisition of

Flickr in 2005 allowed Yahoo to gain an entire online community of photo researchers and

enthusiasts all around the world. Another example is the acquisition of the blogging site, Tumblr,

which was made in 2013. Prior to this acquisition, Yahoo! had a total amount of 800 million

monthly active users. Tumblr, which continues to grow faster than any other social network,

increased Yahoo!’s monthly active user base to over 1 billion. (Garner)

Also contributing to Yahoo!’s increased user base was the company’s launch of the

refreshed Yahoo! Mail application for mobile phones and tablets. Since the launch, the

application alone increased Yahoo! Mail’s daily active users to 110 million users globally, which

is an increase of more than 120%. (Nieva)

Secondly, Yahoo! has implemented the inorganic growth strategy to keep up with the

continued growth of mobile usage all around the world. Out of Yahoo!’s 1 billion users, 575

million of them are active on mobile. (Smith) These numbers go to show just how important it is

for Yahoo! to keep their mobile segment strong. Part of their inorganic growth strategy is to

acquire smaller companies with engineering talent and mobile computing specialists. Over the

last 2 years, Yahoo! purchased more than 37 companies, allowing them to become more

13 diversified and advanced in the fields of applications, mobile phones, and tablets, which are

areas they had been lagging in compared to their peers.

Yahoo!’s strengths allow them to stay in the fight against their competitors, but they

possess weaknesses that prevent them from being more successful. One weakness is Yahoo!’s

relatively poor performance compared to their peers. As shown in Figure 4, Yahoo! displays

stagnant growth rates compared to Google and Microsoft, who have increasing revenues.

Yahoo!’s revenues declined by 1.3% in fiscal year 2014 compared to fiscal year 2013. Google,

on the other hand, had a revenue increase of 18.9%. Further, Facebook’s revenue grew by 58%

during the same period.

Another weakness, as mentioned

earlier, is Yahoo!’s limited presence in

social media and networking. They have

always struggled to compete with their

peers in this segment, and therefore have

made various attempts to make a name for

themselves. For example, in 2005, Yahoo! announced Yahoo! 360º, a personal communication

portal that enabled users to create personal web sites, share photos, and maintain blogs. After just

2 years of operation, global visits to the 360º site dropped significantly. It never gained

popularity in the United States, so Yahoo! decided to stop providing support for it. By 2009, the

entire service was officially closed. During its 4 years of existence, it remained in its beta stage.

The ideology behind this move was for Yahoo! to find ways to better-improve the service and

help it to become more popular, but they were never successful. Today, Yahoo! still struggles to

Figure 4- Source:Gale Business Insights: Essentials 2015 Gale Company Intelligence Database 2015

14 find solutions that enables them to closely compete with Facebook and Google, who currently

hold the leadership positions.

Through the acquisition of Flickr and Tumblr, Yahoo! was able to expand their presence

in the social networking segment. As shown above in Figure 3 (pg 9), they still sit far behind the

leaders, Google and Facebook, with only 7% market share compared to Google’s 35% and

Facebook’s 45%. Video sharing is another part of the social segment that Yahoo! lacks. In the

past, they announced plans of video sharing platforms similar to YouTube, but they have yet to

mark their presence in this segment. Lack of presence in these areas puts Yahoo! at a

disadvantage compared to their competitors.

Although Yahoo!’s weaknesses make it difficult for them to compete, there are still

various opportunities that allow them to improve. One of these opportunities exists in their recent

restructured partnership with Microsoft. In April 2015, the two companies made a new search

deal that extends until 2020. According to Yahoo!’s Corporation Information page on

Yahoo.com, the deal established a transformative relationship between the two companies where

Microsoft exclusively provided paid and algorithmic search services on PC to Yahoo!. In this

agreement, Microsoft pays Yahoo! a percentage of Bing Ads revenue delivered from Yahoo!

searches. With the extension, Yahoo! is given the flexibility to improve the user search

experience on both desktop and mobile devices. This agreement doesn’t limit Yahoo! because

they still have the ability to use other back-end search providers, such as Google or Ask.

A second opportunity Yahoo! can take advantage of is the positive trend in smart device

usage. According to global statistics, smartphone shipment volume is expected to reach 1,733.9

million units by 2017. This represents a compound annual growth rate of 14% from the period of

15 2014 through 2017. By 2017, tablets and smartphones are expected to account for 87% of the

overall smart connected devices around the world. (“Phablets Will Start”)

Recently, it has been noted that Yahoo! has emphasized great focus in the mobile

segment of their company. As previously mentioned, they introduced a new version of their mail

product to capitalize on this growing trend. The new mail product was released across four

platforms including desktop, iOS, Android, and Windows 8. In May of this year, Yahoo!

released numerous updates to Flickr introducing additional intelligent tool features that are more

user friendly, making it easier to access, organize, find, and share photos and videos across

devices. Yahoo! is positioned to

benefit from their strong focus on

introducing products catered

specifically for smart devices.

It’s important to acknowledge

advertising spending is still on the rise,

and this is a revenue generator for Yahoo!. Figure 5 reveals that there has been positive

momentum in the amount of advertising spent by companies and is expected to continue

throughout 2018. The spending growth is an opportunity for Yahoo! to generate a big portion of

revenues from display and mobile advertisements. According to industry estimates, worldwide

mobile advertising generated $18 billion in 2014 compared to $13.1 billion in 2013. (Yakowicz)

The increase was primarily due to the growth in smartphone and tablet usage. With the influx of

spending, the mobile advertising space would be a key growth/opportunity area for Yahoo!.

One last opportunity to mention is the increase in search queries. Figure 6 shows the

constant upward trend of Internet users worldwide, reaching 3 billion users in 2014. Currently,

Figure 5 Source: "Total US Ad Spending to See Largest Increase Since 2004 - EMarketer." Total US Ad Spending to See Largest Increase Since 2004 - EMarketer. Web. 1 Nov. 2015

16 there are 3.2 billion users, and by 2021, the industry estimates there to be 3.8 billion users

worldwide. An increase in internet users leads to an increase in the amount of internet searches.

This means that search queries on Yahoo! properties are also expected to increase. Yahoo!’s

initiative to improve its

content will enhance user

experience, resulting in

greater market share in years

to come.

Reviewing the

struggles Yahoo! has faced since its inception, it’s clear to see

there are many threats in this segment of industry. There are

several things Yahoo! executives who are forming strategies

must be aware of for them to succeed. It is important to

remember, Yahoo! is a content portal and competing with

social platforms already offered by industry leaders

is very difficult but vital. While the social network

market is rapidly growing, Facebook is gaining the majority of the visits. As shown in Figure 7,

the total amount of current social network users is 179.7 million users. Of that amount, 156.5

million of them are Facebook users. (Fleischmann) Although Yahoo! did acquire Tumblr, they

still sit far behind with 19.1 million users. Tumblr has not made a huge impact in the social

networking segment and the platform did not offer a high barrier to entry for competitors

because its model can be easily replicated. Tumblr has a very small spread of demographics,

Figure 6 - Source: "Internet Users" Number of (2015). Web. 3 Nov 2015

Figure 7- Source: "Infographic: Who's Really Using Facebook, Twitter, Pinterest, Tumblr and Instagram in 2015"

17 attracting mainly the youth and young adults and having absolutely no presence in the senior

community. Facebook, who is the leader, is gaining much more share visits than any other social

networking site, making it difficult for Yahoo! to compete.

Another threat is government regulations. Yahoo! is subject to numerous laws, which can

and often do, vary from state to state or country to country. There are different federal, state, and

international laws regarding privacy and protection of user data that Yahoo! is required to

comply with. Yahoo! has already established their methods and procedures on how to run their

business, so when new laws are put into place, it forces them to adjust, which can lead to

expensive future compliance costs. Changes in practices can also impact business and hamper

user engagement, putting the company at a big risk.

Examining Yahoo!’s SWOT analysis, we believe that although Yahoo! is competing in

an industry with fierce competition, they still have a fighting chance and they have not

completely lost the battle. As long as they capitalize on their strengths and take the opportunities

presented to them, they can overpower many of the weaknesses they possess and challenge the

threats that they encounter. While Yahoo! may have extreme difficulty surpassing their powerful

peers, they still have plenty of room to grow and become a more ferocious contender in their

industry.

Appendix 5: The kind of corporate-level strategy that the company is pursuing.

Corporate level strategies focus on how to maximize the long run profitability. Some of the

corporate level strategies we have seen Yahoo! implement are acquisitions, horizontal integration

18 and vertical integration. In the early years of the growth, we saw a large number of acquisitions.

Between its start and 2008, Yahoo! acquired or merged with over 50 companies. Today we are

seeing horizontal integration with the example of Katie Couric being added to Yahoo!’s news

team. Katie Couric became Yahoo!’s “Global Anchor” in 2014 with the strategic hope she’d

expand Yahoo!’s market shares and build credibility to Yahoo! news.

Mayer’s vertical integration strategy can be seen by the many brand extensions Yahoo! has

experienced. This included Yahoo! Magazines, which derived from the acquisition of Tumblr.

Looking at the home page we also see Yahoo! Advertising which ties all of the platforms

together to make a more uniform and united feel for the user. Users are also able to now use the

Smart TV app which links a user’s Yahoo! content to their own TV.

Under Mayer’s leadership, Yahoo! has also implemented the strategy to hire talented people.

Previously, Yahoo! hired more and more individuals to their team to develop ideas and products

instead of ensuring employees provided knowledge capital. Morgan Stanley Research noted

Yahoo!’s revenue per employee was $369,451 compared to Google’s $1,231,362. The median

revenue was noted to be $539,717 which Yahoo! is still attempting to reach. Mayer is working to

acquire talent as noted in Business Insider’s article from March 2014. The article stated when

Mayer was hired in 2012, there were only 40 mobile engineers. Today Yahoo! has nearly 400

mobile engineers to address the vast opportunities in the mobile realm. The article continues to

explain that 400 million users of Yahoo!’s 800 million users are mobile users. The impact from

mobile is profound and clear.

We have also noted that Yahoo! has used the strategy of strategic alliances. We see this

in relation to their improved relationship with Microsoft and the Bing search engine. The

relationship Yahoo! has with Google and Facebook are further examples of how Yahoo! is

19 attempting to implement this strategy. Instead of alienating themselves, Yahoo! is working to be

a bigger part of the industry.

On the negative side of the spectrum, Yahoo! announced the sale of their Alibaba stake.

Alibaba has helped Yahoo!’s struggling revenue, so it’s uncertain how this sale will impact the

bottom line. It should be noted with this sale that Yahoo! may face hefty tax penalties that could

potentially have a negative impact on it’s already struggling finances. All of these shifts cause

volatility for Yahoo! and its stock price, as well as, damaging the confidence of current and

potential shareholders. The executive team needs to really stay focused on using their strategies

to get traction in the market.

Appendix 6: The nature of the company’s business-level strategy

20

Yahoo!’s business level strategy currently in effect under Marissa Mayer’s leadership is

to gain market share. In 2014, Yahoo! appeared to hold the 2nd place position far behind Google

in search engine providers. Per the Market Share Reporter, it stated Google had 75% of the

market share while Yahoo! only had 12%. This is a huge disparity between the leading provider

and Yahoo!. The discrepancy between Google and Yahoo! is even more pronounced when we

review financial statements. As Figure 8 from Yahoo.finance.com shows, Yahoo!’s profit margin

is less than 5% and Google enjoys a profit margin of nearly 23%. The return on assets for

Google is healthy with over 8.5% compared to Yahoo!’s meager .04%. This number is

concerning because it represents

how effectively management is

utilizing a company’s assets. It’s

clear that Yahoo! is

underperforming and the assets

Yahoo! holds are not being used

to their full potential. It was

believed once Mayer joined the

leadership role, Yahoo! would

experience a great turn around. In contrast, it appears Yahoo! still struggles to find its new

identity in the market.

To offset the expenses Yahoo! will need to determine how to utilize their assets more

effectively and increase market share to regain strength and improve the balance sheet. To do

this, Yahoo! is redesigning the company’s website, improving content, and focusing on attracting

a younger generation of users through acquisitions such as Tumblr and Flickr. Yahoo!’s leaders

Figure 8- Source: Yahoo.finance.com

21 believe that the more Yahoo! is able to integrate into the users’ lives, they will be able to grow

and have more leverage in the market.

How to implement this strategy effectively is not always very clear. We do know that

Yahoo! will need to hire talent that can bring knowledge capital to the table. The business needs

to keep costs down by minimizing the number of employees needed and keeping their overhead

lean. Keeping costs down will lower prices to potential advertisers which is a low cost strategy

Yahoo! is working to implement. This strategy is in place to differentiate Yahoo! and generate

revenue. Unfortunately, competitors such as Google are leading in advertising money being

generated by the service they provide as well as a low cost to the advertisers.

Appendix 7: The company's structure and control systems and how they match its strategy

22

It’s easy to see the drastic decline in Yahoo!’s success from its inception. Today we

observe Yahoo! struggling with their identity and to overcome mistakes of the past. Previous

strategies of acquiring businesses ended up being very costly, producing little to no change in the

market share Yahoo! achieved. Realistically we are seeing Yahoo! fighting to come back to

relevance against the leading competitors Google, Microsoft, and Facebook. Note Google is the

winner for the best place to work per Fortune.com in 2015. Yahoo! hasn’t been on this list since

2008. How much does employee satisfaction play into the success of a company?

The culture must play a key role in employee satisfaction so it’s important to discuss a

notable shift in culture that occurred after Mayer took the helm. The industry was in shock when

Mayer revoked the ability for employees to work from home and demanded employees come

into the office. She stated in an interview that while individuals work better alone, they innovate

better together. This mindset was her basis on revising the work from home norm. It has been

noted that Yahoo! has struggled with cohesive teams and top notch work so Mayer had the stock

price removed from the intranet homepage to potentially lessen the impacts from a declining

stock price. She has also added weekly leadership meetings to improve morale and teamwork.

(Moulton)

There were other changes as well, including Mayer’s personal touch on hiring. Every

potential hire is reviewed by Mayer herself, which speaks true to the strategy that Yahoo! needs

to hire talented people versus just hiring more people. This shift in hiring allowed the company

to quickly gain control and set the tone for employee expectations.

Mayer has also taken some of the lessons learned from the success of Google and began

to offer free food to employees. To improve employee satisfaction, employee benefits are

23 competitive and per Yahoo!’s website, include access to a health club, education reimbursement,