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SpectralShifts Blog 
Sunday, January 08 2012

Yahoo executed on the portal concept better than any other company and one time was worth $113B.  Today it is worth $17.6B and is trading at 12.9x operating cash flow.  But its interest in Chinese and Japanese subsidiaries is $19B pretax or $13B aftertax.  Either way YHOO is absurdly cheap on $5B of revenue and $1.4B cash flow and 700 million users.  So new CEO Thompson has a chance to pull off the turnaround of the century for a company that is hard to define by many.

What would we do in his shoes?

First, we would go back to what made Yahoo so valuable in people’s eyes to begin with, namely an approach that used others’ content and turned it into gold via traffic streams and advertising revenue.  As a tools and application company they have been pretty poor at monetizing their innovations.  Ultimately, the chief reason people came to Yahoo was the breadth and easy accessibility of the information, making people shout “yahoo” in joy.  The brand is a great brand after all and one of the real internet originals which will fix itself.

So what is the “new” content today?  Applications.  Yahoo should evolve from content portal to "app-portal".  More specifically we are about to witness an explosion of cross application solutions and commerce that will develop entire new ecosystems of revenue opportunity.  And these will exist across multiple platforms and screens as one writer points out.  Facebook is trying to harness this opportunity with Opengraph, but already people might be concerned that it is just too much confusion and overkill and TMI.

Yahoo can not only remove that confusion but allow people to tailor their own environments.  HTML5 and connectivity across smartphone, TV, tablet and PC/ultrabook will pave the way.  Understanding and harnassing the big data required to do this is one of Thompson’s key attributes.  At the same time virtual currencies can be created to monetize this interactivity beyond mere advertising and that’s what Thompson brings from Paypal.

With over 70 different services/tools and 14,000 employees, Thompson will definitely have to restructure, reduce and refocus in order to have the resources to aggressively develop an app-portal future.

Posted by: Michael Elling AT 08:43 am   |  Permalink   |  0 Comments  |  Email

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