Recent reports from Comscore show that new CEO, Marrissa Mayer's
job of turning around Yahoo! (
YHOO
), just got harder. According to the research firm, the traffic to
two of the company's core products, search and mail, was down 24%
and 12% each in December 2012 when compared to December 2011.
This new data is troubling for the CEO because her turnaround
strategy hinges on driving growth by leveraging the existing user
base on Yahoo!'s platforms. If search and mail traffic are
declining, Mayer's strategy is likely becoming moot. We think that
Mayer needs to come out with new products quickly if she intends to
keep Yahoo!'s services relevant in the highly competitive
Internet industry.
See our complete analysis of Yahoo! here
Relying on General Unique Visitors Much Riskier
Yahoo! has a solid unique visitor base at approximately 114
million visitors per month who visit their homepage in the U.S.
While this is a good starting point, we think that a decline in the
core group of mail and search users, poses risks for Yahoo!. Since
e-mail has become such a central part of an Internet user's life,
the fact that users are leaving Yahoo! mail means that Yahoo! is
losing a relatively sticky user base, who are compelled to come to
the site to check e-mail. A general visitor on Yahoo! sites will
probably not have the same investment in Yahoo!'s services like an
e-mail user would. This makes Yahoo! more susceptible to firms such
as AOL (
AOL
) and Google (
GOOG
), who have products that can attract users from Yahoo!. An example
of such a situation would be a Yahoo! news user switching to
Huffington Post, Google News or CNN for their news needs instead of
visiting Yahoo!.
Mayer Must Release New Products Quickly
Due to the fall in the number of mail users, we think that Mayer
must increase the pace at which Yahoo! releases products. During
the last six months, Yahoo! has only released two major redesigns
to mail and Flickr. We thought that Fickr redesign was a good way
for Yahoo! to get new users onto the mobile platform, but because
Flickr is not a core Yahoo! product, the redesign will not
necessarily drive traffic to other Yahoo! services. We think that
Mayer needs to release more products which drive traffic to
Yahoo!'s core services because this seems to be the only way to
increase user engagement on its platforms.
Yahoo! Needs to Look to Emerging Markets To Drive
Growth
Since Yahoo!'s business is in decline in the U.S., we think that
the company should look overseas to grow its business. However, the
international markets are also highly competitive and
Yahoo! will have a tough time gaining market share in the emerging
markets. We think that despite this competition, the growth in
emerging market Internet users gives Yahoo! an opportunity to
capture a some of the growth potential in the international market.
We think that lack of Internet penetration in the Asian and African
markets (28% and 16%), and the fact that most of these users will
first access the Internet via mobile phones, gives Yahoo! an
opportunity to increase the number of users on its platform. We
think that approximately 1.25 billion new individuals will start
using the internet if penetration on these continents hits 50% over
the next 5 years, which is lower than the 75% penetration in
North America at present. If Yahoo! can capture even 10% of this
with a sound mobile product suite, it would add around 125 million
users to its platforms.
We currently have a
$21 price estimate for Yahoo!
, which is around 15% above the current market price.
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