One fact that Yahoo is worth to stay in market or this is dead horse is yet to be find. since Verizon buy the yahoo core business for $ 4.83 billion while market cap for the business is more than 122 billion at pick.
so the big question is still not resolved, did Verizon buy yahoo for the data only and the subscriber base of AOL will increase by Billion more and it give some additional advantage. or Verizon will do something with yahoo and retain it as a business in coming day.
that question still need to be answered, but today is the day when we are more in the shock and may be near the realty check for other overvalued IT companies. Specially for eCommerce companies that running discount business for years and some other with no revenue model in place.
Some very high value companies with no revenue or fractional revenue are like whatsapp, snapchat, flipkart, Pintrest, Instgram ( instagram generating some revenue now from the facebook ad platform) and there is lot more in the list to name.
you can easily find more than hundred or thousand of tweet and news about what happen to yahoo and several commentary how yahoo dies or will lead to there own death bed.
Considering the strong face of yahoo management and other in the same like who dint speak anything or may be try to be out from the realty check for there own business model. let assume a USD 20 Billion valuation company who already burn more than USD 1 Billion in discount just to get some number of customer. assume another company who again burn about similar amount and the loyalty of that clients move to another vendor and then come amazon in india.
amazon with strong war chest and good fundamental as a business with lot of profit from different market and they announce the USD 2 billion to burn in the business and almost now near number one position in the eCommerce segment.
so how and what will be next innovation rather then burning the investor fund in discount to get a one time clients and then loosing the same to competitors.
Did the markdown valuation for flipkart, Dropbox, Snapchat and others in global market is new signal from the market that asking these cash burning machine to mind the business instead of doing the discount play for business.
are these company just doing something that didn’t worth anything to talk or it is next step to there own death if not get innovative and it will be a new yahoo of market with lot of media attention for all wrong reason.
What Verizon get when buying yahoo
The believers of the deal for yahoo and Verizon is pure discount deal in one sense. this is good in some sense when you remember the actual or early valuation of the yahoo. so the deal will make more of the core asset that include contents, video and more stuff from yahoo. this is well known fact that you are in the mid of a technology and integration of all things like AOL ad technology with google content will lead to higher value for the business or this is just a matter of integration. if they successfully able to marry the technology from both companies. It will create some more mobile ad revenue stream for Verizon as well. and in the case they fail to integrate and reap a revenue they can simply write off the deal value in 2-3 years.
Ultimately the death of a company as a brand is not good, so may be they will retain the yahoo for some more time and if able to reap any benefit it will be the center stage of there content strategy.
We again have some question for the Verizon as a business. instead of looking out strong strategy for the core business and make it more competitive. why mobile giant want a piece of content. Is the strategy is to go with client by saying, hay use our network and you will get these content free or buy these content and we will give you free data.
In both type of offers we try to find the value of data or content or marriage of both.
Valuation Method mathematics –
Did the valuation method need new formula or the investor need to be on the basic ground to understand the business and then go the next step. there is lot of question and may be more answers to all those from those high fly startup team. we expect some innovation in the business for sure and that can be like making a client base or going for growth without too much of value.
Understanding that , if you have a good product that can retain client then it will be your client base. If you are retain your client just for discount, it will be short terms only and it can not count as your client base. A business with strong fundamental is different from the business with strong and big discount to start with.
yahoo and google both started almost on the same era and period , but google survive and become darling for the industry due to so many reason and yahoo keep failing.
today may be one can safely say that yahoo decline for the USD 44 billion bid of Microsoft is one of the biggest mistake business wise. but what about the product innovation ? did yahoo keep the same momentum of product innovation as well or yahoo try to innovate the products with a single thought in mind that we have large client base who is loyal to yahoo.
Mobile is killer dose of yahoo –
This is one point where everyone think that yahoo is killed by mobile. i don’t think so, since mobile is not only the business. the core business of yahoo and google is search and innovation within the search is one that kill the business. yahoo didn’t able to get momentum and revenue share as expected from the market as google did. How google retain and increase the search revenue while yahoo decline it and one day we are here talking about the death of yahoo.
This is very incorrect to assume that yahoo didn’t invent, yahoo is good company in bad hand , if we want to say something to the management. However our purpose of learning from the failure of yahoo can not accomplish so i don’t say this at all. We are more in the mid of IT correctness path where again yahoo is big light that show some more companies there true face and warn them.
if Yahoo can get failed this way , you are not isolated at all unless you have a great business that make some profit and also keep innovation in line with your existing and new competitors.
Read more about what yahoo receive in response to there business from other media.
here is my top 10 favorite list of comments for the same.