Yahoo CEO To Step Down
So after all this speculation, no broadsweeping move was announced at last night’s conference call (which I listened to). Negative growth for Yahoo, that’s a tough one. And they didn’t seem to have any visibility as to how much revenue they’ll pull this fiscal year, committing only to reaching break-even no matter what (lay-offs?). With advertising accounting for about 90% of their revenue, consumer premium services and business offerings would have to meet tremendous growth to offset a declining ad market (and think absolute dollars, not relative triple digit growth rates that are meaningless when starting from scratch). A recession is not necessarily the best period to ask consumers to change their purchasing behavior (ie. purchase immaterial online services), while . Ebay, the other successful pure play, manages to sell its services. But if you think of it, their fees are mostly related to transactions of physical goods. Their service might feel less intangible than, let’s say, a better web email (we’ll see how MSN pulls that one.)
Yahoo! also faces much more competition in the enterprise field than in the consumer portal market, so it’s not obvious how much they can grow there (and the conference call remained unspecific.)
The advertising problem is probably not a CPM issue, rather than an inventory one. Yahoo has the brand image to sustain a correct CPM with marketers, but with about a billion page views per day, they probably create more impressions than they can possibly sell. Of course your CPM falls if you recalculate it across all your inventory, but my point is it’s more a quantity problem than a quality one right now (CPMs having already fallen with click-through rates during the two past years).
Now how do you monetize the service growth to 180+ million users? Remember these page views, downloads and broadcasts cost in bandwidth, hardware, software, engineer hours, … The transition from a free to a (partly) paying web has probably started too late. Companies are under pressure to convert users to customers, or to sign corporate clients, and that doesn’t come overnight, if at all. What are people ready to pay for? Are companies really committed to using the Internet as a daily productivity tool? Let’s face it, consumers will probably drag their feet before they pay for web-based services, while most companies but the smallest rely on internal IS assets such as e-mail servers and Intranets, and try to keep the Internet at the edge, not at the center of their systems (what’s a firewall for?) So the web-centric approach both faces consumer inertia and corporate resistance. It’s possible to overcome both, and much has been done in just a few years, but it will take time for the Internet to impact the economy and society as much as, say, the automobile.
