Yahoo!’s financial performance reflects the strategic challenges it faces. But with so many users, it is not out of the game yet.
Revenue in Q3 was down 24% to $1.2bn, or down 5% if we strip out, as Yahoo! likes to, traffic acquisition costs (TAC). Operating margin excluding TAC was stable at 17%. Slightly better than expected bottom line numbers helped Yahoo! shares climb 3% in afterhours trading.
This is another set of numbers from Yahoo! that underlines how its performance continues to slip. However, an awful lot of people are still using Yahoo!. It remains one of the big 4 web destinations globally. In the US it is, for now, no.2 for unique visitors, with 178m per month (according to comScore’s data for August). Even in the UK it's still a top five player, just behind BBC Online. Problem is, with each month that passes, the company loses ground to Google/YouTube and, in particular, Facebook. Its share of web users and web time thus appears to be in inexorable decline.
Yahoo!’s yet-be-appointed incoming CEO (see Yahoo CEO ousted) will have a number of pressing issues to tackle, from wrangles with Chinese partner Alibaba to its time-limited search agreement with Microsoft. But the key challenge (stroke opportunity) is this: to take Yahoo!’s still-formidable popularity and use it to unleash a business strategy that makes Yahoo! no.1 for something in the online world that is going to remain or, even better become, very big indeed. The alternative, frankly, is a slow decline as a secondary player across multiple categories (search, mail, info, communities, etc). In other words: Yahoo!, what are you?
If I could say categorically what the “something” was, I might send in my CV! But trusted information and news is a good place for Yahoo! to start looking. Its content remains attractive and its media properties page views are rising (unlike metrics on search and communications/communities).
Needless to say, such a strategic transformation would require the hiring of a genuinely visionary new CEO. A break from the scrutiny of Wall Street might also help the company enact the fundamental change that is needed. So the case for taking Yahoo! private, a course reportedly being pursued by Founder Jerry Yang, seems ever more compelling.