Ecommerce Strategy: Building a Virtual Conglomerate Ecommerce Management September 4, 2003 Anindya Ghose

2 No. 1 Search Destination In the U.S. The leading Internet portal with 220 million visitors each month (Source: Nielsen//NetRatings) (Source: Nielsen//NetRatings)

3 Brief History (1) : Starting business One of the first online navigational guide to the Web –David Filo and Jerry Yang began developing the Yahoo! search engine and directory, attracting thousands of visitors in –First million-day hit in –Sequoia Capital decided to fund it in April –Incorporated the business and started selling ad space on its Web site in Top Mgt from MOTOROLA and NOVELL. –Went public (IPO) and teamed with SOFTBANK to form Yahoo! Japan and Yahoo! Europe in 1996 with about 49 employees. Yet Another Hierarchical Officious Oracle

4 Brief History (2) : Continuing growth Expanding services –Acquired Four11 (Internet directory specialist), Viaweb (e- commerce software), and Yoyodyne (Internet direct marketing). –International expansion (25 international sites in 13 languages). –Acquired Geocities ($3.7 bil), broadcast.com ($5 bil), communications firm eGroups ($430 mil). –Launched streaming media application Yahoo! Player. Wading into B2B waters –Teamed with TIBCO Software to offer Corporate My Yahoo! –Launched Yahoo! B2B Marketplace. –Developed Enterprise Information Portal, teamed with Inktomi, Critical Path, and TIBCO Software.

5 Brief History (3) : Struggling for more revenues As the dot-com bubble burst in 2000, online ad revenue dried up and forced to re-evaluate its ad-supported model. Looking for ways to add more revenue from business services and subscription/listing fees –Charging fees to list items on its auction sites –Providing a subscription based music service –Purchasing HotJobs.com (planning subscription-based access to the listing) –Fee-based document search service (partnered with devine) Adding e-books to Yahoo! Shopping. Developing a high-speed Internet service with SBC Communication.

6 Selected Web sites features Communications Properties –Yahoo! Groups (group lists) –Yahoo! Mail –Yahoo! Messenger Information –Yahoo! Education –Yahoo! Health –Yahoo! News –Yahoo! Weather –Yahooligans (Web guides for children) Listings –Yahoo! Autos –Yahoo! Careers –Yahoo! Real Estate Media –Yahoo! Broadcast –Yahoo! Games –Yahoo! Movies –Yahoo! Music –Yahoo! Sports Commerce –Yahoo! Auctions –Yahoo! Classifieds –Yahoo! Shopping –Yahoo! Travel –Yahoo! Warehouse (marketplace for used items)Finance –Yahoo! Finance –Yahoo! FinanceVision Enterprise solutions –Domain name registration –Web site housing –Yahoo! Business Mall

7 TODAY - Consumer and Usage Highlights : Good news? Yahoo! had more than 237 million unique users worldwide during 2002, including Yahoo! Japan, up from 192 million in Yahoo!'s traffic increased to a record 1.62 billion page views per day on average during 2002, up from 1.1 billion page views per day in More time is spent on Yahoo! than on any other portal. An average U.S. Yahoo! consumer spends 113 minutes per month. (Nielsen//Netratings, February 2002) 98 million active registered members logged into their personalized Yahoo! services during 2002, up from 67 million in Yahoo! enabled approximately $776 million in commerce transactions during 2002.

8 Business Model (1) Business profile/strategy Building a global Internet media company: –Offering a branded network of comprehensive information, communications and shopping services. –Giving away content and communications services for free to attract “eyeballs” and ad dollars. –Building an “Internet market mall”. “Yahoo Everywhere!” –Continuing expansion of its services geographically, to different types of services, and to different platforms (e.g., cell phones and Palm handheld computers).

9 Business Model (2) Business profile/strategy Value Creation –Providing easy and convenient search capabilities, variety of contents, and communications services to users –Facilitating direct and personalized marketing activities to advertisers –Providing a complete set of business solutions to merchants Providing online business and enterprise services –To enhance the productivity and Web presence of Yahoo!’s clients. –Corporate intranets: Corporate My Yahoo!, teamed with TIBICO Software. –Building a “Virtual Conglomerate”

10 Business Model: Some Statistics Marketing and Merchant Services Yahoo! served 4,175 advertisers and merchants during Yahoo! clients include 58 of the Fortune 100 advertisers. 95 percent of the company's top 200 advertisers in 2001 continued programs in Yahoo! Store numbers rose to over 18,000 merchants. Consumer and Business Services Yahoo! now has 45 major Yahoo! Portal Solutions customers and Yahoo!'s Portal Solutions total licensed seats to employees, customers, and business partners now exceeds one million. Yahoo! hosted and distributed an average of over 15 million hours of streamed audio and video corporate events for clients in 2002.

11 Financials (1) Revenue Major sources of revenue – banner ad sales – sponsorship ads – listing fees – transaction fees for facilitating e-commerce

12 Financials (2) Costs The biggest sources of costs include: – Advertising and other market-related expenses market-related expenses – Compensation and and employ-related and employ-related expenses expenses – Sales commissions

13 Financials (3) Net Income In 1998, made a positive net income first time in its history In 2001, turned back into a big negative income but got back positive in 2002

14 Market Competition Competitors –AltaVista –Amazon.com –America Online –eBay –Microsoft –Terra Lycos ….

15 Market Competition (1) Top competitors: America Online The world’s largest Internet access provider Offers content, communication tools, and online shopping Other operations include –Netscape (browser software) –Digital city (online community guide) –ICQ (instant messaging software)

16 Market Competition (2) Top competitors: Microsoft Corporation The #1 software company Continuing to expand its empire –Online services and e-commerce portal: MSN –Travel services: Expedia –E-commerce services: through joint venture Avanade with Accenture –Television station: MSNBC –Video game console: Xbox Microsoft is targeting web services for future growth, especially with its.NET initiative

17 Yahoo: Strengths and Opportunities Early mover advantages –Large audience reach and strong brand recognition –Source of scale and scope economies Rich managerial resources/capabilities –Yahoo has got a great promotional and marketing machine. –Large pool of high-caliber people. –Ready to change

18 Weaknesses and Threats Web advertising is a very poor revenue generator Fierce market competition –Volatile market and New competitors –Differentiation/Switching cost Appropriability of business model –Why do we need portal site in the first place? Exploring acquisitions of real estate site Homestore.com and online travel service Travelocity.com. –If you can do it, so can I!

19 Questions & Discussions