D-on-Net

Yahoo Video enhancements merely playing catch-up

During Yahoo’s [YHOO] Analyst Day management’s comments centered on improving its existing platforms by enhancing customer/community engagement through better and more personalized content.  The company said this would be its foundation for building “the next Yahoo” and just unveiled its newest version of Yahoo Video with this strategy at the forefront.  Unfortunately for Yahoo, video sharing sites such as YouTube, VSocial, and Grouper have been gaining in popularity at unprecedented rates and the new offerings integrated into Yahoo Video are merely playing catch-up to the competition.  Said differently, Yahoo is once again trailing in the innovation game and not offering anything that doesn’t scream “me too.”  Yahoo cleaned up its UI and stuck with its strategy of community and personal engagement through several customization features such as enabling users to subscribe to specific video channels/categories, search by tags, create favorite lists and upload their own content to be discovered and shared with the masses.  However, given all of these features are already available on other sites, which have a loyal and engaged community of users, I am skeptical the wave of user generated content will spill over to Yahoo Video.   While Yahoo’s 200M registered users provides a large existing base to build on and perhaps some reasoning why it has yet to acquire any of the competition (and the amount of copyrighted material illegally posted on the sites), it is likely a large percentage of its users are already attached to an existing online video sharing platform.  That said, if Yahoo is serious about building a brand associated with video sharing/search, its next release needs to differentiate and provide a wow factor, which is something the company has successfully failed at delivering. 

Yahoo needs to innovate:  The Company’s latest attempt at innovation through Yahoo Video wasn’t much of an attempt at all.  Yahoo is becoming too well known as an innovation laggard, which is a practice that allowed Google [GOOG] to zoom past them and become the dominant leader in online search.  Although Yahoo is making strides to begin enhancing its existing suite of offerings at a more rapid pace, the improvements to-date have yet to do anything more than to say “me too.”  It is as though Yahoo has lost its innovation gusto and is settling into becoming a mature online media company.  Despite the fact the enhancements made to Yahoo Video were the right ones to be made these releases lose credibility and have a shorter shelf life when there is nothing setting the offering apart from the competition.  If Yahoo wants to create a sea change in online video they must innovate and think beyond what is already available in the market.  One potential differentiator to-date for Yahoo, which is still in the early adopter phase, is its Yahoo Go for TV initiative, which enables Yahoo users to access their Yahoo accounts and thus, would enable users to access and view their Yahoo Video library on their TV.

How can user generated online video sharing sites monetize the opportunity?:  The number one question surrounding the hoards of user generated online video sharing platforms is how they will be able to make money on the service.  Although the obvious answer centers around advertising it remains a question how much of a role advertising can play in monetizing existing platforms.  For example, YouTube users reportedly watch 50M videos/day on its site and upload more than 50,000 videos daily, which are astonishing numbers.  Additionally, YouTube allows users to create a profile asking for details such as gender and age, which is likely to be extremely valuable to potential advertisers.  Assuming all 50M of the videos watched per day were original user generated content and didn’t include any illegal copyrighted material (although this is policed today it is far from 100% accurate and up to the responsibility of the content owner to report and have the material removed from the site), if YouTube were to insert 10-20 second advertisements before viewing the content at $0.10 per viewing the company could net $5M/day in ad revenue equating to $1.8B in revenue per year.  However, this is obviously much easier said than done.  These platforms don’t want to damage the user experience and are likely tip toeing around the idea of inserting ads directly into the user generated content, which are likely to takeaway from the viewing experience, especially considering the advertisements would likely be as long as many of the actual videos.  I believes if the ad insertion strategy were to be adopted, users would likely seek incentives to continue participating on any given online video platform through a revenue sharing model, much like the affiliate networks of GOOG, YHOO, MSN etc.  Additionally, given the traffic YouTube generates its homepage alone should generate a kings ransom in display advertising should the company decide to monetize its real-estate.  MySpace reportedly garners $750K/day on its homepage in ad revenue, equating to approximately $270M a year in revenue.

Takeaways from Yahoo! Analyst Day

We are over an hour into Yahoo!'s Analyst Day and have yet to hear anything new.  Company focused on leveraging existing platforms, social media, user generated content, enhancing Search (new Social search), mobile initiatives etc.  Shares are reacting negatively, down 1.39% to $30.58, due to the lack of compelling information or a new twist to their story.  If shares break $30 today, I would expect shares to fall to $27/$28 before seeing support.  The company remains affixiated on using its properties to serve graphical advertisements and keep users within its portal.  They are clearly the leader in display advertising, but the market wants to know about Search.  Jeff Weiner, SVP of Search and Marketplace is on deck to present. 

Jeff Weiner gave an in-depth overview of Yahoo's plans for Social Search, which is tied to the announcemnt of their Yahoo! Answers announcement earlier this week.  The stock is holding in the low $30s, but Tim Cadogan, VP of Search is up next to talk about the company's monetization efforts, which is what the market is waiting for.

Well, Tim Cadogan gave an in-depth overview of Yahoo's new ad platform, but failed to divulge much in the way of new meaningful and insightful information.  Again, the market is looking for more color around the upside the company expects to see with the improvements in its platform and how this is going to impact RPS and overall monetization, which is color YHOO failed to deliver.  During the Q&A session afterwards, CEO Decker told the audience the company isn't expecting any meaningful financial contribution from the new ad platform in 2006, but is looking more towards 2007.  However, I interpret this as a conservative response and standing firm by its guidance.  Said differently, upside in the remainder of 2006 from the new adplatform is by no means out of the question. 

One interesting bit of context was provided for the graphic and display advertising market in Europe.  Greg Coleman, EVP Global Adv. Sales stated Europe is essentially where the U.S. was in 2003 in terms of accepting grpahical and display advertising and Yahoo! is investing heavily to build out its international infrastructure in order to accomodate for the growth they are anticipating, which they are expecting to outpace growth in the U.S.

Founder and CEO of Alibaba.com, Jack Ma presented and clearly had everyone on Yahoo!'s management team nervous...this is a man that is not afraid to say anything.  Alibaba is taking share from eBay in China.  Alipay is the leading online payment system and the most popular form of payment on eBay.

Shares fell below $30 in AH trading to $29.81 and shares of eBay were beaten down today, below $30 in anticipation of information regarding Alibaba's lead in c2c and b2b e-commerce in China.  That said, I continue to believe shares of both companies are attractive at these levels.   

Yahoo! redesigns its homepage...finally!

Yahoo! announced the launch of its redesigned homepage with a big new search box front and center.  Yahoo! even included a new demo video from the founder on what is new.  The clean up of their homepage was long overdue! 

Shares of YHOO are down over 30% since the beginnning of 2006 and are trading at 16x '06 EV/EBITDA, which is a significant discount relative to its peers.  Yahoo! has been making announcements left and right before the company's analyst day tomorrow.  The company is in dire need of rejuvinating its name on the Street.  Yahoo!'s comments will likely focus on Search and its upgraded version of its Search Marketing platform.  Additional topics I am expecting to be covered are CAPEX plans, MSFT's role as a partner going forward, Mobile (partnerships, new offerings, and Search) initiatives, China (Alibaba update), Japan, Europe and its VoIP efforts as a result of Skype's announcemnt it will be offering free SkypeOut calls in the U.S. and Canada through the end of '06. 

Yahoo! Finance strikes back against Google

Everyone and their mother bashed Yahoo! for sitting on the innovation sidelines after Google launched a competing finance site.  It appears Yahoo! was listening loud and clear and has responded with some innovation of its own.  Yahoo! Finance users will now be able to rank message board comments on a 1-5 scale in terms of how useful people find the information.  While this might seem compelling, I believe credibilty is a large hurdle when it comes to message boards discussing stocks, but perhaps the ranking system will weed out all of the minutia.  This isn't exactly a back breaking response by Yahoo!, but it is better than the sound of crickets.  If shareholders and Yahoo! users are wondering if Yahoo! is planning on seeing what Google will hit back in their court before innovating again, it sounds like Google Finance could be the kick in the butt Yahoo! has needed all along.  According to the general manager of Yahoo! Finance, Peggy White, Yahoo! users can expect "for the next 12 months [users] will see continual introduction on the front end."  However, I would hope Yahoo! learns from this lesson and they don't truly believe further innovation to Yahoo! Finance is only a "12 month" project.

Yahoo! and Google betting on soccer

Given that soccer is arguably the most popular sport in the world and the fact the World Cup is right around the corner, it is no surprise to see Google [GOOG] and Yahoo! [YHOO] are betting on soccer, and its fans.  Today, Everypoint, a mobile app developer start-up, announced it has partnered with Yahoo! to create the Yahoo! Mobile MatchCast client app.  The app will enable soccer fans to get real-time scores and stats during the World Cup starting in June.  Yahoo! is also a World Cup partner, so one can expect to see their logo all over the place come tourney time.  Attaching your brand to an event as popular as the World Cup and a freely downloadable app that will be supplying real-time info. is certainly one way to create brand awareness.  As for Google, I wrote about Google partnering with Nike to create joga.com (in portuguese means "play beautifully"), a community site for soccer fans, a couple of weeks ago, but wasn't writing a blog at that time, so I decided to post the meat of my thoughts again.

It is reported Google and Nike [NKE] have been colloaborating on joga.com for over eight months.  Nike is reportedly supplying all of the conten and Google served primarily as its "technical partner."  The site is officially live and will soon be running in 140 countries and 14 languages.  However, just like Google's social networking site Orkut (most popular in Brazil), joga.com requires an invitation to join the club.  It is reported Nike approached Google about the idea after hearing about the success of social networking sites such as Myspace and Facebook and were interested in exploring if the same success could be applied to community sites centered around specific sports.  Given soccer's global fan base it is obvious why it was chosen as the first sport for such a community site.  Like other community sites, the site is centered around user generated content.  Users are able to create their own profiles and upload and share photos and videos with the rest of joga.com.  The marketing genius that is Nike already has several of its endorsed soccer athletes involved with the site such as Freddy Adu and Ronaldino.  It is less likely Google will be able to serve targeted adds to the site, and more likely Google saw this as a golden opportunity to attach its name with Nike and what is arguably the most popular global brand.  Although joga.com does not currently contain a Google search box it is possible one could be added down the road.