Sweet Spot Case Study

Slide 1:Sweet Spot Case Study

Rahul Gupta 9/11/03 CS453 E-commerce Technologies

Slide 2:Background

Two founders from Stanford: David Filo and Jerry Yang [4] Started in February 1994 in a campus trailer [7] Incorporated in March 1995 [6] In April 1995 funded by Sequoia Capital with an initial investment of about $2 million [7] Went public in April 1996 [6] Corporate Headquarters in Sunnyvale, CA [6] Director and former-CEO of Yahoo, Timothy Koogle, is a Wahoo! [6] In March 1995, Filo and Yang incorporated the business and met with dozens of Silicon Valley venture capitalists. Sequoia Capital, whose successful investments included Apple Computer, Atari, Oracle and Cisco Systems, agreed to fund Yahoo! in April 1995 with an initial investment of almost $2 million. After this funding was secure, the two went to look for their management team. They hired Timothy Koogle, a Motorola employee and Stanford alumnus, as chief executive officer and Jeffrey Mallett, founder of Novell's WordPerfect consumer division, as chief operating officer. They secured even more funding in Fall 1995 from investors Reuters Ltd. and Softbank. Yahoo! launched its IPO in April 1996 with 49 employees. [7]In March 1995, Filo and Yang incorporated the business and met with dozens of Silicon Valley venture capitalists. Sequoia Capital, whose successful investments included Apple Computer, Atari, Oracle and Cisco Systems, agreed to fund Yahoo! in April 1995 with an initial investment of almost $2 million. After this funding was secure, the two went to look for their management team. They hired Timothy Koogle, a Motorola employee and Stanford alumnus, as chief executive officer and Jeffrey Mallett, founder of Novell's WordPerfect consumer division, as chief operating officer. They secured even more funding in Fall 1995 from investors Reuters Ltd. and Softbank. Yahoo! launched its IPO in April 1996 with 49 employees. [7]

Slide 3:Why was it started?

Started as a way to keep track of their personal interests on the Internet [7] Evolved into a complete online navigational guide [7] Initially called �Jerry's Guide to the World Wide Web� [7] Yahoo! acronym for �Yet Another Hierarchical Officious Oracle� [7] Definition of Yahoo accepted by creators: rude, unsophisticated, uncouth [7] Jerry and David started the site as a way to keep track of their personal interests on the Internet. It�s name was initially �Jerry's Guide to the World Wide Web�. They basically added their favorite sites to lists. Eventually, these lists became way too long and they were forced to brake them into different categories. Eventually, these categories became too full and they had to develop subcategories. This is how main concept behind Yahoo!, the directory structure was created. [7]Jerry and David started the site as a way to keep track of their personal interests on the Internet. It�s name was initially �Jerry's Guide to the World Wide Web�. They basically added their favorite sites to lists. Eventually, these lists became way too long and they were forced to brake them into different categories. Eventually, these categories became too full and they had to develop subcategories. This is how main concept behind Yahoo!, the directory structure was created. [7]

Slide 4:What�re the consumer functions?

Provides internet content from over 2000 top-of-the-industry providers in areas such as news, travel, sports, games, and weather. [6] Provides commerce services such as shopping, auctions, finance, and classifieds. [6] Provides communications services such as Mail, Messenger, Photos, Greetings, and Clubs. [6] Yahoo! Everywhere provides consumers with mobile access to information via devices including wireless phones, two-way pagers and PDAs. [6] Yahoo basically divides it�s services into these main categories: Consumer services, Marketing services, Business and Enterprise services , and Premium services. [6]Yahoo basically divides it�s services into these main categories: Consumer services, Marketing services, Business and Enterprise services , and Premium services. [6]

Slide 5:What�re the enterprise functions?

Marketing: Enables agencies and clients to find and connect to audiences through Fusion Marketing. [6] Business and Enterprise Services: Integration of commerce, communications and media into web portal and similar services via Corporate Yahoo!, Yahoo! Broadcast Services, Yahoo! Small Business. [6] Premium Services: Yahoo! Store, Business Express, Yahoo! Yellow Pages, Yahoo! Auctions, Yahoo! Bill Pay, and extra mail storage. [6] Thus Yahoo! follows a B2C as well as B2B model. The secondary components are aimed at businesses. A very interesting feature is the Business and Enterprise Service. With this service, Yahoo! will create for the company a web portal similar in look and feel to the Yahoo! main portal. Companies can use this to roll out their employee Intranet sites as well as their commercial Internet sites. This quote from the Coporate Yahoo! page sums it up best: �At Yahoo! Enterprise Solutions we can help your company build a portal that is designed to be easy and convenient for your site visitors � employees, customers or partners � to find the information and services they are seeking. And the more useful your portal is, the greater the return on your investment. We know how to build portals for different audiences. And we're ready to share our expertise with you. Our professional services team, drawing on our eight-plus years of experience in building one of the largest and most successful portals, can help you design and implement an enterprise portal, partner extranet or customer site that people actually use � and come back to again and again. We'll help you build a portal that will produce results � whether that's growing revenue, reducing costs, improving communications or increasing productivity.� [6]Thus Yahoo! follows a B2C as well as B2B model. The secondary components are aimed at businesses. A very interesting feature is the Business and Enterprise Service. With this service, Yahoo! will create for the company a web portal similar in look and feel to the Yahoo! main portal. Companies can use this to roll out their employee Intranet sites as well as their commercial Internet sites. This quote from the Coporate Yahoo! page sums it up best: �At Yahoo! Enterprise Solutions we can help your company build a portal that is designed to be easy and convenient for your site visitors � employees, customers or partners � to find the information and services they are seeking. And the more useful your portal is, the greater the return on your investment. We know how to build portals for different audiences. And we're ready to share our expertise with you. Our professional services team, drawing on our eight-plus years of experience in building one of the largest and most successful portals, can help you design and implement an enterprise portal, partner extranet or customer site that people actually use � and come back to again and again. We'll help you build a portal that will produce results � whether that's growing revenue, reducing costs, improving communications or increasing productivity.� [6]

Slide 6:Who are the customers?

More than 237 million unique worldwide users in 25 countries and 13 languages (December 2001). [4] 93 million active registered users [5] More than 1.5 billion page views a day [5] One of the main factors behind Yahoo�s huge customer base is the fact that it was the first website of it�s kind. Thus, although other searching sites like Excite were created shortly after, Yahoo! Already had customer loyalty. Another major factor in it�s customer base are the 20 acquisitions to date, which will be mentioned later in the presentation.One of the main factors behind Yahoo�s huge customer base is the fact that it was the first website of it�s kind. Thus, although other searching sites like Excite were created shortly after, Yahoo! Already had customer loyalty. Another major factor in it�s customer base are the 20 acquisitions to date, which will be mentioned later in the presentation.

Slide 7:How does Yahoo! compare?

Taken from reference [9] Main competitors: Google- search engine function AltaVista, MSN, AOL Web- portal function eBay- auction functionMain competitors: Google- search engine function AltaVista, MSN, AOL Web- portal function eBay- auction function

Slide 8:How it compares cont�d

Taken from reference [9] In other words, the users that have the most experience using different aspects of the Internet such as researching, making payments, and purchasing movies tickets online are Yahoo! users. This is mainly due to the fact that Yahoo! Had a high early adoption rate, and so most experienced users are regular Yahoo! users.In other words, the users that have the most experience using different aspects of the Internet such as researching, making payments, and purchasing movies tickets online are Yahoo! users. This is mainly due to the fact that Yahoo! Had a high early adoption rate, and so most experienced users are regular Yahoo! users.

Slide 9:Awards

Taken from reference [9] Yahoo! has captured a large share of the market in Sports entertainment news beating several large and prominent publications in audience reach. This, of course, is largely due to the ease with which information can be spread via the Internet, and due to the fact that millions of households are connected to the Internet.Yahoo! has captured a large share of the market in Sports entertainment news beating several large and prominent publications in audience reach. This, of course, is largely due to the ease with which information can be spread via the Internet, and due to the fact that millions of households are connected to the Internet.

Slide 10:Why is Yahoo special?

Taken from reference [9] Yahoo! has a very loyal customer-base due to the fact that it was basically the site to go in the mid 90s.Yahoo! has a very loyal customer-base due to the fact that it was basically the site to go in the mid 90s.

Slide 11:Front-end of main portal

Taken from reference [1] This is the main portal page. It provides access to the search engine as well as the other major features of the site such as auctions, sports coverage, news, directories, movie reviews, and email.This is the main portal page. It provides access to the search engine as well as the other major features of the site such as auctions, sports coverage, news, directories, movie reviews, and email.

Slide 12:Front-end of Yahoo! Search

Taken from reference [2] On April 7th, a new Yahoo! Search feature was created to rival the simplicity of Google. Although this search feature is built into the main portal page, a separate page was created for those users that only use the search function because the abundance of features on the main portal page can be slightly overwhelming. The features of the page are also very similar to Google, including the Directory, News, and Images. And similar to Google�s Toolbar feature, Yahoo! has its own Search Toolbar. This is an interesting quote from Investor Relations: �In the last eight months we have conducted extensive research to understand what our users are looking for in a search experience and these latest improvements to Yahoo! Search are focused on providing the key features that our users want,� said Jeff Weiner, senior vice president of Search & Marketplace at Yahoo!. �To accomplish this, we have built a world-class team and search organization, dramatically improved the quality of our search results, and acquired Inktomi, a leading search technology provider.� [12]On April 7th, a new Yahoo! Search feature was created to rival the simplicity of Google. Although this search feature is built into the main portal page, a separate page was created for those users that only use the search function because the abundance of features on the main portal page can be slightly overwhelming. The features of the page are also very similar to Google, including the Directory, News, and Images. And similar to Google�s Toolbar feature, Yahoo! has its own Search Toolbar. This is an interesting quote from Investor Relations: �In the last eight months we have conducted extensive research to understand what our users are looking for in a search experience and these latest improvements to Yahoo! Search are focused on providing the key features that our users want,� said Jeff Weiner, senior vice president of Search & Marketplace at Yahoo!. �To accomplish this, we have built a world-class team and search organization, dramatically improved the quality of our search results, and acquired Inktomi, a leading search technology provider.� [12]

Slide 13:Front-end of Yahoo! Auctions

Taken from reference [3] Although eBay is the undisputed market leader in auction brokering, Yahoo! still found the market wide enough to include an auction feature on their site. Yahoo! Auctions was launched in September of 1998 and operates in 16 countries and 11 languages. The site offers many items to choose from in categories such as entertainment, autos and sports memorabilia. It also features rare collectable items found through unique charity, featured and merchant auctions. [13] A major innovation that Yahoo! implemented for its Auctions site is the Yahoo!� Seller's Manager which is basically an offline seller's management tool that allows sellers to easily prepare multiple auction listings offline via templates, then submit hundreds of auctions with just one click once they are connected. The tool also allows sellers to easily manage and track progress of each of their auctions in progress. [13]Although eBay is the undisputed market leader in auction brokering, Yahoo! still found the market wide enough to include an auction feature on their site. Yahoo! Auctions was launched in September of 1998 and operates in 16 countries and 11 languages. The site offers many items to choose from in categories such as entertainment, autos and sports memorabilia. It also features rare collectable items found through unique charity, featured and merchant auctions. [13] A major innovation that Yahoo! implemented for its Auctions site is the Yahoo!� Seller's Manager which is basically an offline seller's management tool that allows sellers to easily prepare multiple auction listings offline via templates, then submit hundreds of auctions with just one click once they are connected. The tool also allows sellers to easily manage and track progress of each of their auctions in progress. [13]

Slide 14:Back-end

Yahoo at first used a proprietary server-side page language written in C/C++ [5] Transitioned to PHP in 2002 [5] 4500+ servers in 16 co-locations [5] USA: Sunnyvale, Santa Clara, San Diego, Washington DC, Dallas Intl: England, Central America, South America, Taiwan, Hong Kong, Singapore, China, Australia, India, Japan, Korea These are the features that Yahoo! considered in its decision to use PHP as it's new back-end software structure [5]: 1. C/C++ extensions 2. loops, conditionals 3. complex data-types 4. pleasant syntax 5. runs on FreeBSD 6. high performance 7. robust, sand-boxed 8. interpreted (or dynamically compiled) 9. low training costs 10. i18n support 11. clean separation of presentation/content/app semantics 12. doesn�t require CS degree to useThese are the features that Yahoo! considered in its decision to use PHP as it's new back-end software structure [5]: 1. C/C++ extensions 2. loops, conditionals 3. complex data-types 4. pleasant syntax 5. runs on FreeBSD 6. high performance 7. robust, sand-boxed 8. interpreted (or dynamically compiled) 9. low training costs 10. i18n support 11. clean separation of presentation/content/app semantics 12. doesn�t require CS degree to use

Slide 15:Acquisitions

Yahoo! has acquired twenty companies since its start. [6] Taken from reference [6] An interesting passage from a TechWeb Article: �Yahoo has set the pace, said Bill Bass, an analyst with Forrester Research, in Cambridge, Mass. It has been able to use its huge stock valuation to make big money deals that essentially cost it nothing, he said. The Broadcast.com deal is yet another example, involving the conversion of Broadcast.com stock into Yahoo stock. The conventional logic says when a company pays stock for an acquisition, its executives are essentially acknowledging their stock is overvalued. But Yahoo has been able to make these types of deals over and over again, and its stock price has remained high, Bass said. In the process, Yahoo has made acquisitions harder for its competitors. In January, Yahoo paid $4.6 billion in stock for GeoCities, even though the free-Web-page company had only $30 million a year in revenue. The result, Bass said, is many of the other acquisition candidates competing portals might target are now behaving like they are worth $10 billion or more. Furthermore, Bass said, Yahoo has been able to use its name to hand-pick the best companies. This advantage has become even more important in the case of Broadcast.com. There are many other e-mail and Web-page hosting companies out there for other portals to pick up, Bass said. But in the area of multimedia broadcasting, there is less parity.� [11]An interesting passage from a TechWeb Article: �Yahoo has set the pace, said Bill Bass, an analyst with Forrester Research, in Cambridge, Mass. It has been able to use its huge stock valuation to make big money deals that essentially cost it nothing, he said. The Broadcast.com deal is yet another example, involving the conversion of Broadcast.com stock into Yahoo stock. The conventional logic says when a company pays stock for an acquisition, its executives are essentially acknowledging their stock is overvalued. But Yahoo has been able to make these types of deals over and over again, and its stock price has remained high, Bass said. In the process, Yahoo has made acquisitions harder for its competitors. In January, Yahoo paid $4.6 billion in stock for GeoCities, even though the free-Web-page company had only $30 million a year in revenue. The result, Bass said, is many of the other acquisition candidates competing portals might target are now behaving like they are worth $10 billion or more. Furthermore, Bass said, Yahoo has been able to use its name to hand-pick the best companies. This advantage has become even more important in the case of Broadcast.com. There are many other e-mail and Web-page hosting companies out there for other portals to pick up, Bass said. But in the area of multimedia broadcasting, there is less parity.� [11]

Slide 16:Financial information

The opening price of Yahoo!'s stock on the day of the IPO was $13.00 per share and the closing price on that day was $33.00 per share. [6] Taken from reference [10] Other interesting related information include [6]: Yahoo! had 566,905,000 shares of common stock outstanding as of the 10-Q filed on March 31, 2001. Yahoo! was added to the S & P 500 on December 8, 1999 The Yahoo! stock has split four times: 3 for 2 September 2, 1997 2 for 1 August 3, 1998 2 for 1 February 8, 1999 2 for 1 February 14, 2000 Other interesting related information include [6]: Yahoo! had 566,905,000 shares of common stock outstanding as of the 10-Q filed on March 31, 2001. Yahoo! was added to the S & P 500 on December 8, 1999 The Yahoo! stock has split four times: 3 for 2 September 2, 1997 2 for 1 August 3, 1998 2 for 1 February 8, 1999 2 for 1 February 14, 2000

Slide 17:How�s Yahoo! doing now?

For Fiscal Year 2002 [8]: Revenue per average Unique User per month: $0.40 Net Revenues Total: $953.1 million Net income (loss): $42.8 million Net income (loss) per share: Diluted: $0.07 Free Cash Flow: $221.0 million As we can see, Yahoo! is doing pretty good. It is turning a healthy profit. Complete supplementary finance information can be found at http://docs.yahoo.com/info/investor/metrics.htmlAs we can see, Yahoo! is doing pretty good. It is turning a healthy profit. Complete supplementary finance information can be found at http://docs.yahoo.com/info/investor/metrics.html

Slide 18:Spectacular successes

According Nielsen/NetRatings 8/2002, Yahoo! is the World�s most trafficked Internet destination. [5] First all-encompassing portal/guide to the Internet [4] Takes number 1 spot on corporate desktops, with a 70%+ reach in the U.S. workplace[4] The Yahoo! Music Experience (http://launch.yahoo.com), was once again ranked the No. 1 Internet music destination in the U.S., according to the Nielsen/NetRatings' MarketView report issued in June 2002. At Music Experience users can access a streaming audio, exclusive artist features, music news, and the largest collection of music videos. [14] Yahoo! Search once again ranked as the No. 1 Internet search destination in the U.S., according to the Nielsen/NetRatings' MarketView report issued in April 2002. [15] Yahoo!�Shopping network has been independently ranked as the No. 2 online shopping destination on the Web by Nielsen/NetRatings with more than 27 million unique visitors during November 2001. This occurred after Yahoo! integrated Auctions, Shopping, Classifieds and Warehouse into the Shopping network in October 2001. [16]The Yahoo! Music Experience (http://launch.yahoo.com), was once again ranked the No. 1 Internet music destination in the U.S., according to the Nielsen/NetRatings' MarketView report issued in June 2002. At Music Experience users can access a streaming audio, exclusive artist features, music news, and the largest collection of music videos. [14] Yahoo! Search once again ranked as the No. 1 Internet search destination in the U.S., according to the Nielsen/NetRatings' MarketView report issued in April 2002. [15] Yahoo!�Shopping network has been independently ranked as the No. 2 online shopping destination on the Web by Nielsen/NetRatings with more than 27 million unique visitors during November 2001. This occurred after Yahoo! integrated Auctions, Shopping, Classifieds and Warehouse into the Shopping network in October 2001. [16]

Slide 19:Spectacular successes cont�d

Taken from reference [9] This graph depicts Yahoo!�s great success on the Internet.This graph depicts Yahoo!�s great success on the Internet.

Slide 20:My Thoughts on Yahoo!

I believe that Yahoo! is going to continue to be very successful due to it�s extremely wide breadth. It turned a healthy profit early in its history and each year that profit has increased. I predict that it will continue this same trend in the coming years. Yahoo! Search is a great feature designed to rival the simplicity of Google, but it might not be enough to recapture the customer-base that Google has earned. I personally use Google as my main search engine because it gets me what I want quickly and accurately. Even with so many formidable competitors I believe that overall Yahoo! is still unique due to the fact that it seems to have everything that most people use on a day to day basis such as search, auctions, sports coverage, news, directories, music, movie reviews, and email.

Slide 21:References

Yahoo!: http://www.yahoo.com Yahoo! Search: http://search.yahoo.com/ Yahoo! Auctions: http://auctions.shopping.yahoo.com/ Company Overview: http://docs.yahoo.com/info/misc/overview.html Making the Case for PHP at Yahoo!:http://public.yahoo.com/~radwin/talks/yahoo-phpcon2002.htm FAQ: http://docs.yahoo.com/info/pr/faq.html

Slide 22:References Cont�d

The History of Yahoo! - How It All Started... : http://docs.yahoo.com/info/misc/history.html Supplementary Financial Information: http://docs.yahoo.com/info/investor/metrics.html Yahoo! Facts & Figures: http://solutions.yahoo.com/advertiser_center/research/factsandfigures.html Yahoo! Investor Information: http://yhoo.client.shareholder.com/ TechWeb: Yahoo Turns Reputation Into Acquisitions: http://www.techweb.com/wire/story/TWB19990401S0016

Slide 23:References Cont�d

Yahoo! Introduces New Yahoo! Search: http://yhoo.client.shareholder.com/ReleaseDetail.cfm?&ReleaseID=105839 Yahoo! Auctions Introduces Offline Seller's Management Tool: http://docs.yahoo.com/docs/pr/release709.html Press Release: Yahoo! No. 1 Online Music Destination in the U.S. According to Nielsen/Netratings' Marketview Report: http://docs.yahoo.com/docs/pr/release990.html Press Release: Yahoo! No. 1 Search Destination in the U.S. According to Nielsen/Netratings' March Marketview Report : http://docs.yahoo.com/docs/pr/release983.html Press Release: New Yahoo! Shopping Network Ranked the No. 2 Online Shopping Destination by Nielsen/Netratings: http://docs.yahoo.com/docs/pr/release904.html