Porter’s Five Forces Analysis of Yahoo
|Name||Yet Another Hierarchical Officious Oracle|
|Industry||Software & Services|
|Headquarters||Sunnyvale, California, United States|
|Revenues||US $133.613 billion(audited) by Verizon Communications ,FY 2021|
|Profit||US $ 22.065 billion(audited) by Verizon Communications,FY 2021|
|Competitors||Google, Baidu, Inflow, Overture Search Services (Ireland) Ltd., Microsoft.|
The original Yahoo company was founded by David Filo and Jerry Yang in January 1994 and was incorporated on March 2, 1995. The company also provides advertising services, online mapping and video sharing and had also started to move into the social media sector when it acquired Tumblr amongst much fanfare for over 1 billion U.S. dollars in 2013.Verizon purchased AOL in 2015 for $4.4 billion, and acquired Yahoo in 2017 for $4.5 billion. After completing its Yahoo acquisition, Verizon placed both brands under the woefully bland “Oath” brand.Yahoo Search is still considered competitive and has millions of users around the world, as of April 2019. As of the second quarter of 2019, Yahoo accounted for three percent of total organic search and for two percent of mobile visits in the United States.In 2022 Apollo Global Management bought 90% shares of Yahoo from Verizon while 10% share is still retained by Verizon Communications.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School.
Yahoo Rivalry among Existing Competitor
- Yahoo Business Segments: The company has manybusiness segments some of which include Yahoo Search, the Yahoo web portal, Yahoo Techcrunch, Yahoo finance, Engadget, Yahoo entertainment, which brings together various services, such as Yahoo News, Yahoo Finance, Yahoo Answers and most notably Yahoo Mail. In fact, a 2015 ranking of most popular single websites in the United States, based on share of visits, shows Yahoo Mail as the second most popular e-mail provider, after Google’s Gmail. Its headquarters are in Sunnyvale, California, while a number of additional offices are located in 25 other territories.As of 2017, it was merged with Verizon.
The top countries that use Yahoo include United States, India, Brazil, Russia, Nigeria, Egypt, Canada, Turkey and Republic Indonesia.
- Yahoo Global Operations Year 2021: As of 2015, the Yahoo websites cumulated more than 200 million unique visitors per month, making Yahoo the second-most popular multi-platform web property in the United States, after Google. In September 2021, Yahoo! Search had a worldwide market share of 1.48 percent. The search engine is powered by Microsoft’s Bing.
In 2022, Yahoo and Taboola Enter 30-Year Commercial Agreement, Developing a Leading Offering for Advertisers, Publishers and Merchants on the Open Web; Partnership to Generate Approximately $1 Billion in Annual Revenue. In 2021 Yahoo had141% Growth in CTV YoY.
As for Verizon, in 2021 there was an increase in Consumer total operating revenues that includes the net impact of approximately $680 million in the fourth quarter of 2021 as a result of acquisition of Tracfone. Also an increase of $1.3 billion in access revenues related to postpaid plans driven by additional subscribers and migrations to higherpriced plans as well as growth related to content offerings, cloud services and mobile security products included in certainprotection packages and an increase of $464 million related to growth in non-retail service revenue.
- Google is also proved to be one of key players by giving a record sale of US $ 257.637 billion, with a net profit of US $ 76 billion for 2021 and revenue of US $ 788 billion and net profit of US $ 46.348 billion for third quarter ended September 2022.In 2021, Google accounted for the majority of parent company Alphabet’s revenues with 177.7 billion U.S. dollars in Google website ad revenues alone. The majority of Google’s revenue comes from advertising through Google owned and operated properties such as Google Search, Google Maps and more. Advertising remained the main revenue-generating segment for Google in 2021. During the examined year, 81.3 percent of Google’s revenue came from advertising on Google properties and YouTube. The Google Cloud revenue segment generated 7.5 percent of the company’s revenues, up from 4.3 percent in 2018. As of January 2022, Google sites were ranked first amongst the most visited multi-platform web properties in the United States with just over 270 million U.S. unique visitors and a market share of 61.4 percent among the leading U.S. search engine providers. Parent company Alphabet’s market capitalization in February 2021 was valued at 1.79 trillion U.S. dollars.
- Microsoft gave tough competition to Yahoo by generating a record sales of US$198.27billion , with a net income of US$ 72.738 billion in the year 2022. Microsoft do business worldwide and have offices in more than 100 countries. The company generate revenue by offering a wide range of cloud-based and other services to people and businesses; licensing and supporting an array of software products; designing, manufacturing, and selling devices; and delivering relevant online advertising to a global audience. Microsoft operates in 190 countries and is made up of more than 220,000 passionate employees worldwide. In addition to the operations centers, Microsoft also operate data centers throughout the Americas, Europe, and Asia regions. Office 365 is used by over a million companies worldwide, with over 879,851 companies in the United States alone using the office suite software. Microsoft’s market capitalization in 2022 amounts to $1.91 trillion. Almost 70% of organizations use Microsoft Azure for their cloud services worldwide. More than 95% of Fortune 100 companies trust Microsoft Azure. Four out of every five Fortune 500 companies use Microsoft Office 365.In August 2022, Windows occupied 28.79% of the Operating System market share worldwide. Windows runs on 1.6 billion active devices in 2022.About 100 million gamers use Xbox in 2022.In 2022, 158 million people used Microsoft Edge.
- Investment in Research & Development-Marketing Cost and Brand Image: Yahoo’s success is based on its ability to create new and compelling products, services, and experiences for their users, initiate and embrace disruptive technology trends, to enter new geographic and product markets, and to drive broad adoption of their products and services. It is necessary to invest in a range of emerging technology trends and breakthroughs that can offer significant opportunities to deliver value to customers and growth for the company.Yahooalso needs to focus the marketing cost to increase the brand image and better customer loyalty.
Yahoo Threat of New Entrants
- Global Software and IT Services Industry Revenue in the IT Services market is projected to reach US$1,204.00bn in 2023. The market’s largest segment is IT Outsourcing with a projected market volume of US$430.50bn in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 6.86%, resulting in a market volume of US$1,570.00bn by 2027.
- High Capital Investment- Trained Human Resources: The new entrant will be requiring high capital investment, since the industry is very intensive on research and development which requires specialized workers and is capital intensive. Projects have high capital requirement and significant amount of investment for training the staff is required.
- High Research & Development Cost: High research and development cost is required for launching any new product in the current tech industry.
- Technological Advancement: In this era of technological developments like AI, machine learning, robotics, and other technologies only high technological advance companies or groups can enter such a market
Yahoo Bargaining Power of Suppliers
- Suppliers Industry Influence: The bargaining power for suppliers is very low and since high-standardization exists, there is little scope of suppliers having any clout. The suppliers consists of IT Infrastructure providers (Servers, computers etc.), Recruitment firms, Office Space Suppliers etc..
- Suppliers Collaboration: Since2013, Verizon have assessed 413 key suppliers. In 2019, they purchased more than $5.8 billion in goods and services with diverse suppliers.In 2019, Verizon hosted the BDR’s Annual Summit, which provided a forum for certain Fortune 100 companies, BDR members and diverse suppliers to explore the power of collaboration, leverage learnings and drive the strategic direction of supplier diversity and inclusion in the supply chain.
Yahoo Bargaining Power of Buyers
- Product Awareness and Availability: By using search engines customers can easily obtain information about rival products and can switch to any other product without any difficulty.
- Customer Satisfaction – After Sales Services: Yahoo offers an excellent customer service with availability of contacting to customer help for 24/7. Customer feedback, customer satisfaction and continuous innovation is important to retain the market share. According to the American Customer Satisfaction Index (ACSI), the index scores of customer satisfaction with the internet portal and search engine Yahoo from 2002 to 2021 fluctuated between 72 and 80 index points out of 100. In the most recently reported period, the customer satisfaction score was 72 index points.
Yahoo Threat of Substitute Products or Services
- Social-networking sites: Social-networking sites and blogs feature as substitutes as they also offer platforms for digital advertising as well as social connections with other users. Social-networking sites like Facebook and Twitter are currently experiencing major growth in users, thus becoming a major substitute for Yahoo.
- Low Switching Cost: The threat of substitutes out there is high given the truth that competition with market share with international companies like Intel, Google, IBM, this indicates that the marketplace has a high level of rivalry where manufacturers that have design as well as development capacities along with making proficiency may have the ability to have a greater bargaining power over the marketplace that too with low switching cost.
- Yahoo basic information| Available at Forbes
- Yahoo – Statistics &Facts(Nov 30, 2022)| Available at Statista
- Global search engine market share held by Yahoo! Search from January 2018 to September 2021(Dec 5, 2022) | Available at Statista
- Number of full-time Yahoo employees from 2007 to 2016(Dec 5, 2022) | Available at Statista
- U.S. customer satisfaction with Yahoo from 2002 to 2022(Dec 5, 2022) | Available at Statista
- Brands under Yahoo | Available at Yahoo
- Yahoo Closes FY 2021 with 141% Growth in CTV(February9, 2022)| Available at Yahoo
- Apollo Funds Complete Acquisition of Yahoo(September 01, 2021)| Available at Apollo
- IT Services – Worldwide| Available at Statista
- Software – Worldwide| Available at Statista
- Revenue of Yahoo from 2004 to 2016(Dec 5, 2022)| Available at Statista
- Yahoo and Taboola Enter 30-Year Commercial Agreement(November 28, 2022)| Available at Yahoo
- Revenue of Google from 1st quarter 2008 to 2nd quarter 2022(Dec 2, 2022)| Available at Statista
- Google – Statistics &Facts(Jan 3, 2023)| Available at Statista
- Annual revenue of Google from 2002 to 2021(Dec 2, 2022)| Available at Statista
- Distribution of Google segment revenues from 2017 to 2021(Dec 2, 2022) | Available at Statista
- Verizon Supply Chain| Available at Verizon