YHOO is a good company, but it seemed to have problems showing in its share price. Why is this though. It is maybe because of the way ads work on the Internet. As a technology though YHOO is still innovative and admirable, they are always more liquid then the rest.
But that is the problem for ads, there wasn't a character to hold onto to make you say this is a YHOO ad, it was too liquid in that sense. This is a problem myspace has to a lesser extent, and facebook, despite criticisms of its revenue, does not have. I click on facebook ads, they have this element of facebook respectability (which is worth so much to anyone wanting to value it correctly).
This respectability reflects back onto the advertisers as well. Myspace is still exciting and sexy and has become exclusive in a certain way, it probably needs to use this in its ads. But facebook increasingly has the excitement as well.
I have used YHOO since the 90s. I always go back to it, it is like the place to find yourself online again. If you look at YHOO right now they give you everything in terms of HCI technologies and those ads are looking glossy again.
But GOOG has moved to a place where they do not need to worry if the user thinks this is a google ad, and if that helps or hinders the advertisers, because their technology adapts and is given to those who take the ads on their sites to adapt, with the huge incentive of what a successful adaptation means.
GOOG has taken a bottom up approach, while the other networks still rely on their brand to encourage the user to click. Of course GOOG is a search engine, which is where YHOO came from. And of course it is now moving into social networking.
What has YHOO done exactly ? It has taken its brand, which is essentially the sense that you can do what you like and are given the tools to do so and made a slimmed down yet rich social networking site out if this. This differentiates itself from facebook and myspace.
Myspace used to be: do what you like within your own private profile. This changed, possibly from the barrage of criticism they faced, but there are signs that as always listening to criticism can be bad for your financial health, and they seem to be moving back to their model. But they have done it, having gone sufficiently in the other direction, that the culture of myspace changed to the extent users became more self-regulated, like facebook users have to an extent to be.
But YHOO needs to have a sense of: I cannot do without it, the MOAT for facebook and myspace is to an extent the fact they are myspace and facebook. For some reason users do not seem to like freedom all that much. Facebook is arguably the most restrictive of all the sites, yet it is the most successful.
But there are users who want freedom and perhaps YHOO is attracting them again. There are possible signs of this nascent MOAT on the year on year income statement. To be honest it look functionally better than last time I looked at it, before the crisis. Functionally better does not mean more income necessarily, it is a reflection on the income statement in conjunction with the statement of cash flow. Is everything flowing well, essentially.
If you use multiple social networking sites, one tends to have one as ones favorite for a time. Perhaps YHOO can fill the space, be like its messenger software and be the site you want there all the time. My personal feeling is that GOOG will be challenging this. My initial look at Orkut, suggests a very clear HCI, that crisp differentiation GOOG specializes in, with things you need, for me, like finance. The shopping integration is exciting as well.
The MOAT for GOOG is innovations and quality you expect it to work and be effective and innovative. Anytime GOOG comes out with something there is the assumption it will be these things and more. That is an extraordinary moat to be constructing. It will be interesting to see what this means for social networking success.
That said YHOO has the fluidity and it seems to have found a way to express this is social networking communication, rather than simply making profiles and chatting on messenger. That is a MOAT for YHOO, because it always has been. MOATS need to be moved into new spaces technology creates.
Mostly companies do not have to do this, but they do in Internet technology, where innovation proceeds at breakneck speed. It is one reason why it is hard to analyze tech in traditional ways. This is US creative innovation, in front of your eyes. Hopefully that may be showing where all MOATS show, the financial statements of YHOO.
© 2010 Guy Barry - All Rights Reserved.
