For Sale: One Used Internet Company Called Yahoo

Apr 17, 2016
Originally published on April 18, 2016 7:39 am

Yahoo goes on sale Monday. At least some of you reading this are thinking, "Yahoo? Are they still around?"

Yes, this company founded in 1994, is ancient by Internet standards, but, according to the measurement company comScore, Yahoo sites are the third-most trafficked on the Internet. Among its properties are Yahoo Finance, News, Search, Mail, Tumblr and Flickr.

Why is Yahoo on sale? Despite having a billion monthly unique visitors — as the company claimed in its 2014 report — Yahoo just hasn't been able to make its investors happy.

Over the last decade, six different CEOs have passed through its doors. The latest, Marissa Mayer, is a talented computer scientist who was one of Google's earliest employees and played a crucial role in its success. But Yahoo is a puzzle that, after nearly four years, even Mayer can't solve.

"It's not like Yahoo doesn't have revenue coming in, they do," says analyst Rob Enderle. "They just don't have enough revenue coming in to cover the costs."

When Yahoo was founded, the Internet ad business was small and Yahoo was popular. It seemed like it could be a big player as the Internet grew up. But now, Facebook and Google have eclipsed Yahoo, with sophisticated algorithms that target the ads to the most-interested eyeballs.

Yahoo, for its part, is expected to capture more than $2.6 billion in worldwide digital ad revenues, according to eMarketer. But that's only 1.5 percent of the online ad market. Google and Facebook control 40 percent.

Though CEO Mayer has made some high-profile content acquisitions, such as the blog site Tumblr and talent like David Pogue and Katie Couric, she and her predecessors have spent a lot of time trying to make Yahoo search better.

Yahoo may be the number three search engine in the United States, but that only amounts to less than 13 percent of the market share. Google has nearly 65 percent and Bing has the rest.

Enderle thinks Yahoo instead should have tried to be a social site more like Facebook. "Facebook is incredibly profitable," Enderle says. "They should have focused more on making the communities their center of power than the information."

We asked some Yahoo users what has kept them loyal to the company. Yahoo Finance, for example, has garnered praise from many people who like its tools for learning about stocks and companies.

Many of the people who responded to the NPR inquiry said they stay on certain Yahoo sites because they've been there for a long time.

"Yahoo itself has never been anyone's favorite," says Jen DeMayo, who co-founded a listserv for parents in the Washington, D.C., area with 6,500 subscribers. "It's just sort of the platform where it started and no one's moved it anywhere."

There's been debate over which companies are going to bid for Yahoo. The sale is not expected to include Yahoo's most valuable assets, namely its share in the Chinese online retailer Alibaba and Yahoo Japan.

Potential buyers of Yahoo's other properties include Verizon, AT&T and Comcast. These companies have a way to reach people over the Internet, but ownership of Yahoo might give them a better relationship with consumers and a lot of that precious stuff called "user data" which will help them further understand tastes and demographics.

What will the sale mean for those tens of millions of people who still use Yahoo products? It's not clear. Whoever buys Yahoo may try hard to keep its users — or not. Or it could mean the end of the Yahoo brand and with it, an era of Internet history.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

RENEE MONTAGNE, HOST:

Want to buy a used Internet company? There's one coming up for sale today, Yahoo. One of the pioneers of the Internet has been struggling for years to meet the expectations of its investors, despite more than 1 billion monthly visits to its sites. Joining me now to talk about the sale is NPR's digital culture correspondent, Laura Sydell. Good morning.

LAURA SYDELL, BYLINE: Good morning.

MONTAGNE: Why is Yahoo up for sale at this moment in time?

SYDELL: It's odd in a way because it's got so many users still. And here's a company with so many popular sites and is, in fact, the third most trafficked site on the Internet. Yet, its investors are not happy. Yahoo makes a profit but not enough profit. And the truth is that the use of its sites has been slowly going down.

MONTAGNE: Still though, if that many users are there, you'd think Yahoo would be quite profitable or profitable enough not to be on sale.

SYDELL: You'd think that, wouldn't you? But, you know, think back here. Yahoo was founded in 1994 by a couple of Stanford students, Jerry Yang and David Filo, and the commercial Internet was still pretty new. Their idea was that they were going to create a directory of their favorite sites. And it became this portal to the web that picked sites that were popular.

A few years later, a couple of other Stanford students started a search engine called Google, and that changed the way people found things on the Internet. So then Facebook comes along, organizes groups of people and, most importantly, Facebook and Google come up with very smart algorithms and ways to get ads to the eyeballs of people who are most likely to find them interesting. So pretty much Facebook and Google have 40 percent, now, of the online ad market, and poor little Yahoo only gets around 1 and a half percent.

MONTAGNE: Well, exactly - then what will Yahoo be selling?

SYDELL: Most of what people think of when they think of Yahoo are its news sites - Yahoo Finance groups, sports, fantasy football, its email service. Then there are some popular properties that it's acquired over the years, like the photo sharing site Flickr and the blog and social networking outlet Tumblr. What's not for sale is its very valuable - as in $32 billion valuable - share in the Chinese online shopping company Alibaba. And it's unlikely they will sell Yahoo Japan, which is also very profitable.

MONTAGNE: And then who are the likely buyers?

SYDELL: You know, there have been a wide range of possible buyers. Among them, Verizon seems to be the bidder that a lot of analysts think is going to make the most sense. Verizon has shown a lot of aspirations to become more than, say, delivery pipes. Last year it acquired another ancient Internet company. You may remember AOL. And AOL doesn't nearly have the number of users that Yahoo does for its properties. So if Verizon buys Yahoo, then it gets a lot more users. And this is going to be a good formula for selling ads. The way the ad market works these days, Renee, is that advertisers prefer to make a few really big deals rather than going around to a bunch of small companies. So if Verizon were to have Yahoo and AOL, they'll be able to sell big ad packages.

MONTAGNE: And Laura, if Yahoo has so many users, some of them must be listening right now and wondering exactly what's going to happen to their email account or favorite finance site.

SYDELL: You know, I would imagine that a buyer like Verizon actually would want to keep those sites up and running and hopefully make improvements. But another scenario is Yahoo could get bought by a company that's less interested in maintaining those sites than in just getting all the valuable data about who is using those sites and using it for other purposes. So no guarantees if you've been using Yahoo. Sorry.

MONTAGNE: Laura, thanks very much.

SYDELL: You're welcome.

MONTAGNE: NPR's Laura Sydell. Transcript provided by NPR, Copyright NPR.