Yahoo’s Surprising Success Strategy

Is Yahoo! on track with its latest business strategy, or is it losing the focus that made it a force to be reckoned with in the online arena?

In the last year, Yahoo! has purchased HotJobs.com and rolled out a stream of services that use its portal-building and streaming media expertise to help corporations reach employees.

But the move that has raised the most eyebrows by far is Yahoos alliance with SBC Communications, in which the two companies are offering co-branded Internet service. First, the companies targeted the dial-up market, and more recently they waded into the market for DSL (digital subscriber line) high-speed access.

Buying Time

Most questions about the prudence of Yahoo’s expansion moves were shunted aside by the company’s third-quarter earnings report, which far exceeded expectations and seemed to indicate that Yahoo! might be poised to lead online media companies out of the woods.

Still, given that the company seems to have righted its fiscal ship, why would it want to jump into the telecom fray, especially at a time when telecom firms are among the only ones to have suffered more than dot-coms?

Forrester Research analyst Charlene Li told the E-Commerce Times that Yahoo! has a lot to offer consumers who are searching for a way onto the Web. Its dominance in the portal market makes it a logical candidate to offer online service as well, she said.

“Some of what Yahoo! does, like real-time stock quotes, really shines in a broadband environment,” Li noted. “This is Yahoo! putting its best foot forward in a way.”

On the Upside

The deal also seems to pose little risk for Yahoo, Li noted.

Under terms of the agreement, Yahoo! will provide content, personalization and customization features, as well as discounts on premium Yahoo! services, while SBC will provide the broadband access. SBC Yahoo! DSL hit the market last month in 13 states, with some 26 million potential customers. Yahoo! said it does not have recent figures on sales or adoption of the new service.

Financial details of the partnership have not been released, but Li noted that by setting an initial price for their offering that is lower than comparable services from MSN and AOL, Yahoo! and SBC may steal some market share from those two service providers.

Looking Ahead

Meanwhile, the upside for Yahoo! may be nearly unlimited, if it can convert its user base to broadband quickly while ensuring users’ continued loyalty to the Yahoo! brand, IDC vice president Richard Villars told the E-Commerce Times.

Like a similar deal between Verizon and MSN, Villars said, the SBC-Yahoo! deal is a way for the portal to enhance its distribution channels, making it far more likely that consumers will embrace video-on-demand and other long-promised premium services as broadband becomes more widely adopted.

“Portals will have a lot of clout in the Internet of the future,” he noted.


  • Definitely Yahoo! pairing up with SBC will give them a ‘sitting market’ at which to target their products and offerings that their competition have had for some time (MSN and AOL). Yahoo! have done really well so far even without that, so watch what they can do now! 😉

    • Ms. Johnston… I AM a student at the University of Texas – Pan American. For my management class, I AM researching ways Yahoo! could continue to increase it’s involvement in global market strategy. You gave a lot of ways they are making their presence known, but what makes them really stand out globally? What makes them so different from ebay? or from AM azon? or the personals you mentioned? It’s been interesting to learn of the laws any company has to adhere to when they market their product in another country. Any thoughts/insights would be tremendously helpful. Thanks!!!

  • I have worked for Yahoo! recently and I think there are good reasons to be extremely optimistic about their future position and stock price.
    Portals are my main area of interest (see my articles on Informit.com under the Ebusiness section). The Yahoo! Enterprise Services’ recent decision to partner with BEA Weblogic and others more strongly, taking the emphasis off of their relationship with Tibco, can only be good for future profits in the Portals area and in the Professional Services area in my opinion.
    Within all other areas of Yahoo!, there are drives towards finding ways of creating revenue from all the services offered by Yahoo! and some of these will be exceptionally successful I believe.
    I think that EBay should watch its back in the Auctions market as I feel sure Yahoo! will make big inroads in that direction in the near future. I also believe that Yahoo! shops (http://www.yahoo.com/r/s3) will give Amazon Z-Shops a run for its money. Yahoo Bill Pay (http://finance.yahoo.com/bp), though it has limitations right now, will be the leader in the personal billing field I suspect.
    Yahoo! Travel (http://www.yahoo.com/r/ta) is set to be extremely successful, as is Yahoo! Personals (http://www.yahoo.com/r/pr) in gaining revenue from the ‘young people’ market. Yahooligans! (a fantastic portal site for kids, I think it is a classic and much-underestimated) is aimed at capturing the next generation too!!
    See, no one is safe!
    I believe that, much as IBM was caught out by underestimating Microsoft in the 1980s, and it lost the PC market, we could be about to see a situation whereby Microsoft itself is surprised to lose a great deal of the internet to Yahoo!
    Of course, the one thing that may hamper their growth is that I no longer work for them! 😉
    In the US all these services are available already, but the one factor that I think holds back Yahoo! is that it focuses on the US market so strongly – it really should focus on some key other markets also – esp the UK.
    If anyone would like any more information on these issues, please contact me. I write articles, give talks and advice on Ebusiness issues.
    Michelle Johnston
    EBusiness Consultant

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