Yahoo’s board met yesterday amidst disappointing financial results that have failed to live up to the expectations of its investors. Prevailing rumors suggest that the board under pressure from investors will vote to break apart the business and sell the pieces.
While it is true that the majority of Yahoo’s revenue comes from online advertising, the future is clearly mobile. Mobile phone numbers are more important than email addresses, and consumers already use their mobile phones more than two hours a day in the U.S. Global expansion depends on mobile.
Power in mobile depends on two core factors: audience and data. Here’s why.
Audience will draw in developers, advertisers and service providers. Today in mobile, audience depends on a strong presence in social networking, instant messaging, and media (e.g., video, music, games, news and books).
Data is the context that drives the value of the audience. The more context brands have about consumers to offer them insights about needs and motivations, the better brands can win, serve and retain those customers in their mobile moments. Winning in data includes access to email, browser, maps, search, wallet, commerce, health, fitness, home and automotive data - as a start. Those who own the mobile OS (e.g., Apple, Google and Microsoft in the U.S.) own the trump card in data.
Simply put, despite a host of strategic mobile acquisitions (e.g., social media, mobile analytics) and new talent, Yahoo! is still too small. It lacks the scale of Facebook or Google. This makes Yahoo a good partner, but not the booming, independent success that each of these businesses has become.
Today Yahoo! announced its acquisition of mobile analytics and ad platform, Flurry. TechCrunch and Kara Swisher on re/code both reported the deal, with a $300M minimum price and $1 billion on the upper end. According to the press release, Flurry sees app activity from 1.4 billion devices monthly and 5.5 billion app sessions per day.
A little math: 1.4 billion devices does not equal one billion active users. However, a user could have one or many apps on his phone with the Flurry software embedded. Apps do not tend to have exclusive arrangements with one mobile analytics provider – let alone the free ones. They tend to have one or more. The code is small and there aren’t many compelling reasons to limit the number of buyers for your inventory unless there is unique value. It becomes hard to compare to the price tags of Viber ($900M) or WhatsApp ($17B to $19B). This is as much a play for audience as it is analytics. Flurry’s scale makes it interesting as an acquisition more so than what they do.
What does the acquisition mean?
No doubt, it’s a huge financial payoff for Flurry and its investors. When we interviewed Flurry a year or so ago for our research, they had 150 employees. 2014 will be known as a year of phenomenal mobile exit events – especially for those companies buying audience. It’s a good time to sell. A few thoughts:
Here at the World Economic Forum annual meeting in Davos, I moderated a CEO discussion on “The New Digital Context” (video below). Thank you to my panelists Marissa Mayer (Yahoo), Marc Benioff (salesforce.com), John Chambers (Cisco), Randall Stephenson (AT&T), and Gavin Patterson (BT).
We are in the age of the customer, where technology is dramatically accelerating the shift in power from institutions to individuals, forcing organizations to be with their customers as they move through time and space.
My big takeaways from the panel:
The age of the customer underpins what’s coming next in tech: context-driven systems, the Internet of everything, and customer-centric software.
Much of the Internet of everything will focus on personal care and health.
These leaders want more transparency from the Obama administration regarding privacy — critical to regaining customer trust.
Total privacy is history. The national security concerns are too great. In the future, the best that people can hope for is that 90% of their data will be private.
My Customer Intelligence colleagues and I, like many others, can't help but wonder how Carol Bartz's departure from Yahoo! is going to play out for the digital behemoth. Shar VanBoskirk's post last week summarizes Yahoo!'s current state, and I agree with her assessment that the company's assets are worth far more piecemeal than as a whole. As she points out, Yahoo!'s advertising capabilities are one of its greatest assets.
But from a CI perspective, so is its OpenID-based Yahoo! ID, which enables single sign-on (SSO) functionality for its more than 273mm global email-service users. Now, while a relative minority of those users actually take advantage of Yahoo! ID across the web today, the demand for SSO and federated identity is growing such that Yahoo!'s broad user base and consumer trust is already tremendously valuable.
So, who are the "unusual suspects" that have the most interesting opportunity for acquiring Yahoo!'s personal services/communications/identity management business?
Wal-Mart. Yep, you read it right. Wal-Mart, despite being the world's largest retailer, continues to lose digital market share to Amazon, and it clearly wants to change that. Last month, it restructured its online organization to better align with its brick-and-mortar presence and just this week announced plans to to buy "key assets" of mobile ad targeter OneRiot. Yahoo! ID would give Wal-Mart the single sign-on capability that it doesn't have today, with some nice benefits over Amazon's closed-ecosystem identity service. And Yahoo!'s user base is, demographically speaking, a slightly better fit for Wal-Mart than other major big-box retailers.