Yahoo's Potential Suitors Are A Motley Crew

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.
     
  • Adobe. The software giant has been scooping up web intelligence providers pretty aggressively in the last couple of years — Omniture, Demdex, and, most recently, Echosign — signaling its desire to become a leader in digital targeting. Acquiring Yahoo! is a two-sided win for Adobe: it gets to fold the wealth of Yahoo!'s user data into its web analytics and ad serving solutions, and it acquires the ability to tie an incredibly well-leveraged SSO solution with Echosign's digital signature solution, making it one of the first mainstream intermediaries for executing legal transactions digitally. Huge. 
     
  • Microsoft. The two companies have a complicated history. In 2008, Microsoft made two separate bids to acquire Yahoo! (first in its entirety, and later for its search business) that were both rebuffed. Two years later, Yahoo! would sign an agreement for Microsoft's Bing search engine to power Yahoo! search. Then, just this summer, the two companies buddied up with Google on schema.org, a protocol that "webmasters can use to markup their pages in ways recognized by major search providers." We believe that schema.org is one of the first steps towards a semantic web standard that will, by design, require identity verification and authorization. Since Microsoft's own attempt at identity — CardSpace — has been canceled, we can envision a scenario where it would combine Yahoo! ID with its own claims-based identity management technology (U-Prove) to create a cutting edge protocol that will already have broad reach simply by virtue of Yahoo!'s user base.
     
  • Sony. Sony's Consumer Products & Services division, which includes TVs, devices, Sony Online Entertainment, and the Playstation network, represents nearly 50% of the company's revenue. I can't think of one single company better suited to tackling the Splinternet by creating an OpenID-based ecosystem for sharing content and personal data across myriad services and devices. Apple is too protective of its tightly controlled ecosystem, while Google is still too new (and too underpenetrated) in the hardware game. A Yahoo! acquisition would let Sony migrate 100+mm user accounts to Yahoo ID!, thus 1) enriching that data source with a completely new set of variables, and 2) enabling it to push relevant ads and content to the millions of devices it sells. 

Yahoo! is putting on a great game face in the aftermath of Ms. Bartz' firing. But it's hard to imagine that it will be able to reinvent itself quickly enough to satisfy shareholders; that kind of innovation's just not in the organization's DNA anymore. I'm looking forward to seeing which companies are enterprising enough to see the value in Yahoo!'s identity management and personal services business.

Who else do you think might go nosing about for Yahoo's identity assets? Comcast? AT&T? Baidu? Samsung? I'd love to hear your thoughts!

Comments

Is there a "social" play?

I love the perspective here. In addition to the folks you've mentioned, I wonder if any of the social media players would take a look - interesting opportunity for them to get immediate access to more "traditional" online data. Who else? DMPs, data compilers and aggregators, agency holding companies? Ironic to think how valuable Yahoo! might be to others.

The holding company angle is

The holding company angle is interesting, Dave. I think it would have to be one that's already shown interest in data assets... WPP and Omnicom come to mind.

A fun read Fatemeh! Microsoft

A fun read Fatemeh! Microsoft seems the most logical given their existing ties and Microsoft's penchant for overpaying for past-their-prime legacy businesses. The stars really align on this one. Wal Mart is theorhetically interesting. I enjoyed your reasoning behind this; but I think this is so far from Wal Mart's core business that they wouldn't do it. Sony is a zombie, and more likely an acquisition target themselves. Away from gaming, their business is in too much turmoil to even think about how they would shift and integrate these elements. This would mark a nice change of direction for Adobe. Flash is dead, and they need to use their cash to get a new direction, and quick.

My dark horse prediction is

My dark horse prediction is not all that dark: Private Equity. You are absolutely correct that the sum of the parts is worth far more than the whole. Taking it private and getting it out the quarterly churn-and-burn would give (new) management the time to realign, streamline, and prep the pieces for sale. Think Hellman & Friedman's acquisition of Doubleclick... the constant urgency to produce quarterly numbers really kept DC from reaching its potential. Taking it out of the quarterly earnings game, cleaning it up, and parting it out produced a 500% profit for HF in about 18 months. Yahoo is in the same boat.

Hey HJ - Agreed on the

Hey HJ -

Agreed on the private equity front -- I don't think Yahoo! has the kind of leadership it takes streamline and break apart the business today. There are, however, areas of the business that are probably much easier to divest quickly, and I suspect the data/identity asset is one.

Thanks for weighing in!

Did I mention that Flash (in the context of mobile) was dead?

So... maybe Adobe?

They have cash, their business is shifting... they already like the web analytics space. Who knows...

Very good article thanks a

Very good article thanks a lot for sharing with us, great job