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What Is a Case Study?
When you’re performing research as part of your job or for a school assignment, you’ll probably come across case studies that help you to learn more about the topic at hand. But what is a case study and why are they helpful? Read on to learn all about case studies.
Deep Dive into a Topic
At face value, a case study is a deep dive into a topic. Case studies can be found in many fields, particularly across the social sciences and medicine. When you conduct a case study, you create a body of research based on an inquiry and related data from analysis of a group, individual or controlled research environment.
As a researcher, you can benefit from the analysis of case studies similar to inquiries you’re currently studying. Researchers often rely on case studies to answer questions that basic information and standard diagnostics cannot address.
Study a Pattern
One of the main objectives of a case study is to find a pattern that answers whatever the initial inquiry seeks to find. This might be a question about why college students are prone to certain eating habits or what mental health problems afflict house fire survivors. The researcher then collects data, either through observation or data research, and starts connecting the dots to find underlying behaviors or impacts of the sample group’s behavior.
Gather Evidence
During the study period, the researcher gathers evidence to back the observed patterns and future claims that’ll be derived from the data. Since case studies are usually presented in the professional environment, it’s not enough to simply have a theory and observational notes to back up a claim. Instead, the researcher must provide evidence to support the body of study and the resulting conclusions.
Present Findings
As the study progresses, the researcher develops a solid case to present to peers or a governing body. Case study presentation is important because it legitimizes the body of research and opens the findings to a broader analysis that may end up drawing a conclusion that’s more true to the data than what one or two researchers might establish. The presentation might be formal or casual, depending on the case study itself.
Draw Conclusions
Once the body of research is established, it’s time to draw conclusions from the case study. As with all social sciences studies, conclusions from one researcher shouldn’t necessarily be taken as gospel, but they’re helpful for advancing the body of knowledge in a given field. For that purpose, they’re an invaluable way of gathering new material and presenting ideas that others in the field can learn from and expand upon.
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Case Study on Yahoo
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- 1. 1 | P a g e Introduction: Organization Overview: Yahoo was established in 1995 in Delaware and launched a highly successful initial public offering IPO in April 1996. The founders of Yahoo David Filo and Jerry Yang were PhD candidates in electrical engineering at Stanford University when they set up this company.Yahoo’s stock price rose to the high of $120 in 2000 but 2009 has been trading under $14. Now, Yahoo is the second leading global Internet brand and one of the most trafficked Internet destinations worldwide. At present, Yahoo has offices in more than 25 countries, provinces, or territories. In 2008 Yahoo’s revenues increased by 3.4 percent to $7.2 billion which was $6.9 billion in 2007. But their net income decreased by 35.7 percent to $424 million compare with 2007. We found that the company owned and operated online properties and services. They also provide advertising offerings and access to Internet users beyond Yahoo through its distribution network of third-party entities, who have integrated its advertising offerings into their Web sites. Most importantly Yahoo generates revenues by providing marketing services to advertisers across hundreds of Web sites. Yahooprovides many of the services to users are free and charge fees for a range of premium services. Yahoo’s core strategy and operations is to become the starting point for Internet users. To become the starting point for Internet users they provide must-buy marketing solutions for the world’s largest advertisers and also to deliver industry-leading open platforms that attract developers and publishers. Vision and Mission: Vision and mission statement of Yahoo is- “Yahoo powers and delights our communities of users, advertisers, and publishers—all of us united in creating indispensable experiences, and fueled by trust.” Excellence, Innovation, Customer Fixation, Teamwork, Community, and Fun those are the Company’s code of morals.
- 2. 2 | P a g e Organizational Chart: Current situation: Now, Yahoo is the second leading global Internet brand and one of the most trafficked Internet destinations worldwide. At present, Yahoo has offices in more than 25 countries, provinces, or territories. In 2008 Yahoo’s revenues increased by 3.4 percent to $7.2 billion which was $6.9 billion in 2007. But their net income decreased by 35.7 percent to $424 million compare with 2007. We found that the company owned and operated online properties and services. They also provide advertising offerings and access to Internet users beyond Yahoo through its distribution network of third-party entities, who have integrated its advertising offerings into their Web sites. Most importantly Yahoo generates CEO Co-founder and Chief Yahoo Co-founder and Chief Yahoo Executive vice president, General Counsel and secretary Executive VP products & Chief Technology Engineering and Operation Executive VP North America Chief Marketing Office Global Marketing Chief of Human Resource
- 3. 3 | P a g e revenues by providing marketing services to advertisers across hundreds of Web sites. Yahoo provides many of the services to users are free and charge fees for a range of premium services. Products and Services: Yahoo offers various services which include Yahoo Groups, Yahoo Answers, and Flickr and are generally provided to users free of charge. Yahoo search offers include Yahoo Search, Yahoo Local, Yahoo Yellow Pages and Yahoo Maps those are available free to users. It also provides marketing services to advertisers across hundreds of web sites. The Yahoo Communications includes Yahoo Mail, Zimbra Mail, and Yahoo Messenger those provide a wide range of communication services to users. Strategy of Yahoo: Yahoo’s core strategy is to become the starting point for Internet users. To become the starting point for Internet users they provide must-buy marketing solutions for the world’s largest advertisers and also to deliver industry-leading open platforms that attract developers and publishers. Existing Strategies: Horizontal Integration: Analyzing the case we found that Yahoo try to increase control over the competitors. They have resumed discussion with Microsoft about search and advertising partnerships as both company struggles to compete with Google. Market development: At present, Yahoo has offices in more than 25 countries, provinces, or territories. In 2008 Yahoo’s revenues increased $7.2 billion by 3.4 percent which was $6.9 billion in 2007. Market Penetration: According to the case, Yahoo owned and operated online properties and services. They also provide advertising offerings and access to Internet users beyond Yahoo through its distribution network of third-party entities, who have integrated its advertising offerings into their Web sites.
- 4. 4 | P a g e Products development: Most importantly Yahoo generates revenues by providing marketing services to advertisers across hundreds of Web sites. Yahoo provides many of the services to users are free and charge fees for a range of premium services. Internal Factors Analysis: As we know Internal factors analyze or audit requires gathering and assimilating information about the firm’s management, marketing, finance, productions/operations, research and development, and management information system. Management function: We know function of management includes:- 1. Planning: Yahoo’s core strategy is to become the starting point for Internet users. To become the starting point for Internet users they provide must-buy marketing solutions for the world’s largest advertisers and also to deliver industry-leading open platforms that attract developers and publishers. 2. Organizing: Yahoo organizing their departments quite good that’s why their revenues is increased 10% in 2007 to 2008. 3. Motivating: They should take some steps to motivate the employees. We know without employees motivates the company cannot implement or achieve their goals. 4. Staffing: Analyzing the case we found that Yahoo has been extensively reducing its workforce because of profit decline. They eliminated 675 employees at 1st quarter of 2009 and at the end of 2009 they also eliminated 700 employees. 5. Controlling: To increase the profit and reduced the cost Yahoo closed its third video property, Maven Network based in Cambridge Massachusetts and also they plan to close twenty video services. Internal Factors Evaluation (IFE) Matrix: We know Internal Factors Evaluation (IFE) Matrix helps to evaluate the major strengths and weaknesses in the functional areas of a business.
- 5. 5 | P a g e Strengths: 1. one of the most important strength of Yahoo is it has reputation among the search engine business and it is the second leading internet brand in the industry. 2. Yahoo offers various services which include Yahoo Groups, Yahoo Answers, and Flickr and are generally provided to users free of charge. 3. It also provides marketing services to advertisers across hundreds of web sites. 4. In 2008 Yahoo’s revenues increased by 3.4 percent from 2007. 5. Aggressive cost cutting allowed to Yahoo to increase the profits. 6. Yahoo’s market capacity, revenue, operating margin ratios is above the industry benchmark. Weaknesses: 1. According to the case, Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to net income in 2006. 2. It generates more revenues but because of its overall advertising spend the net income is goes down. 3. In 2008 its current ratio, net profit margin, earning per share, total assets turnover ratios is lower than the 2006. 4. Yahoo only possessed 17 percent of internet traffic where their main competitors Google has 72 percent. 5. Yahoo closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services which includes network site Yahoo! 360 and its Web hosting service GeoCities.
- 6. 6 | P a g e Key Internal Factors Weight Rating Weighted Score Strengths 1. In the search engine business Yahoo is the second leading internet brand in the industry. 0.08 3 0.24 2. Yahoo offers various services which include Yahoo Groups, Yahoo Answers, and Flickr and are generally provided to users free of charge. 0.09 4 0.36 3. It also provides marketing services to advertisers across hundreds of web sites. 0.10 3 0.30 4. In 2008 Yahoo’s revenues increased by 3.4 percent from 2007. 0.07 3 0.21 5. Aggressive cost cutting allowed to Yahoo to increase the profits. 0.08 4 0.32 6. Yahoo’s market capacity, revenue, operating margin ratios is above the industry benchmark. 0.08 3 0.24 Weaknesses 1. According to the case, Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to net income in 2006. 0.10 1 0.10 2. It generates more revenues but because of its overall advertising spend the net income is goes down. 0.09 2 0.18 3. In 2008 its current ratio, net profit margin, earning per share, total assets turnover ratios is lower than the 2006. 0.12 1 0.12 4. Yahoo only possessed 17 percent of internet traffic where their main competitor Google has 72 percent. 0.10 1 0.10 5. Yahoo closed its third video property, Maven Network and they plan to close twenty video services which includes network site Yahoo! 360 and its Web hosting service GeoCities. 0.09 2 0.18 Total 1.00 2.35
- 7. 7 | P a g e External Factors Analysis: The purpose of an external factors analysis is to find out the list of opportunities that could benefit a firm and threats that should be avoided. Opportunity: 1. In the Internet search business industry, Yahoo is the second most leading worldwide internet brand. 2. Yahoo improved identification that customers use additional of their time online. 3. Another opportunity for Yahoo is in USA, $ 23 billion revenue from Internet advertisement remains them strong. 4. Until 2006 there are 1.1 billion internet user around the world and 211 million in USA. 5. The increasing numbers of Internet users are now spend huge time in the online. Threats: 1. Due to economic recession the development of economy has been slowed in the USA and globally. 2. Internet media and market research firm comScoreInc, uttered concerns about deceleration in online growth. 3. At some stage in 2008, Google had 72% of internet passage whereas Yahoo only haunted 17% of internet passage. 4. Yahoo works with the internet products, services and substance markets. And that is incredibly aggressive and characterize by quick transform, converging technologies and growing opposition. 5. Increasing strength of competitors: In internet ear, Google, Microsoft, Amazon.com, EBay, Monster.com, MySpace, Facebook, and YouTube are the more than Yahoo. We can see that Google 50% people at present. But Yahoo user men are 29%. 6. More Internet related businesses: At present all most work are complete by internet. As a result many internet related company are increasing which is a threat for yahoo. 7. Rapidly technology changes: For changing technology rapidly, it is difficult to be up to date all the time. And changing legislative, Man can not to use internet easily.
- 8. 8 | P a g e 8. The search engine industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. External Factor Evaluation (EFE) Matrix: We know External Factor Evaluation Matrix allows summarize and evaluate a firm external opportunities and threats. Here we evaluate the Yahoo’s external opportunities and threats:- Key External Factors Weight Rating Weighted Score Opportunities: 1. In the Internet search business industry, Yahoo is the second most leading worldwide internet brand. 0.08 3 0.24 2. Yahoo improved identification that customers use additional of their time online. 0.10 2 0.20 3. Another opportunity for Yahoo is in USA revenue from Internet advertisement remains them strong. 0.10 4 0.40 4. Until 2006 there are 1.1 billion internet user around the world and 211 million in USA. 0.07 3 0.21 5. The increasing numbers of Internet users are now spend huge time in the online. 0.08 4 0.32 Threats: 6. Due to economic recession the development of economy has been slowed in the USA and globally. 0.08 3 0.24 7. Internet media and market research firm comScoreInc, uttered concerns about deceleration in online growth. 0.10 3 0.30 8. At some stage in 2008, Google had 72% of internet passage whereas Yahoo only haunted 17% of internet passage. 0.12 4 0.48 9. Increasing strength of competitors 0.10 3 0.30
- 9. 9 | P a g e 10. It is difficult to be up to date all the time because technology is changing rapidly. 0.08 3 0.24 11. The search engine industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. 0.09 4 0.36 Total 1.00 3.29 Porter’s Five forces Model: We know Porter’s five forces model of competitive analysis is a widely used approach for developing strategies many industries. The Porter’s five forces discussed below: 1. Rivalry among competing firms: According to the case we found that Google has 72% of Internet traffic on the other hand Yahoo only possessed 17% followed by MSN at 6% and IACI at 4%. Another fact is that Google has 42% of search engine utilization compared to Yahoo which has 23.8%. Yahoo’s another vital competitors Microsoft has a strong desire to increase its internet presence. Their main competitors Google has expanded well beyond search related functions into areas such as e-mail (Gmail), mapping (Google Maps), web-based productivity applications (Google Apps), a finance offering (iGoogle), a mobile Internet software platform(Android) and browser software(Google Chrome). 2. Potential entry of new competitor: The search engine industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. By analyzing the case we found that there are 1.1 billion internet users around the world and also internet advertisement generates more revenue which is encouraged to new entries to enter in the industry. 3. Potential development of substitute products: The industry has more potential substitute products. From the case we know that there are top 25 Internet properties exist including Yahoo, Google and so on provides internet search engine services. 4. Bargaining power of Suppliers: Yahoo should pursue a backward integration strategy to gain control or ownerships of suppliers.
- 10. 10 | P a g e 5. Bargaining power of Buyers: According to the case, there are more than 20 Internet properties existing in the industry which provide internet search engine services. So, customers have plenty of option, they can switch to competing brands or substitutes product. CPM (competitive profile matrix): We know CPM identifies a firm’s major competitors and its strength and weakness. For understanding the external environment and the competition in a particular industry, they use CPM. It finds out firm’s key competitors and then compares with firm’s critical success factors. Like advertising, product quality, market share etc. As it compares the strengths and weakness, firm should know which area they need to improve and which need to protect. In CPM rating refers to strength and weakness where, a) 4= major strength b) 3= minor strength c) 2= minor weakness d) 1= major weakness In this case we found Yahoo’s main competitor is Google. They have another competitors like MSN, AOL, Microsoft, ASK and other but bigger competitor is Google. Google is a top web property in all major global markets today. It is a big name in international market and most of the people choose Google then the other sites like Yahoo! Reason is Google provides very speedy results. Now we are going to make CPM between Yahoo and Google: Critical success factor Yahoo Google weight Rating Score Rating Score Advertisement 0.05 2 0.10 3 0.15 Online product and 0.10 3 0.30 4 0.40
- 11. 11 | P a g e service Market share 0.20 2 0.40 4 0.80 Number of advertisement member 0.10 2 0.20 4 0.40 Earnings per share 0.15 2 0.30 3 0.45 Global leader and technology 0.25 2 0.50 4 1.00 Brand reputation 0.15 4 0.60 4 0.60 Total 1.00 2.40 3.80 The weight ranging from .0-1.0 means low impotence to high importance. And this number indicates how important the factor is. In CPM of Yahoo’s is the strongest in only “brand reputation” because it indicated by rating 4 where Google is strong in “online product service, Market shares, number of advertisement member, brand reputation and global technology” it also indicated by rating 4. Yahoo has so many minor weaknesses and that’s why they got 2 ratings. Still they have no major weakness. But in overall analysis Google is stronger than Yahoo because Google’s total weighted score is 3.8 where Yahoo got 2.4 score. Financial Analysis: Yahoo’s revenue was $23.4 billion in 2008 which is record and exceeded 2007’s performance. The company’s former record was $21.2 billion that means revenue increased 10.6% in 2008. But because of their overall advertising spending the net income is decreased. Here, by analyzing various ratios we are analyzing the company’s financial performance.
- 12. 12 | P a g e Liquidity Ratios: Liquidity ratios measure a firm’s ability to meet maturing short-time obligations. It is one of the vital ratios to know the organization's position. 1. Current Ratio: Current assets / Current liabilities. Current Ratio (2006) = $ 3,750,142 / $ 1,473,994 = 2.54 times Current Ratio (2007) = $ 3,237,722 / $ 2,300,448 = 1.41 times Current Ratio (2008) =$ 4,745,498 / $ 1,705,015 = 2.78 times Interpretation: We know, current ratio measures the company’s ability to pay off its current liabilities. Here we can see that Yahoo’s current ratio is above 1 that means by these current assets they can meet current liabilities. 5.54 1.41 2.78 0 1 2 3 4 5 6 2006 2007 2008 Current Ratio Current Ratio
- 13. 13 | P a g e 2. Quick Ratio: (Current assets-Inventory) or (Cash and equivalents + Marketable securities + Account receivables) / Current liabilities Quick Ratio (2006) = $ (3,750,142 –217,779) / $ 1,473,994 = 2.40 times Quick Ratio (2007) = $ (3,237,722- 180,716) / $ 2,300,448 = 1.33 times Quick Ratio (2008) = $ (4,745,498 – 233,061) / $ 1,705,015 = 2.67 times Interpretation: Quick ratio measures which a firm can meet its short-term liabilities without relying upon the sale or revenue of its inventory. In 2006 the Yahoo’s quick ratio was 2.4 times and in 2007 it’s goes down. But in 2008 quick ratio again increase and all three years their quick ratio was above 1.5 which is good enough expect 2007. 2.4 1.33 2.67 0 0.5 1 1.5 2 2.5 3 2006 2007 2008 Quick Ratio Quick Ratio
- 14. 14 | P a g e Leverage Ratios: We know, Leverage ratios measure the extent to which a firm has been financed by debt. 1. Debt-to-Total-Assets Ratio: Total Debt / Total Assets Debt-to-Total-Assets Ratio (2006) = $2,352,998 / $11,513,608 = 20.44% Debt-to-Total-Assets Ratio (2007) = $ 2,696,910 / $ 12,229,741 = 22.05% Debt-to-Total-Assets Ratio (2008) = $ 2,438,906 / $ 13,689,848 = 17.81% Interpretation: Debt-to-Total-Assets Ratio represents the percentage of total funds that are provided by creditors. From the chart we can see that 17.81% funds collected from creditors out of total funds in 2008 which is less than the other two years 2006 and 2007. 20.44% 22.05% 17.81% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2006 2007 2008 Debt-to-Total-Assets Ratio Debt-to-Total-Assets Ratio
- 15. 15 | P a g e 2. Debt-to-Equity Ratio: Total debt / Total stockholders’ equity Debt-to-Equity Ratio (2006) = $2,352,998 / 9,160,610 = 25.68% Debt-to-Equity Ratio (2007) = $ 2,696,910 / 9,532,831 = 28.29% Debt-to-Equity Ratio (2008) = $ 2,438,906 / 13,689,848 = 17.81% Interpretation:Debt-to-Equity Ratio measures the percentage of total funds provided by creditors versus by owners. In 2006, 2007 and 2008 respectively 25.68%, 28.29 and 17.81% funds collected from creditors comparing with owners or stockholders. Activity Ratios: 1. Total Assets Turnover: Sales / Total Assets Total Assets Turnover (2006) = 6,425,679 / 11,513,608 = 0.56 times Total Assets Turnover (2007) = 6,969,274 / 12,229,741 = 0.57 times Total Assets Turnover (2008) = 7,208,502 / 13,689,848 25.68% 28.29% 17.81% 0.00% 10.00% 20.00% 30.00% 2006 2007 2008 Debt-to-Equity Ratio Debt-to-Equity Ratio
- 16. 16 | P a g e = 0.53 times Interpretation: We know, Total Assets Turnover measure whether a firm is generating a sufficient volume of business for the size of its assets investment. In 2006 their Total Assets Turnover was 0.56 times that means every 0.56 times they are generating revenue from assets investment. In 2007 the total assets turnover was increased but 2008 it fall down. Profitability Ratio: 1. Net Profit Margin: Net Income / Sales Net Profit Margin (2006) = $751,391 / $6,425,679 = 11.70% Net Profit Margin (2007) = 660,000 / 6,969,274 = 9.47% Net Profit Margin (2008) = $424,298 / $7,208,502 = 5.89% 0.56 0.57 0.53 0.5 0.52 0.54 0.56 0.58 2006 2007 2008 Total Assets Turnover Total Assets Turnover
- 17. 17 | P a g e Interpretation: We know net profit margin shows how many percent revenues or sales they can convert to net income or profit. Here we can see that Yahoo in 2006 their net profit was 11.70% which is quite good but after that their profit margin goes down which is threated for them. In 2008 their profit margin only 5.89%. 2. Return on Total Assets: Net Income / Total Assets Return on Total Assets (2006) = $751,391 / $11,513,608 = 6.53% Return on Total Assets (2007) = $660,000 / $12,229,741 = 5.40% Return on Total Assets (2008) = $424,298 / $13,689,848 = 3.1% 11.70% 9.47% 5.89% 0.00% 5.00% 10.00% 15.00% 2006 2007 2008 Net Profit Margin Net Profit Margin 6.53% 5.40% 3.10% 0.00% 2.00% 4.00% 6.00% 8.00% 2006 2007 2008 Return on Total Assets Return on Total Assets
- 18. 18 | P a g e Interpretation:As we know Return on Total Assets ratio measure how efficiently a company can manage its assets to produce profits. In 2006 ROA was 6.53% but after that it was decreased dramatically which is almost half in 2008 compare with 2006. That means Yahoo cannot manage its assets effectively to make profit. 3. Return on Stockholders’ Equity: Net Income/ Total stockholders’ equity Return on Stockholders’ Equity (2006) = 751,391 / 9,160,610 = 8.20% Return on Stockholders’ Equity (2007) = 660,000 / 9,532,831 = 6.92% Return on Stockholders’ Equity (2008) = 424,298 / 11,250,942 = 3.77% Interpretation:As we know Return on Equity measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested. By analyzing Yahoo’s ROE we found that in 2006 their position was good enough but in 2008 it’s decreased huge. 8.20% 6.92% 3.77% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 2006 2007 2008 Return on Stockholders’ Equity Return on Stockholders’ Equity
- 19. 19 | P a g e 4. Earnings Per Share (EPS): Net income / Number of shares of common stock outstanding Earnings per Share (2006) = $ 0.52 Earnings per Share (2007) = $ 0.47 Earnings per Share (2008) = $ 0.29 Interpretation: From 2006 to 2008 the company’s net income is decreased very badly. That’s why their earning per share decrease every year. In 2006 it was $0.56 which is decreased it 2007 & 2008 both years. Total Observation: Yahoo passes very tough time in internet-search business industry. In 2008 the company’s all kinds of ratio trend is backward. In 2008 their net income is $424,298 which was $751,391 in 2006 that means within 2 years their net income decreased almost 50% which is serious threated for them. Revenues by groups of similar service: Yahoo makes good amount of revenues from owned and operate sites, affiliate sites, marketing service and fees. In 2006 they make $6.4 million and 2008 it increased which is $7.2 million. From marketing service they make more revenue which is 88% of its total group of similar service revenues. SWOT Matrix: We know the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies those are- SO (Strengths-Opportunities), WO (Weaknesses-Opportunities), ST (Strengths-Threats), and WT (Weaknesses-Threats) strategies. Strengths 1. Yahoo has reputation among the search engine business and it is the second leading internet brand in the industry. 2. Yahoo offers various Weaknesses 1. According to the case, Net Income of Yahoo is decreased every year. 2. The net income is goes down because of Its overall advertising spend.
- 20. 20 | P a g e services to users free of charge. 3. It also provides marketing services to advertisers across hundreds of web sites. 4. In 2008 Yahoo’s revenues increased by 3.4 percent from 2007. 5. Aggressive cost cutting allowed to Yahoo to increase the profits. 3. In 2008 its current ratio, net profit margin, earning per share, total assets turnover ratios is lower than the 2006. 4. Yahoo only possessed 17 percent of internet traffic 5. Yahoo closed its third video property. Opportunities 1. Yahoo improved identification that customers use additional of their time online. 2. Another opportunity for Yahoo is in USA revenues from Internet advertisement remains them strong. 3. Until 2006 there are 1.1 billion internet user around the world and 211 million in USA. 4. The increasing numbers of Internet users are now spend huge time in the online. SO Strategies 1. Improving the service planning to lead the market. (S1, S2, S3, O1, O4,O5) 2. Increasing marketing service to the advertisers. (S3, S4, O2, O3) 3. Invest to cope up with advance technology and attract to customers. (S1, S2, O1, O3, O4) WO Strategies 1. Control the cost to increase the revenue. (W1, W2, W3, W5, O3. O4). 2. Try to negotiate with Microsoft to lead the market.(W3, W4, O1, O2, O3) Threats 1. Due to economic recession the development of economy ST Strategies 1. Introduced new products and service to increase market WT Strategies 1. Increase service and product promotion. (W4, T1,
- 21. 21 | P a g e has been slowed in the USA and globally. 2. Concerns about deceleration in online growth. 3. At some stage in 2008, Google had 72% of internet passage whereas Yahoo only haunted 17% of internet passage. 4. The search engine industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. share. (S1,S2,S5, T1, T3, T4) 2. Attract the new customers. (S1, S2, T2,T3) T3) 2. Reduced the cost and follow low cost strategy. (W1,W2, W3, W5, T1, T4) Finding and Recommendations: Finding: 1. Yahoo’s current ratio, Net profit Margin, Total Assets turnover, Debt ratio, ROE and ROA ratios trend is backward. 2. Yahoo’s stock price is goes down. In 2000 which was $120 but in 2009 it has traded under $14. 3. Their revenues increased in 2008 by 3.4 percent from 2007 but their net income decreased because of operating expenses is high. 4. By Analyzing the case we found that Yahoo’s main competitor is Google which has 72 percent of Internet traffic where Yahoo has only 17 percent. 5. They are trying to merger with Microsoft about search and advertising partnerships as both company struggles to compete with Google.
- 22. 22 | P a g e 6. We also found that in 2009 aggressive cost cutting allowed them to increase the profit 7 percent. 7. Yahoo offers various services which include Yahoo Groups, Yahoo Answers, Flickr, search offering includes Yahoo search, and Yahoo Local, Yahoo Yellow pages, Yahoo Maps and their communications segment include Yahoo Mail, Zimba Mail and generally provide those services to users free of charge. 8. It also provides marketing services to advertisers across hundreds of web sites which is make huge profit and they also have more opportunity to make profit from these services. 9. The search engine industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. 10. Another opportunity for Yahoo is in USA revenues from Internet advertisement remains them strong. Recommendations: 1. Yahoo should control their operating and other cost especially the advertising cost. Then they will make more profit. 2. They should continue discussions with Microsoft about search and advertising partnerships to compete with Google. 3. They should formulate new strategy and implement it for competing with the existing competitors as well as the new competitors. 4. They should utilize their opportunities to take effective actions. Their main opportunity is- the increasing numbers of Internet users are now spend huge time in the online. 5. Yahoo offers various services and they also have good reputation insearch engine business industry. So, they should utilize their goodwill effectively and efficiently. Conclusion: Yahoo was established in 1995 in Delaware and launched a highly successful initial public offering IPO in April 1996. Now, Yahoo is the second leading global Internet brand and one of the most trafficked
- 23. 23 | P a g e Internet destinations worldwide. Yahoo’s core strategy and operations is to become the starting point for Internet users. To become the starting point for Internet users they provide must-buy marketing solutions for the world’s largest advertisers and also to deliver industry-leading open platforms that attract developers and publishers. The company owned and operated online properties and services. Most importantly Yahoo generates revenues by providing marketing services to advertisers across hundreds of Web sites. Many of the services Yahoo provides to users are free; it does charge fees for a range of premium services. In 2008 Yahoo’s revenues increased by 3.4 percent to $7.2 billion which was $6.9 billion in 2007. But their net income decreased by 35.7 percent to $424 million compare with 2007. Yahoo’s current ratio, Net profit Margin, Total Assets turnover, Debt ratio, ROE and ROA ratios trend is backward. They are trying to merger with Microsoft about search and advertising partnerships as both company struggles to compete with Google. We also found that in 2009 aggressive cost cutting allowed them to increase the profit 7 percent.We would like to say that if they overcome their weaknesses, faces the threats effectively and utilize their opportunities and strengths, they will become a one of the market leader in the industry. References: 1. David F.R (2011) Strategic Management concepts and cases. Thirteenth edition.Prentice Hall. Case 4- AirTran Airways, Inc.-2009.
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Yahoo! case: the fall
Written by Drew's editorial team Published at Aug 1, 2022 5:32:00 PM
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In the early days of Internet search engines and email pages, Yahoo! was one of the giants. From the beginning, it was outlined to achieve a great future, but due to bad decisions made throughout its history, the company, today, does not have much weight on the Internet and has been sold for much fewer dollars than in a time had been offered.
In this case study, we are going to talk about the history of Yahoo! and what were the key decisions that led this company to its decline instead of leading it to the success that it seemed it was going to have.
<<< Case study Blockbuster: Why is it necessary to innovate? >>>
What is the history of Yahoo!?
The company was born in 1994 , like most companies in the United States, in a small office or shed of some university, from the idea of university classmates. In this case, it was in a small office at Stanford University that Jerry Yang and David Filo created a directory of Internet pages to facilitate the search for information and websites. We must bear in mind that we are talking about the first half of the 90s when the Internet was not yet so installed in our lives and a few years ago web pages began to emerge.
In 1995, the yahoo.com domain was created , having exceeded 100,000 daily visits in 1994 . In this way, its founders managed to get a venture capital company to invest a million dollars in them and from there venture into novelties that were not yet so exploited in the virtual world. In 1996 Yahoo went public.
From that moment, the company began to grow abysmally . Incorporated Yahoo! mail, games, pagers, and yahoo messenger, among other actions that led it to position itself as one of the companies of the moment. For a long period, Yahoo! was growing, increasing its numbers and employees. It was part of the boom of internet pages that occurred between 1997 and 2001.
<<< Netflix case: disruptive business model >>>
When did their mistakes start?
In 1998 Google emerged , the company that years later would be one of the main nightmares of Yahoo!. In its beginnings, today's giant Google asked for financing from Yahoo! and it refused to give it. We could say that this was one of the first mistakes.
During the first years of development, both companies coexisted, but as Google gained ground, Yahoo! went from being a provider of services on the web to being an advertising portal that was increasingly relegated to what the competition allowed it to access.
In 2007 , one of the most serious mistakes of the company Yahoo! is committed. The owners of Google do not rule out selling their company, and Yahoo! offered 3,000 million dollars, but unfortunately, they could not acquire it because the amount that Page and Brin asked for was 5,000 million. Yahoo! did not make any other offer and lost one of the great opportunities that it would have had to gain much more ground in virtuality.
Another of the mistakes that condemned this company was the missed opportunity to buy Doubleclick , an online advertising company, which was later bought by Google and through which it was able to take a big step in terms of online advertising. What also unseated Yahoo! in this area of development.
Later, Yahoo! also had the opportunity to buy Facebook. In 2006 , the social media company did not have the weight it has today, but its imminent growth could be seen coming. Zuckerberg was asking for something like $1 billion, but Yahoo! decided to offer 850 million and did not agree to buy it.
Microsoft , another technology giant, in 2008, offered the owners of Yahoo! to buy the company for more than 44,000 million dollars, much more money than it was worth at the time. But, again, Yahoo! made the wrong decision and turned down the offer. Even more incredible is that years later, Microsoft asked them for permission to use their search engine (Bing), and Yahoo! allowed it. Let's say it gave them something for free that, years before, they had offered billions of dollars for.
<<< Spotify case: The importance of user experience >>>
Other problems faced by the company
Cybersecurity today is one of the main issues that every technology company must guarantee, but in the case of Yahoo!, this has failed . Numerous times the company has acknowledged having suffered cyberattacks that generated data loss and leaks that involved user accounts. This took away the credibility of its security and, of course, caused many users to migrate to other offers. It has even admitted to creating software at the request of the US intelligence service, to obtain information from users' emails.
In addition to security problems, the company has suffered from organizational problems . In its years of history, it has had 7 different executive directors and almost none of them deviates from having made a significant mistake for the company. One of them even admitted having lied about the information on his CV.
In 2012 Marisa Mayer joined, who had previously worked at Google and came to Yahoo! hoping to revitalize the company but she didn't make it. It was she who in 2016 announced the sale of it to Verizon , for an amount of just over 4,000 million dollars , something that a few years before could have been much more.
<<< Zappos case: the best customer service >>>
As we see, the company Yahoo! has been successful in its first years , due to not having too much competition in the market, but as soon as a company of the same weight arrived, it was completely overshadowed by it and did not have enough maturity to make strategic decisions correctly, which led to its decline. The role of executive directors is very important when making decisions and also organizing the company itself, but this is something that could not be achieved. Their high turnover is a point that did not contribute at all to their growth.
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Case Study: Yahoo!
Center for Innovation & Sustainability in Local Media
UNC Hussman School of Journalism and Media
Introduction
In 2019, Yahoo isn’t even Yahoo anymore.
As part of its 2017 merger with Verizon, the company’s brand was folded into a new media conglomerate called Oath. The deal married Yahoo’s content platforms with some remaining AOL brands that survived their own 2016 sale to Verizon.
In January 2019, Oath is no more. Verizon wrote down its online advertising business by $4.6 billion. This is in addition to the 10,400 employees who were extended buyouts in 2018.
How is Verizon’s consolidation of Yahoo’s business units a sign on transformation of the competitive landscape? What lessons can Verizon apply from Yahoo’s own mistakes, especially as the digital landscape grows more competitive?
1994: David Filo and Jerry Yang launch “Jerry’s Guide to the World Wide Web” from Stanford. The site is a hand-built directory of other websites, organized in a hierarchy rather than a searchable index of pages. Filo and Yang rename site to “Yahoo!” – an acronym for Yet Another Hierarchically Organized Oracle – to describe how the site is organized according to subcategories (art, business, computers, economy, etc). In March Yahoo! Is incorporated.
1995: Michael Moritz of Sequoia Capital provides Yahoo! with two rounds of venture capital, equaling $3 million. Timothy Koogle comes on as CEO.
1996: Yahoo!, valued at $848 million, goes public, raising $33.8 million by selling 2.6 million shares at an opening bid of $13 each. Yahoo! uses web crawlers and tips from users to find new websites and then human classifiers to sort them into the appropriate category. At Stanford, Larry Page at Sergey Brin develop an algorithm, laying the foundation for a search engine that would become Google.
1997: Yahoo! Mail launches after an acquisition of Four11 (Webmail). Unlike AOL mail, Yahoo Mail does not require a subscription. Yahoo!’s US audience surpasses 25 million users, compared to AOL’s 5 million.
1999: Yahoo! added to S&P 500 Index.
2000: Yahoo hits its highest valuation at $125 billion. AOL is the nation’s biggest internet provider and is valued at $125 billion, Ebay is valued at approximately $18 billion, and Amazon at $8 billion. Google begins selling advertisements associated with keywords. AOL merges with Time Warner to form AOL Time Warner.
2001: Terry Semel is appointed chairman and CEO of Yahoo! Yahoo! acquires HotJobs and LAUNCH Media.
2002: Terry Semel puts in a $3 billion bid to acquire Google but it is rejected . Yahoo! acquires Inktomi, a leading Web search provider. Yahoo! hires new COO, Daniel Rosenweig.
2003: Yahoo acquires Overture, a leader in commercial search services and unveils a new search feature, which is aimed at improving the user’s search experience.
2004 :Google goes public at $85 a share. Yahoo! acquires Kelkoo, Europe’s leading online comparison shopping service, and announces a joint venture with SINA in China.
2005: Yahoo invests $1 billion in Chinese e-commerce player Alibaba , a 40 percent stake. Yahoo! launches new services – podcasts, messenger, music unlimited. Yahoo! acquires Flickr.
2006: Yahoo! announces a reorganization to align its operations with key customer segments and capture future growth opportunities. AOL begins to offer email, other web services for free rather than behind an AOL membership.
2006-7 : Microsoft and Yahoo discuss merger off and on for 2 years, but never merge. Yahoo! Co-founder Jerry Yang comes back as Chief Executive Officer and hires Blake Jorgensen as CFO. Yahoo! attempts to buy Facebook for $1billion but fails.
2008: Yahoo turns down a $44.6 billion acquisition deal from Microsoft. Jerry Yang steps down as CEO.
2009: Carol Bartz joins Yahoo! as CEO but Yahoo! fails to catch up to Google and Facebook in the display ad market and lags behind in mobile, social and cloud markets. Bartz is fired after two years.
2011: Yahoo pushes into web video, launching Yahoo Screen—a hub of original content including NBC’s Community. Yahoo Screen is shut down in January 2016.
2012: Scott Thompson comes on as CEO, lasting only four months until it surfaces that he fabricated his degree in computer science. Marissa Mayer is hired as CEO in July 2012.
2013: Mayer acquires Tumblr for $1.1 billion, aiming to reach a millennial audience.
2014: Yahoo! sells Alibaba for $9.4 billion.
2014 : Mayer launches 11 digital magazines across food, tech, sports and lifestyle. In February 2016, seven of the verticals—health, parenting, food, makers, travel, automotive and real estate—are shut down.
2014: Yahoo acquires mobile app analytics company Flurry and programmatic video player BrightRoll to build up its ad-tech stack.
2015: The company signs a deal with Google to place some ads and search features on Yahoo search listings. It also partners with the NFL on the league’s first online-only livestream.
2016: Tumblr partners with video apps YouNow, Kanvas and YouTube to power livestreaming on the site. Unlike similar efforts from Facebook, Twitter and Google, Tumblr plugs into existing video apps, so it doesn’t not need to build a platform to power the technology.
2017: Verizon offers to acquire Yahoo! As of January 2017, Just over 3 percent of worldwide internet users use Yahoo! to search the web, while more than 89 percent use Google.
Source: theverge.com
In June, Verizon closed the deal with Yahoo shareholders, acquiring the company for $4.5 billion. Yahoo properties were folded into a new unit called Oath, which included AOL brands like HuffPost, TechCrunch and Engadget. At the point the deal was closed, Oath’s reach included 1.3 billion monthly users and 1 trillion monthly ad requests.
In December, Verizon continued its quest to become the “first screen for live sports,” with a $2 billion NFL rights deal. The investment granted Verizon the ability to stream games on its Yahoo, Yahoo Sports and go90 properties. The deal was expected to raise annual NFL costs from $250 million to $450 million, but for a key business purpose — giving in-game advertisers access to a non-traditional online audience.
Verizon announced the acquisition of Niddel, a startup that uses machine learning technology to identify Internet security issues.
Verizon also announced a similar online expansion with NBA. Rights to “League Pass” games were granted to all of its Yahoo Sports platforms, in addition to the go90 video streaming player. The deal also included original programming options and fantasy basketball features. NBA viewership for the 2017-18 season was up 21 percent at the time the deal was closed, which meant potential for big ad dollars.
Verizon’s 2017 Q4 earnings missed expectations, but sales were up a notch from the previous year. After the passage of tax reform, the company also announced bonuses of 50 restricted stock shares to full-time, non-executive employees.
In April, Verizon announced consolidated revenue rose 6.6 percent year-to-year, as a result of growth in Oath. Revenue from Oath is expected to keep growing as NBA and NFL programming moves to Yahoo, AOL and go90 platforms. Verizon also drew headlines in April for taking steps to strip Yahoo! users of their class-action rights.
In January, Verizon dropped the name Oath from its Yahoo property unit. Shortly thereafter, Verizon Communications Inc. announced that 7% of its media staff would be laid off in an effort to overhaul struggling AOL and Yahoo through consolidation.
For more information on how Yahoo! was affected by rapid change in the digital age, refer to pgs. 85-86 in The Strategic Digital Media Entrepreneur .
Sources for Yahoo timeline:
Tim Armstrong Unveils Oath: AOL-Yahoo Combo Is as Big as Netflix and Looking to Expand
Verizon Seals $4.5 Billion Yahoo Purchase as Mayer Heads Out
https://www.bloomberg.com/news/articles/2017-06-13/verizon-seals-4-5-billion-yahoo-purchase-as-mayer-heads-out
CMO Today: Comcast Drops Out of Fox Talks; Verizon’s NFL Deal; Delivery Services Rethink Marketing
https://www.wsj.com/articles/cmo-today-comcast-drops-out-of-fox-talks-verizons-nfl-deal-delivery-services-rethink-marketing-1513082229
CMO Today: Verizon Expands NBA Deal; Redstone Pushes for Viacom-CBS Merger; MDC Digital Ad Transparency
https://www.wsj.com/articles/cmo-today-verizon-expands-nba-deal-redstone-pushes-for-viacom-cbs-merger-mdc-digital-ad-transparency-1516280547
Verizon acquires autonomous threat detection startup Niddel
Verizon earnings: 86 cents a share, vs. 88 cents EPS expected
https://www.cnbc.com/2018/01/23/verizon-earnings-q4-2017.html
Verizon and Disney announce bonuses for employees
http://money.cnn.com/2018/01/23/news/companies/verizon-disney-bonuses/index.html
Bet on Oath content services built around Yahoo acquisition is paying off for Verizon
Verizon layoffs media staff as it revamps troubled business
http://fortune.com/2019/01/23/verizon-to-cut-7-of-media-staff-as-it-revamps-troubled-business/
Supplemental Content Ideas:
Yahoo Finance has a plan to become the Uber of saving money (Jan. 2018, Quartz)
https://qz.com/1183768/yahoo-finance-has-a-plan-to-become-the-uber-of-saving-money/
Former state Senator Jeremy Ring talks about the first days of Yahoo
- Privacy Policy
Yahoo Case study Solution Analysis
Yahoo case study.
News; there were a lot of reasons to visit the Yahoo website. However, currently, Yahoo is a shadow of its former self (Nordquist, 2017).
First, came the search engine Google, which became the preferred search engine for many. This is because the business model used by Google offered a lot of information to users of the search engine, as it used information created by others while Yahoo in a lot of ways created their own information. It is totally wrong for a business to blame a competitor for its problems, since Yahoo’s failure came from within the company.
Yahoo’s Problems
Flat-line growth – The company stopped growing, most of the users moved to other options, such as the Google search engine. By the time Yahoo was realizing its slow growth, it may have been a little too late to catch up. At one point in 2008, Microsoft tried to acquire Yahoo for $44.6 billion; a deal that Yahoo’s leadership declined hoping to find other buyers till Microsoft withdrew their offer. Now if Microsoft was to buy Yahoo, it would be for $4.8 billion (Nordquist, 2017).
Also Study: Online Business Marketing Plan and Strategies
Slim profits – Though Yahoo still makes profits to date, it could do better being some of the first successful companies that grew with the internet era. Yahoo makes its profits from shareholding at Alibaba.com and Yahoo Japan, and not so much from its main original services.
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Poor or no strategy
Yahoo lacks a good strategy that can be used as a blueprint to success. Further, Yahoo lacks brand purpose and future brand vision. A company like Google has stuck by the same principles it made upon creation while Yahoo’s self description has changed 24 times in 24 years (Wharton, 2016). When Mayer’s became the CEO, she made efforts to gather young technology talents to revise the company strategy. Finding this expensive, she instead got to an acquisition binge for over $2.5 billion which has not benefited the company much (Nordquist, 2017). When comparing Yahoo’s strategy to that of Google, Yahoo is more of a media house than a search engine.
Poor leadership
Poor top leadership is probably one of the biggest contributors to Yahoo’s downfall. When Yahoo realized its downfall, it started appointing CEOs that would turnaround the company into something close to its old self. Though there were other CEOs who were appointed and left (4 CEO’s in 5 years), Marissa Mayer, is probably when Yahoo really got it wrong in terms of leadership. Yahoo viewed Mayer as the savior of the company yet all she brought it were the wrong strategies. For example, among her first activities as CEO was to personally participate in logo redesign and went on to acquire new technologies and companies for over $2.5 billion (Nordquist, 2017).
Poor organizational culture
Yahoo’s culture has been broken as a result of poor leadership. When Mayer took over leadership, she made the organization and the task of giving Yahoo a turnaround about herself, not about those she was leading. “If you dismiss the opinions of your team, don’t be shocked when they stop sharing their insight (Myatt, 2015). Under Mayer’s, leadership, top executives were leaving the company and it was losing its best talents. Mayer failed to sustain the strong and vibrant culture that Yahoo had before (Mattone, 2016). The biggest failure of leadership was from the board of directors for failing to notice how much Mayer’s was unsuited for the job since they observed her track record in technology and brand execution but not her ability to motivate and engage talent and maintain a vibrant culture (Mattone, 2016)
Yahoo Strategic Analysis
Yahoo SWOT Analysis
Porter’s Five Forces Analysis of Yahoo
Threat of new entrants- medium to high.
In the recent past, there are low entry barriers thanks to the internet and technology advancement hence new entrants are coming up in a lot of areas that Yahoo is involved in; such as directories, mail, answers platforms etc. “Thus, scale economies may be less important in this context and new entrants can go to market with lower capital costs” (Dess, Lumpkin, & Eisner, 2007, p. 282).
Bargaining power of buyers- high
Buyers have low switching costs and the next seller is just a click away. “The internet and wireless technologies may increase buyer power by providing consumers with more information to make buying decisions and by lowering switching costs (Dess et al., 2007, p. 284). Buyers are also more informed and will know where to get a better version of everything.
Bargaining power of suppliers-high
Yahoo depends on existing technologies in order to improve its own. This means suppliers do have high bargaining power (Kasi, 2017). They also depend on sources of information, to feed their directories and search engines which and with the opportunities available in the industry for suppliers to sell their material, they do have high bargaining power.
Threat of substitutes- high
Substitutes have increased due to information available on the internet. Traditional media which is still usable today is another source of substitutes.
Competitive rivalry- high
This is one of the biggest threats to Yahoo; the intensity of competition on the internet is very high. The main competitor is Google which already has 83% market share. In other services that Yahoo offers, there is high competition such as directories, answers, etc.
Proposed Solutions
- Yahoo should update their strengths and build up a new strategy that is current in order to gain new and future customers
- With the resources they the company has, it can create new and efficient way to use their website such that they differentiate self from the rest
- Attract new talent that will suggest innovative ideas. For example, Terry Semel has implemented the concept of network optimization that has been a source of revenue and projected Yahoo’s other businesses in the industry.
Recommendations
Before committing to any activity, it is very important that Yahoo reviews its strategy. The strategy must consider the changes that have happened in the internet environment since the last one was created. It must also foresee the expectations of the people in the future. This information will feed Yahoo with a strategy that is not going to be obsolete in the next few years, but one that is sustainable in the long run.
References;
- Dess, G. G., Lumpkin, G. T., & Eisner, B. E. (2007). Strategic Management (3rd ed.). Irwin: McGraw-Hill.
- Kasi, A. (2017, June 1). Porter’s Five Forces Model for Yahoo . Retrieved from Porter Analysis: https://www.porteranalysis.com/porters-five-forces-model-of-yahoo/
- Mattone, J. (2016, March 28). Yahoo’s problem? A massive lack of leadership at the top . Retrieved from Huffington Post: https://www.huffingtonpost.com/john-mattone/yahoos-problem-a-massive-_b_9550092.html
- Myatt, M. (2015, November 20). Marissa Mayer: A case study of poor leadership . Retrieved from Forbes: https://www.forbes.com/sites/mikemyatt/2015/11/20/marissa-mayer-case-study-in-poor-leadership/#2733db133b46
- Nordquist, B. (2017, August 2). So why was Yahoo worth $4.8 billion? Retrieved from Storage Craft: https://www.storagecraft.com/blog/verizon-purchase-yahoo/
- Wharton. (2016, Feb 23). A tale of two brands: Yahoo’s mistakes vc. Google Mastery . Retrieved from Wharton University of Pennsylvania: https://knowledge.wharton.upenn.edu/article/a-tale-of-two-brands-yahoos-mistakes-vs-googles-mastery/
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YAHOO INC. Harvard Case Solution & Analysis
Home >> Harvard Case Study Analysis Solutions >> YAHOO INC.
YAHOO INC. Case Solution
The statement of cash flow includes inflows and outflows of cash from operating, investing and financing activities, giving a net cash balance at the end of the year. Yahoo’s wasn’t generating enough cash in years 6 and 7 but suddenly in 2008 the firm ended up with a huge cash surplus. Following were the factors that derived the cash flow of Yahoo:
- Deferred Revenue:
The term deferred revenue is referred as unearned revenue in which the company has already received payments from clients but hasn’t provided services yet (Deferred Revenue, 2018). Deferred revenue was main turning point in Yahoo’s statement of cash flow. The company might had introduced new attractive and cheap policies to attract users but still, the services were not provided yet.
- Depreciation and Amortization:
Both terms are non-cash items and companies usually account them as an expense but they don’t actually pay it, for the year 8 Yahoo had comparatively bigger amount of depreciation and amortization that was increasing the net cash flow from operating activities.
- Tax benefits from stock options:
Yahoo successfully saved a huge amount of cash from taxes that were contributing a positive effect in year 8 and increasing the cash from operating activities. For the past two years from 2008, the company was unable to get tax benefits.
- R&D Cash Inflows:
During the year 8 Yahoo purchased R&D unit that was making cash inflows with a big amount. That was another positive point in net cash from operating activities and increased the net cash of Yahoo. On the other side there were no such cash inflows in the year 2006 and 2007.
- Accrued expenses and other Liabilities:
Liabilities and expenses increased during the year 2008 but the firm hadn’t paid them yet that was causing a cash surplus, comparatively for the last two years the expenses and liabilities were not that high.
- Issuance of Common stock:
Yahoo’s performance was improving that’s why the firm took advantage of the moment and issued huge amount of shares in market to raise funds. Common stock was another big factor for cash surplus.
Yahoo is a giant firm having long term focus and strategic plans, every firm wants to minimize risk and support themselves with a financial backup to target liquidity problems. Yahoo invested a huge amount of cash in marketable securities to overcome any cash defect that might have raised during the period. Marketable securities are highly liquid tool that can be sold quickly on a reasonable price in financial market, these are basically short term financial instruments having life of less than a year. (Mrketable securities, 2018) Moreover they do not cause big losses when a firm sells them. Similarly, Yahoo got its cash back when security matured to overcome any shortage of cash in statement of cash flow.
Deferred revenue is referred to as the revenue that is unearned i.e. liability. Clients already paid for work to the firm but the work was not done yet. The firm had promised to provide services but later on, in this case Yahoo earned a revenue of 33.21B USD whereas services were yet to be provided. Earning the big amount of revenue didn’t mean that the firm’s profits were higher. The big amount of revenue expressed that the company had done a good job in sort of attracting customers with the help of advertising offers but the future was uncertain for profit.
Conclusion:
Overall, Yahoo is a huge online platform that provides space for the internet users as a portal and search engine. The firm was facing the liquidity problems in year 6 and 7 but suddenly, in year 8 the firm had cash surplus with significant numbers. The main factor for cash surplus were deferred revenue and issuance of common stock. Yahoo was also involved in the sale and purchase of short term financial instruments to overcome cash deficit that arose during the year.
Recommendations:
Yahoo should have focused on the cost deeply, the firm needed to negotiate with its service providers and suppliers in order to get low costs because Yahoo had already gathered revenue and they had to offer services in return. If the new sale terms and policies became successful then the organization needed to focus on same approach. Investing in marketable securities was an appreciable action by firm, Yahoo didn’t need big surplus of cash with it, they could have invested back money somewhere else to get some income..
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