A Case Study of Yahoo

Microsoft offered to acquire Yahoo for $40.8 billion. Microsoft attempted

acquisition of Yahoo was through hostile takeover or through outright purchase (Asay

2008; Pimental, 2008). According to Pimental (2008), Microsoft has more money than

most countries; the company has an excessive cash of over $19 billion. Despite

Microsoft huge excessive liquidity, the company was unable to meet its immediate

short-term obligation of acquiring Yahoo. Explicitly show maybe, how desperate

Microsoft was in trying to acquire Yahoo; the company had sought to use debt to

finance this transaction. Microsoft intended to integrate Yahoo into its company’s core

philosophy and into its expanded business empire.

Without schism, this case study analysis will not be about Microsoft hodgepodge

of businesses but obviously, it is about Yahoo. Palpable kernel to this foreground

analysis is what propelled or prompted Microsoft attempted acquisition of Yahoo

through hostile takeover. What makes other technology companies envious of Yahoo

organizational culture; innovations and sustainable competitiveness through

Technological Situational Happenstances (TSHs); Strength, Weaknesses,

Opportunities, and Threats (SWOT); Political, Environmental, Social, Technological,

Economic, and Legal (PESTEL); are core to this analysis with some verisimilitude? For

instance, online advertisement expected to reach an epic proportion of over $80 $120

billion a year by 2010-2015 (Ackerson, 2010; Asay, 2008; Pimental. 2008). Facebook,

Google, Yahoo and Twitter, have now surpassed the predictable benchmark of $80

billion of online advertisement (Aluya, 2010). Yahoo innovative technology using TSHs,

SWOT, and PESTEL places the company at a sustainable competitive and comparable
advantage. Economically and strategically, Yahoo was positioned serendipitously to

maximizing profit through online advertisement. Not surprising therefore, that Microsoft

wanted to acquire Yahoo. This sanguine discussion starts with the background of

Yahoo and the analysis of the remarkable feat accomplished by the company will follow.

Background

In 1994, David Filo and Jerry Yang, doctoral students at Stanford University,

founded yahoo. Jerry and David started Yahoo as hobby while working on their doctoral

dissertation at Harvard Business School. Understanding the power of internet through

the use of TSH, the founders ascended to fragmenting informational materials into

categories. The reason why the founders decided to fragment or breakdown information

was due to the clustering, clogging and complexities and difficulties involved in finding

information within then popularized internet in the 1990s (Donegan, 2000). From initial

exotic to ubiquitous, the United States government in the early 1990s fully released the

internet for commercial use during this period. Finding information on the ever-

expanding World Wide Web was increasingly complex and difficult. Search processes

required tedious and time-consuming on the part of the end users. Exigencies of the

circumstances led Yahoo founders to categorize information into categories using

creative destruction, vis-à-vis disruptive situational technological happenstances. When

categories became too full, subcategories were developed, and more subcategories

followed. Aptly, the founder’s concept of creating more subcategories in the internet

cascaded into the conceptualized framework of what has become known as Yahoo.

Yahoo conceptualized from proposal to fruition using the creativity of this novel idea of

subcategories (Eisenhardt and Sull, 2001). Exquisitely using TSHs, SWOT, and
PESTEL, Yahoo became the First Prima Donna in this ideological eruption of

subcategories (Aluya and Garraway, 2014).

Yahoo is a major top internet portal (Donegan, 2000). Yahoo generates an

astounding numbers of subscribers on a daily basis with over 100 million visitors. Yahoo

systematically uses TSHs, SWOT and PESTEL to reposition the company strategically

into the followings (a) obtain exclusive content as a way of creating customer loyalty, (b)

establish product bundling packages similar to Microsoft Word, PowerPoint, EXCEL,

with e-mail accounts, instant messaging, calendaring, and hosting services, and (c)

create additional revenue streams. Yahoo was regarded as one of the major viable

competitor in the digital era. Currently, Yahoo burgeoning sales and growth has

exceeded 200% market capitalization. Comparably, Yahoo intangibles, intrinsic and

sales have exceeded the sales of Walt Disney Company (Eisenhardt and Sull, 2001).

Magnificently, Yahoo was a leading search engine site during the late 1990s. In

the late 1990s, according to Nielsen/Net Ratings, Yahoo trailed behind Google in the

United Kingdom, Australia, and Germany as the proverbial search engine of choice for

internet users. With TSH, subscribers and visitors now frequently use Yahoo search

engine due to innovations, inventions, and subcategories search methodologies. For

instance, rather than use complex software based algorithmic search solutions that

were initially used by competitor Excite, Yahoo uses human web-surfers to read, assess

and categorize website characteristics (Rindova and Kotha, 2001).

Rationally expected, the students-turned-entrepreneurs who invented Yahoo

attracted lore venture capitalists. With accessible venture capital funding, Filo and Yang

were former board of directors and the chief executive officers. The founders
understanding their handicap and inexperience in managing an organization hired

experts to managed Yahoo. Unlike Facebook initial public offering, Yahoo stock

skyrocketed to high price level from the opening price. Yahoo current CEO is Marissa

Mayer who took over the helms of affair from former CEO Scott Thomas and iCEO

Ross Levinsohn (Swisher, 2013).

Nusca (2010) purported that former CEO, Carol Bartz, stated,

“Yahoo is a great company that is very, very strong in content for its users,
uses amazing technology to serve up what increasingly we think is going
to be the web of one. People come to us to figure out what’s going on in
the world…it’s a place where you can just get it together” (Nusca, 2010,
p.1).

To be simplistic, leaders in Yahoo have transcended the company from a simple

business model through the use of TSH into a major internet portal.

Strauss, EL-Ansary and Frost (2003) defined a portal as a point of entry to the internet

that provides many services in addition to search capabilities. The internet business

portals were innovations that started from situational technological happenstances of

the internet. Portals were categorized as horizontal or vertical (Donegan, 2000).

Horizontal portals were referred as consumer portals, public portals or web portals that

were generic organizers for information. In contrast, vertical portals were referred as the

corporate portals, enterprise information portals or specialized portals that provide

information for groups or for particular organizational specific interests (Spitzer, 2000).

Innovative portal companies increased stickiness. Rosen (2002) purported that

stickiness is the capability of the internet portals to keep visitors at the site for as long as

possible and thus persuading them to return. Stickiness is also achievable through an

encouraging elixir of continuous innovative products and services through local,

national, international and global content changes. Stickiness includes using TSHs,

SWOT, and PESTEL to offer customized services to customers and increased

investment in branding.

With TSHs, SWOT, and PESTEL, Yahoo uses product bundling to maximize

profit (Shapiro and Varian, 1999). Yahoo basic informational materials were bundled

with services like homepage customization, e-mail accounts, calendaring, instant

messaging and hosting services. With TSHs, SWOT, and PESTEL Yahoo provides

other services free, although the services bundled up in comparable services (Cooper

and Schindler, 2003).

Yahoo’s strategic transition to portal technologies was due to situational

technological happenstances using real time data from large data sets (see the figure 1

below) in response to common competitive business pressures. These pressures

required constant product innovation, increased revenues through advertising and

premium content downloads. Yahoo accomplished this transition through a series of

strategic partnerships.
 deft at negotiating
Volume of data
Size available
Increasing Variety
of sources
Scope
deft at
communicating.
Big Data adaptability

Deft at influencing Deft leadership Skill Speed

disparate
personalities towards
goal achievement implementation

Rapid inefficiencies
instantiation Management Rapid
Structure Adjustment Resolve
change inadequacies
improve data Objective
performance unification function
Duplicitous Degree of data
nature independence
reduce use-
related risk

To increase business’
value scope given
improved margins

Figure 1: The leveraging properties of big data

This case study includes the following:

a) Purpose

b) Significance of the study to leadership

c) Anticipating global economy recession and recovery periods

d) Financial graphs, charts and vignettes

e) Summary and references

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