by Jonathan Berr | January 16, 2014 11:49 am
Yahoo (YHOO) Chief Executive Marissa Mayer has gotten the corporate equivalent of a “hall pass” ever since she joined the company in 2012.
Though she has spent billions on acquisitions and has so far failed to ignite growth in the core display advertising business at YHOO, Wall Street has cut her a lot of slack given the potential bonanza it may reap from its investment in the Chinese Internet company Alibaba.
But as I have noted recently, the reality of Alibaba may not match its hype given the potential slowdown in the Chinese economy — Yahoo’s stock has more than doubled over the past year.
Mayer, though, realizes that YHOO stock is on a sugar high that can come crashing down at the slightest hint that the economy in China is not performing up to Wall Street’s lofty expectations. YHOO stock will one day be judged on the performance of its businesses — perhaps sooner than many expect.
Mayer is working diligently to bolster the company’s moribund core advertising business and announced a slew of new advertising products for both display and search advertising at the recent Consumer Electronics Show (CES). The payoff of these offerings for YHOO stock investors may not be apparent for a while.
Mayer made four major announcements at CES that deserve a closer look because they have the potential to move YHOO stock both over the short and longer term. They offer investors hints on the direction she is taking the company and the challenges that lie ahead.
Let’s take a closer look at the announcements in no particular order.
What it is: A summary of the days top news delivered twice a day to iPhone and iPod touches. It was developed by British teenager Nick D’Aloisio, who sold his Summly business to YHOO for a reported $30 million last year. The feature, according to D’Alosio, takes “summarization to the next level” by selecting “atoms”, important bits and pieces of stories, using algorithms and human editors. It will use multiple sources and includes infographics, videos and photos.
Takeaway: This is an interesting idea, but why would a news consumer need Yahoo News Digest? Finding summaries of news articles isn’t hard at sites such as Google (GOOG) News and BuzzFeed. The New York Times (NYT) offers readers RSS feeds of article summaries as well as do most other newspapers.
Yahoo, though, understands that in order to deliver content in interesting ways, it needs interesting content. Which leads us to…
What it is: Taking a page from Sumner Redstone’s “Content is King” playbook, Yahoo unveiled at CES what it has dubbed “magazines. ” One is called Yahoo Tech, which will be led by former New York Times columnist/author David Pogue and is designed to appeal to readers interested in tech but who may be turned off by talk of ‘version numbers, chip names, and bus speeds.” The other magazine unveiled at CES is Yahoo Food, which will provide articles on food trends and what the company has described as “surprising recipes,” whatever that means. More titles are sure to come.
Takeaway: Pogue certainly has big dreams, telling Forbes: “Yahoo Tech represented the opportunity to build something from the ground up with the incredible support of a giant technology company.” Unfortunately, that’s easier said than done. Yahoo Tech will be fighting for readers against a plethora of competitors including re/Code, the recently launched site run by veteran technology journalists Walt Mossberg and Kara Swisher. The same hold true for Yahoo Food, which will face a huge challenge standing out from established sites such as The Daily Meal and Cake Wrecks, not to mention the Food Network.
What it is: Yahoo recently acquired the startup, which provides relevant information from Apps on the home screen of Android phones, for a reported $80 million. This seems useful because it would provide users with quotes for stocks they’re following when they power up their devices instead of forcing them to open a separate feature. “Aviate learns your habits and helps anticipate the information and apps you need — making your phone smarter,” according to the company’s blog post. It is currently in private beta.
Takeaway: This is an interesting idea, which Yahoo says it plans to make a “central a central part of its Android-based experiences in 2014.” Though it didn’t offer any commentary at CES about plans for Apple (AAPL) iPhones, YHOO did say that it plans to continue to develop the feature. The challenge lies in monetization. One possibility may be in how it recommends Apps for people to try, and ads may be part of the mix as well. Yahoo has about 400 million mobile users, so Aviate is a key part of its strategy to grow that business, which is of keen interest to Wall Street.
What it is: Yahoo Smart TV may be the most radical idea Mayer presented at CES. As the company notes, Smart TV will offer viewers commentary on shows along with “highly personalized program recommendations from TV, Video on Demand, and Web services.” Basically, it makes TVs smarter by going around incumbent service providers such as cable and satellite providers. This is such a big deal that Business Insider opined that it might save television … or perhaps kill it. Interestingly, a cable subscription is not required for the offering from YHOO.
Takeway: According to Business Insider, Samsung and Vizio are likely partners for Yahoo Smart TV. As with everything else Yahoo is doing, the challenge lies in standing out from its competitors. LG, for instance, unveiled an new operating system at CES for its smart TVs. But Yahoo may have a unique opportunity in this market because, as The Verge noted, many of the existing smart TV apps are terrible: “User interfaces remain overwrought with unnecessary bloat, sacrificing speed and intuitiveness for features that most humans will never use.”
Again, it will take some time to see how much these projects affect the core business at YHOO … if they do at all. But with the Alibaba IPO looming in the background, something needs to happen soon for YHOO stock.
As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities.
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