Verizon / Yahoo – Digital desert.

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No last hurrah for Yahoo.

  • Despite its recent acquisition by Verizon, the decline of Yahoo’s assets seems to be accelerating, further underpinning my long-held position that Verizon substantially overpaid to acquire them.
  • At the same, it also reinforces my opinion that Marissa Mayer’s last actions at Yahoo were by far her best in terms of delivering value to shareholders (see here).
  • Two of Yahoo’s assets are showing accelerating signs of decline.
    • First, Tumblr: Shortly after Yahoo’s $1.1bn purchase in 2013, activity at Tumblr peaked and has been in decline ever since.
    • The change in ownership has made no difference that I have seen.
    • Once Tumblr’s founders and owners had been paid, they had no incentive to continue pushing the platform forward resulting in drift and decay.
    • At its peak in 2014, there were 106m new posts every day which has now collapsed to 35m from where it is still falling.
    • Blog posts (a subset of all posts) has also fallen substantially (45%) to 130,000 per day indicating that key content creators have gone elsewhere.
    • Furthermore, Yahoo has written off $712m of the investment it made, and Tumblr’s founder Alex Karp has announced that he will be leaving at the end of the year.
    • I very much doubt that Verizon has the management bench strength to turn this around leaving the outlook as very bleak.
    • Second, Yahoo Groups: This is a social networking system that is still quite popular with businesses, schools and so on due to its deep integration with email.
    • However, the system has been plagued with technical problems and downtime for over a week.
    • The issues began on November 17th and were not fully rectified until November 25th.
    • Digital Life services upon which users rely need to be as reliable as telecom networks meaning that even downtime of a few hours can have far reaching effects.
    • Taking 8 days to fix basic functionality is unheard of among Internet companies.
    • To me, this is a sign of how little what remains of Yahoo seems to care about retaining usage.
    • As a result, businesses moved their Black Friday promotions to Facebook and many other users are now seeking alternatives.
  • When this is combined with what was the biggest hack in history resulting in the probable compromise of every single account that Yahoo has, it is clear that there is very little point in living one’s life with any of Yahoo’s remaining Digital Life services.
  • Consequently, I expect the drift of users away from the platform, to better and more secure alternatives, to accelerate leaving Verizon with a series of deserted digital properties.
  • On top of Yahoo, Verizon already owns AOL and is trying to rebuild its Go90 mobile video service using the team and assets acquired from Vessel in 2016.
  • The problem I have with Verizon’s strategy is that it was very late to the game meaning that it has ending up acquiring all of the assets that no one else wanted.
  • Furthermore, Yahoo and AOL have both badly failed to generate any traction on mobile but somehow Verizon seems to think that putting all of these together will create a thriving ecosystem.
  • This is of course possible, but if Yahoo was unable to hold onto the talent capable of executing this dream, I think that Verizon has very little chance.
  • This view is supported by the fact that instead of flourishing, the Yahoo assets seem to be accelerating their demise under Verizon’s ownership.
  • The result is likely to be a hefty write down of the assets that it paid $4.5bn for and their eventual closure or distressed sale consigning Yahoo to the annals of history.

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