Yahoo – Photo finish

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Yahoo’s changes could be the end of Flickr.

• The latest changes that Yahoo has made to its photo service Flickr are symptomatic of a company that does not really seem to understand the market in which it is trying to compete.
• Flickr is the online photo service that used to enjoy complete dominance of the internet but more than 10 years of mismanagement and neglect allowed other offerings to take over.
• The market has now bifurcated into two camps.
  • First. The free camp designed for consumers taking snaps of friends and family on their phones.
  • This consists of Google Photos, iPhoto, OneDrive, Instagram, Dropbox and so on which automatically back up all your photos to the web for free.
  • These services also offer more storage than any user is ever likely to need and monetise through data collection.
  • Second. The services that are aimed at serious amateurs and professional photographers and charge a subscription.
  • These include 500px, SmugMug, Adobe creative cloud and so on and offer much deeper functionality and tools.
• Flickr predates all of these offerings and with its latest changes moves from the free camp into no-man’s land.
• A year ago Flickr 4.0 launched which followed Google Photo’s lead in making it easy for users to back-up all of their photos into one place and organise them.
• This was a free service and aimed to get users interested in using Flickr once again.
• Given that Flickr has far more experience than Google when it comes to photography it was in pole position to offer a more effective service and thereby win more users and more traffic.
• However, just one year into this new offering Yahoo has decided to force Flickr users to pay for this added functionality which I think ensures that usage will now collapse to baseline.
• 500px and SmugMug have already built communities of paying users and a user paying for a photography service is going to much better off moving there.
• At the same time, most of the users of the free service are now likely to migrate to Google Photos or one of the other free services.
• This is yet another example that makes me think that Yahoo and its advisors have completely misunderstood the market in which they are trying to operate.
• Yahoo has a collection of assets that if they were properly integrated could provide a vibrant and fun to use place for users to live their digital lives.
• By spending a lot of time with Yahoo, it would learn about its users and its ability to monetise them would improve significantly.
• Instead, Yahoo and its advisors appear to view these assets as a series of standalone services that have to generate revenues and profits in their own right.
• This is not how ecosystems work and I have long believed that Google makes so much money in search largely as a result of the data that it collects from all of its other services which have all been properly integrated.
• The net result is that Yahoo is likely to continue missing out on the opportunity especially in mobile where RFM calculates that it missed out on 88% of the revenues it should have generated in Q4 15A.
• I can see a lot of value in Yahoo’s shares but I find it hard to have confidence that the value will not be squandered making Yahoo a classic value trap.
• I continue to prefer Samsung, Microsoft, Apple and Google to Yahoo.