Yahoo! – Shopping trip.

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Yahoo! needs to tidy its house before it can successfully expand.

• Yahoo! is going to spend $230m on Polyvore which is a website that has created a community around discovering and buying fashion.
• The value in this company is the community of style conscious consumers that it has created.
• On Polyvore, users can create complete outfits with accessories which they can then share with other users and so on.
• The kick comes as all of the products can be purchased via direct web links to e-commerce vendors.
• The idea is that the community gains as they have a place to discover new things and retailers benefit from an engaged audience who have a high propensity to make purchases.
• With a valuation of $230m, this is a sizeable acquisition for Yahoo! and one can only hope that this reflects a website that has tens of millions highly engaged users all dying to hit the buy button.
• Unfortunately, I suspect that this is not the case as basic benchmarking this site against Twitch reveals a worrying picture.
• Twitch was purchased by Amazon for $972m and has over 55m users of whom 7m logon every day spending an average of 2 hours on the site.
• Alexa ranks Twitch at 76 in the USA and 143 globally compared to Polyvore at 533 in USA and 1,202 globally.
• Internet traffic is highly concentrated among the top websites and it is clear from this simple analysis that Polyvore is not one of them.
• Apart from questioning the value for Yahoo! shareholders in this deal, the real issue is how does this push Yahoo!’s strategy forward?
• Google has shown that success in this space requires an integrated series of services that relate to each other and with which the user can identify.
• This integrated approach also has the benefit of being able to understand the user as a complete profile rather than just a single user of a single service.
• The better the user is understood, the more valuable the marketing that is sold and the greater the opportunity there is to improve the service.
• Yahoo! has been a shopping spree over the last few years but many of the assets that it has purchased seem almost untouched.
• This means that Yahoo! is missing out on the real value of being an ecosystem of services which is further exacerbated by its inability to really do anything about mobile.
• I have previously estimated (see here) that Yahoo!’s lack of execution in mobile is leading to it missing out on 90% of the revenue opportunity.
• Consequently, this acquisition looks set to be another tombstone on the desk and very little more.
• Until Yahoo! really knuckles down and does something with its assets, the core business is likely to continue drifting sideways.
• I think Yahoo! will continue to underperform its peers and prefer Google, Microsoft, Apple, Facebook and many others to this one.