Reinventing Yahoo, version 804: Start by buying TripAdvisor
I have learned many things as a chronicler of the digital media industry over the last decade plus.
But one of the definitive items is this: you will always be proven wrong about any prognostication on Yahoo, not because what you said wasn’t the path Yahoo took, but that it didn’t take any.
Unless of course Yahoo’s procrastination was your prognostication.
With a brand new CEO now at the helm, Yahoo’s choice on running-while-standing-still has run out. That much is sure.
Besides the industry-mystifying choice of ex-PayPal president Scott Thomson, there’s a lot of movement on disposing off its Asian stakes, part of its “trying to unlock the value” of its assets.
And it looks like it is happening soon: now there’s a M&A wish-list as part of “a tax-efficient asset swap with Alibaba and Softbank,” according to a report in Bloomberg this week.
All which seem very random, only being considered because their size may fit what all parties need in terms of size of transaction to close the swap-deal. And that they’re conveniently part-owned by private-equity firms, all of which happen to want to part-buy Yahoo as well.
But let’s step back a bit. What does Yahoo want to be when it, well, gets born again?
Back in 2005, when Yahoo was trying to reinvent itself under Terry Semel, I suggested that it buy Martha Stewart Living Omnimedia — back when Martha mattered — as a way to double down on women’s media and lifestyle play, a huge market, and more importantly, a unifying plan.
We all know how that and subsequent attempts went.
With the Asian sell-offs, it will have around $10 billion or more in cash, and why not use it for transformative acquisitions to help build around a theme? What could that theme be, large enough for Yahoo to continue to be one of the largest Internet players in the world?
Here’re my humble suggestion for Yahoo: start by redefining yourself as the “people-powered listings business”.
And it won’t be a stretch: after all, Yahoo started as a listings layer on top of the web, with its directory service, which curated everything interesting to “surf” at that time.
Why not go back to that theme, and stretch it to the users?
What that means is instead of investing everything in expensive original content (which it needs to do in certain verticals like news, sports, finance, if only as a glue that holds everything else together) or tech (a losing battle in face of Google, Facebook, take-you-pick-startup), use your users to help build the next version of Yahoo.
Let them curate the real world, through reviews and ratings of these listings. This isn’t a small vertical business, this is a huge intelligence layer over the world that Yahoo, with its money and users, can piece together better than almost anyone can.
User generated opportunity
TripAdvisor is about a $630 million (2011 estimates) revenue business, about $3.5 billion market cap, top-line revenue growth of over 30% over the past several quarters and at least 50 percent operating margin, so those numbers themselves paint a big story.
It has a huge repository of user-gen content that actually works and leads to transactional and advertising
opportunities, and has a big worldwide footprint and potential.
It also plays into the two biggest growth “sectors” for anyone in digital: mobile and social, and TripAdvisor, in its own messy way, has done a lot in both.
Of course there’s the small matter of trying to convince Barry Diller, who continues to be TripAdvisor (and indeed Expedia’s) largest shareholder, but when has Diller ever shied away from a large M&A deal?
Another adjacent, people-powered listings business is Yelp, smaller than TripAdvisor, and private, and Elevation Partners, its major private equity shareholder, would be happy to do a deal, anything that will make its much-panned portfolio and exits look better.
Yelp’s numbers are less readily available, but it is viewing an IPO, according to a November report by WSJ.
Revenue estimates for Yelp are around $100 million in 2012, and the IPO is expected to value it anywhere between $1 billion to $2 billion. Yelp is TripAdvisor’s cousin, with potential to be joined at the hip when put together with TripAdvisor, exact same philosophy in the transaction+advertising mix.
An expansion on that theme would include listings (and resulting transactions) businesses which could use that reviews layer added to them: HomeAway in the TripAdvisor-adjacent vacation rentals business, and OpenTable with its Yelp-adjacency.
A global web layer
All of this also helps Yahoo forge a path independent of the other better-positioned internet giants like Google and Facebook and even similarly-troubled ones like AOL.
Almost all of these and smaller startup players are better at tech, Yahoo will never win that game in Silicon Valley or outside.
And every large media and every tech-trying-to-be-media company will continue to build content assets, and chip away at the media ad dollars, with the resultant downward ad pricing pressures that all of us are aware of.
This plan leverages its user base, still the second largest in the world, to build its future.
It allows Yahoo to be the utility layer of the world, a daily use across all forms of digital delivery, online and mobile, and at the nexus of every large internet trend: be a platform, and leverage local, social and mobile (there, I finally used that buzz phrase!).
It can continue to focus on content assets that build on top of those listings and reviews assets, as a loyalty driver.
NB: This is a guest article by Rafat Ali, an entrepreneur, journalist and founder of paidContent. Ali is currently working on his new still-in-development-startup Skift, a travel intelligence company.
NB2: Disclosure – Ali is a shareholder in Yahoo.
NB3: Image via Shutterstock.
Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.