Yahoo! A Critical Analysis Yahoo! History Problem

Yahoo!

A Critical Analysis

Yahoo! History

Problem Areas for Yahoo

Search Engine Industry Review

Yahoo! In the Light of Porter's Theory

Threat of New Entrants

Threat of Substitutes

Bargaining Power of Suppliers

Bargaining Power of Customer

Competition in the Industry

Strategic Plans of Yahoo!

Financials

Yahoo! Stakeholders & Other Strategic Partners

Strategic Challenges

Strategy Implementation

Realign the focus of Employees without layoffs

Improve the Algorithm

Apply the Algorithm

Redeploy the Advertising Network

Expand the Ad Network

The Implementation of Outside Publishers

Yahoo! is one of the pioneers of what virtual internet world looks like today. Incorporated with the sole objective of providing internet service to both end-users and businesses, Yahoo! has transformed into more than that. It was founded by David Filo and Jerry Yang in 1995. Since then Yahoo! has enjoyed the status of market leader for several years. However with introduction of Google and tough competition from organizations like Microsoft, Yahoo! has failed to retain its old status. In fact, recently it is struggling to revamp the company's structure and vision which may respond to the robust market requirement.

In order to meet the demands of global market, Yahoo! management has decided to build its strengths and exploit its potential. It has closed down various unprofitable ventures, laid off non-productive employees and engaged potential talent. Example of such gesture is hiring of Google's Marissa Mayer. With the rich experience of over thirteen years spent in Google, Marissa appears to be well-versed with how to operate in a robust and challenging environment. Where Yahoo employees are going through a great stress of uncertainty with change of five CEO in past four years resulting into many layoffs, Marissa's initiatives such as free food and iPhone for everyone, appear rather appealing.

Yahoo! has been currently facing many strategic challenges. Now all it needs to do is follow its new vision and act aggressively.

Introduction

"Yahoo!! creates deeply personal digital experiences that keep more than half a billion people connected to what matters most to them, across devices and around the globe. That's how we deliver your world, your way. And Yahoo!'s unique combination of Science + Art + Scale connects advertisers to the consumers who build their businesses."

Mission statement of Yahoo! surely appears to be highly powerful however it is critical to understand whether Yahoo! has been following its own ideology or not. Since its inception Yahoo! has preferred to be known as media company instead of IT company. It core business is to provide digital content which can be expanded and utilized on global scale. The Company provides online properties and services (Yahoo! Properties) to users, as well as a range of marketing services designed to reach and connect with those users on Yahoo! And through a distribution network of third-party entities (Affiliates). These Affiliates integrate its advertising offerings into their Websites or other offerings (those Websites and other offerings, Affiliate sites.

Yahoo! is a clear example of how companies lose their market position if they fail to respond to market norms and consumer requirements. Once market leader of IT world, Yahoo! has been struggling to retain a stable position, let alone the former glory that it had enjoyed for several years. Also, it is a classic case study which helps to evaluate how lack of decisiveness and insight in company's leadership make the organization and its stakeholders suffer in the long-run. There should be only two motives of an enterprise: satisfy and retain its customers and generate business. Unfortunately, Yahoo! forgot how to perform both.

Yahoo! History

Yahoo! is one of the pioneers of what virtual internet world looks like today. Incorporated with the sole objective of providing internet service to both end-users and businesses, Yahoo! has transformed into more than that. It was founded by David Filo and Jerry Yang in 1995. Initially started as a mere hobby of two PhD students it later transformed into a brand which captured millions of users all over the globe for its multifaceted services. It became the largest online service provider for integrated services and also one of the major search engines on the World Wide Web.

Yahoo! currently has over 700 million users visiting the site on monthly basis. Furthermore, its success came from providing user-friendly service to the customer which is available in more twenty languages satisfying its users globally. Currently, it is located in Europe, the Asia Pacific, Latin America, Canada and the United States. It has its headquarters in Sunnyvale, California.

Formed in California in March, 1995, Yahoo! shows its first public appearance in NASDAQ where the commodities and services not being listed anywhere else got listed (Yahoo!, 2012). Initially, Yahoo! announced a per share price of USD 13.00. However, at the end of its first closing day, it had reached a price hike up to USH 33.00. In its early times, Yahoo! started off with the team of forty nine members and later on its was transformed through reincorporation in 1999 (Yahoo!, 2012). Later on, it was made to add into S&P 500.

Other than the changes in stock listings, Yahoo! entered into a joint venture with SOFTBANK along with other strategic alliances with other content partners (SOFTBANK, 2012). This venture was Yahoo!'s first step into Japanese market which led to the creation of Yahoo! Japan. Later on this joint venture resulted into exploration of German, France, UK and Korean markets. Same association caused formation of Geocities Japan to happen (Marketwatch, 1998).

In 2006, Yahoo! And Seven Networks Ltd. which was an Australian media management firm, entered into another venture which made contributions to Australian internet business generation. Yahoo! owns fifty percent equity of this company and operates with the name Yahoo!7. This company owns Australian online assets, television and magazine content publisher with the name Pacific Magazines. In addition to that Yahoo! also operates Flickr which is an image management and sharing website.

Yahoo! began using the services of Google in 2000. However, over the passage of four years it began to develop its own search technology which became operational in 2004. Furthermore, it also redefined its emailing service in 2007 in competition with Google's Gmail. Yahoo had been the pioneer of today's technological web-based world however once the dot com bubble burst, Yahoo began to lose its worth. In 2008, Microsoft offered Yahoo with USD 44.8 Billion but the offer was declined by the then CEO usually known as Chief Yahoo, Jerry Yang (Ovide, 2012).

Three years later, Yahoo! had the market worth of USD 22.24 Billion. Jerry Yang although being the co-founder of this organization, was often criticized for following a vision which was not adaptive to the changing circumstances and was not in the best interest of the investors. As a result of immense criticism, Yang left his CEO's office and handed it over to Carol Bartz in 2009 who held a strong portfolio of working in the similar field in presidential role. However, even Bartz aggressive approach failed to deliver results and she ultimately was made to leave Yahoo in 2011. In an extension to that on-going criticism, Jerry resigned in response to this resistance and criticism however the parting note was rather positive and interesting at the same time. In his resignation, Yang wrote

"My time at Yahoo!, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life. However, the time has come for me to pursue other interests outside of Yahoo! As I leave the company I co-founded nearly 17 years ago, I am enthusiastic about the appointment of Scott Thompson as Chief Executive Officer and his ability, along with the entire Yahoo! leadership team, to guide Yahoo! into an exciting and successful future."

In 2012, Scott Thompson, ex-CEO of E-bay's PayPal unit was given the particular position. In the period of five years, there were layoffs of about 14% of Yahoo's workforce which was expected to perform cost cutting of about USD 375 Million. Scott from the beginning of his tenure showed a positive vibe about the business but even he could not continue working with Yahoo upon his failure to satisfy board of directions regarding his misstated academic records. As a result of this layoff, the office of CEO was then offered to and now held by ex-Google Vice President, Marissa Mayer.

With the rich experience of over thirteen years spent in Google, Marissa appears to be well-versed with how to operate in a robust and challenging environment. Where Yahoo employees are going through a great stress of uncertainty with change of five CEO in past four years resulting into many layoffs, Marissa's initiatives such as free food and iPhone for everyone, appear rather appealing.

In addition to the controversies that Yahoo has been attached to, lawsuit against Facebook also has captured media's lime light since March 2012. The suit entailed claims for infringement of patents covering advertising, privacy controls and social networking, following through on a threat it made last month. Yahoo which is now a mere shadow of its former glory has claimed that Facebook should acquire licenses for its patent. However, Facebook has opted for rather aggressive approach in response to Yahoo's allegation of "puzzling actions"

Yahoo had first threatened the suit last month. It demanded that the giant social network, which is preparing to go public in what may be one of the largest public offerings ever, should license the patents. I n response to Yahoo's lawsuit, Facebook replied, "We're disappointed that Yahoo, a longtime business partner of Facebook and a company that has substantially benefited from its association with Facebook, has decided to resort to litigation,." This particular lawsuit has its consequences for Facebook which holds only fifty six U.S. patents whereas Yahoo has filed more than 1000 patents for coverage of its extensive operations (Arthur, 2012).

This particular lawsuit has added more complications and troubles on Mayer's plate. Where Facebook may face troubles because of this suit, Yahoo will not be saved from the heat due to loss of revenues that are generated to Facebook advertisements redirected to Yahoo. Constant changes in management, loss of sales, layoffs, demotivated team, puzzled and frustrated investors, dissatisfied and strayed customers and now this lawsuit, is precisely few of many problems that Yahoo is currently facing. It is up to the management of Yahoo and Marissa's leadership which will now decide the fate of the glorious existence of Yahoo! .

Problem Areas for Yahoo

Yahoo! is the leading name when it comes to search engines however it had allowed its product to suffer greatly. It has intended to provide the consumers with value-added offerings however not much effort has been actually placed as to attaching these features to revenue generation. Yahoo has been clearly lacking the vision to target users with advertisement or any other value-added service. The usage of search has defined the very culture of Yahoo! with its roots engrained in it in the form of portal terminology. Instead of making it their core business, other companies like Google and Microsoft have made the search engines a product of users facilitated to make their ways through the internet.

Yahoo! although having an extensive users base which was once loyal to it, focused more on Mail service, Finance, News and other IT-related services such as Geocities and Flickr. These acquisitions were made with the intent of revenue generation but failed to play their role in making overall situation better for Yahoo. Furthermore, Yahoo has been mainly banking on the web traffic which has shown a declining trend over last few years, as the source of money making through strategic alliances and partnerships. However Partners usually make payments for making additions to Yahoo directory which is getting rather stagnant now and is receiving lesser customer traffic.

Private advertisements also act as the source of revenue generation for Yahoo. A prominent banner on any of Yahoo pages is supposed to perform miracles for the buyer but since the end-users are opting for Google's services as Microsoft Bing (which was the result of strategic alliance between Microsoft and Yahoo itself). Therefore, the search engines business generation has failed to generate enough money for Yahoo. Despite the huge number of users, Yahoo's advertisement are only limited to Yahoo's pages only. This fails to target the individual web publishers who are owners of their website. Hence, these Publishers are unable to utilize Yahoo's service unlike Google which has provided its users with empowerment through contextual ad system. Where Yahoo was once the heaviest trafficked website, it was still lagging behind in business generation due to its inability to satisfy individual publishers.

In addition to this basic problem in business generation, Yahoo! has encountered many other problems in its services which ahs displeased many end-users. The famous turmoil is with Yahoo! spam guard. In 2008, BT which was one of the major alliances of Yahoo! lost thousands of emails due to Yahoo! spam up-gradation. The very idea behind this spam control was to restrict emails coming from other domains by allowing the end-user an option to access whatever domain they wanted. However, the whole process added a lot of hassle and trouble to the simple process of email send / receive which affected the inflow and outflow of thousands emails.

In addition to that, Yahoo! has also troubled with partners with delayed delivery notifications. The whole trouble started with Yahoo backlogging due to which senders using services for years are receiving no delivery of emails all of a sudden. Third main problem faced by Yahoo is its failure to make sufficient revenues by having strategic alliance with Microsoft which certainly did not went as it was. It is providing Yahoo with rather small figures in terms of revenues; resultant is Microsoft paying Yahoo out of its own pocket. There is always a probability that these two partners will now separate their ways and look for better alliances. Marketplace RPS (revenue per search) has continued to shown discrepancies between the targeted figures and the actual figures.

The deal entailed the agreement of generating the RPS equivalent to what Google is making right now. However, the figures cumulatively states that the revenue generated in terms of ads that are generated widely through Microsoft have failed to provide similar revenues as the ads acquired by Google. On the end of first quarter of partnership between two giants, Yahoo stated, " As we enter 2011, the marketplace is not producing the click yield and RPS we had hoped, and it's going to take continued focus over the next two quarters to get to the financial model we established for the Alliance." Where consumers are looking for better ROI on the given ad centre, this partnership is about to fall apart (Sullivan, 2012). Also, slow services on Flickr and Yahoo! China are some of the common drawbacks shown in the service model of Yahoo!

Search Engine Industry Review

Search Engine industry is mainly ruled by three giants: Google, Microsoft, and Yahoo!. Google has been acting as the search engine excellence providers since its very inception after performing syndication of its search engine services in the pursuit of becoming everyone's favorite search engine (See EXHIBIT E, F & G). Yahoo! On the other hand, started off as a directory and a core search portal which was later on outsourced to inktomi and then to Google, later on. Yahoo! gained the status of search engine after purchasing Income, AltaVista and Altthe Web. This agreement took place in 2003. These purchases made Yahoo! became a competitive rival for Google on the basis of its search technology.

Out of these three giants, Microsoft has the greatest leverage due to its size, potential and ability to adapt. There is no wonder why Microsoft tried to acquire Google in 2003 and then Yahoo! In 2008, in the pursuit of reducing the competition in content acquisition. Where both the companies decided to stay on their own feet, Microsoft was still interested in moving on top of the economic food chain. The result of this desire has resulted in to strategic alliances between Microsoft and Yahoo. After Google denied Microsoft's offer, it turned to opt for another plan. Till 2003, MSN was using Inktomi as the major source of reliance for its organic searches which was already a subsidiary owned by Yahoo! It decided to drop Looksmart and Inktomi, in the pursuit of designing its own search engine Thus, Microsoft had begun to amass a proprietary index of sites from which to conduct searches and was hiring hundreds of engineers to work on web-searching algorithms to top Google. Moreover, the software company planned to integrate its search technology directly into its Windows operating system under a project codenamed "Longhorn" (Mangalindan, 2003).

Furthermore, with GoogleTalks introduction and the strong position enjoyed by Microsoft's MSN, Yahoo's messenger nearly became extinct. MSN has been rather proud of its email services which are highly customized and adaptive with no major flaws. This pride is well reflected in Microsoft's statement, "Today we are number one in email, we are number one in messenger. Our ambition is to be number one in search," Sharon Babyle, the general manager of MSN's consumer Internet service, said at the end of November 2003 (Conners, 2003). Triumphing over Netscape browser has added another feather to Microsoft's trumpet.

However, once the Microsoft had beaten the Netscape, Google came up with its desktop-based search engine which allowed end-users to perform efficient browsing at their desktop which was a better feature than Microsoft itself. In this whole competition of acquiring search engine industry, Yahoo! has been making feeble efforts of regaining its old glory on the basis of same products which haven't gone through much customization. Rather news of client dissatisfaction and services crashes have become the slogan of Yahoo!.

Further industry review enables us to evaluate how Google now has the requirement of providing optimum research to the shareholders as its diversion from search engine to emails and messenger line, is raising questions about the integrity of Google Search integrity. As the opening sentence of a story in Wired plainly said, "The world's biggest, best-loved search engine owes its success to supreme technology and a simple rule: Don't be evil. Now the geek icon is finding that moral compromise is just the cost of doing big business" (McHugh, 2003). The initial step towards compromise over morality is Google's diversion to desktop-based browser which allowed it to gain maximum revenues through Google advertisement. Subsequent introduction of mailing service with the name Gmail also allowed Google to examine the given content transported over web in the form of emails send / receive making Google accumulate the data back to its database.

The chances of this compromise on morality are even higher with the strategic alliance between Yahoo! And Microsoft which has not gained the given results as yet. Commercial intrusions are also one of few concerns that analysts have been showing about Google. These days, even Google, the "ethical" search engine with the company motto "Don't Be Evil," is now focusing most of its attention on ad placement, either through the sponsored links it brokers on its own search pages, through contextual links on other content pages, or through data mining. Reflecting on the company's motto after Google went public in 2004, a New York Times editorial stated "Such idealistic talk out of Silicon Valley, so seemingly empowering back in 1999, seems embarrassingly naive now that the party's ended, at least for the rest of us."

Yahoo! other than low outputs in search engine functionality it also lacks various other features. It hasn't ventured into mobile hardware configuration as of now. Similarly, where Google, Apple and Microsoft have excelled greatly in Mobile Applications, Yahoo! has yet failed to address this major area which has been showing tremendous growth mainly in android phones and other devices globally. Also, Google, Microsoft and Apple have their own mobile operating systems which are Android, Windows Mobile and iPhone OS respectively.

Music hardware is also another area neglected by Yahoo! although despite its claim of being a media company. Microsoft and Apple have long addressed the desires of music lovers and youth which forms the major customer base, by providing them Music Xbox and IPods respectively. But Yahoo! And interestingly Google also, have decided not to explore this segment. Google can be excluded from this segment as it mainly focuses on the search engine, mobile devices and desktop applications. But the claim of Yahoo! being a media company requires it to venture into these unexplored seas as well.

Another major weakness of Yahoo! is absence of any office suite. Google, Microsoft and Apple have made their customers loyal to them by providing a single application for their all needs by providing them Google Chrome / Chromium OS (a Linux-based model), Microsoft Windows and Apple-Mac OS respectively. Now, the users don't need to employ various different applications from various platforms since they have all what they need in a single product which unfortunately Yahoo! does not provide. This lacking is enhanced by absence of any web-browser. Google has designed Google Chrome; Microsoft has a pioneering browser called Internet explorer with many upgrades; and Apple has Safari. Yahoo! is now a mere search engine with low output, and complicated mailing service provider with weak spam guards.

In order to beat its major competitors, Yahoo! needs to be an all-rounder. Google and Microsoft have played smart by providing its users everything the need at one platform. Whether its their computers, cell phones, music devices or any other form of technology access, Google, Microsoft and Apple have left their marks in the respective fields. As far as Yahoo! is concerned, it is only present on the Web and even then, user needs Google or Microsoft to access it. Yahoo! needs to be independent and address the requirements of its users by providing relevant solutions for the lacking mentioned above.

Yahoo! In the Light of Porter's Theory

With the world getting more and more competitive and user becoming immensely demanding, Yahoo! has now many challenges in front of it. In order to combat these challenges, Yahoo! needs to analyze the environment that it operates in.

Threat of New Entrants

Threat of new entry into this particular market seems to have no impact on Yahoo! In short run. The reason for such projection is the presence of two major giants in the market who are capable of handling or to be more precise crushing the new competition. Yahoo! also has a potential of ruling out any new entrant due to its rather old existence in the search engine industry. However, as far as browser-based developments are concerned, Yahoo! needs to invest more into its technology.

Threat of Substitutes

Yahoo! has a greater threat from the products of similar nature offered by other service providers. Yahoo! email service faces a greater competition from MSN and Gmail. Although it is one of the pioneers in the email services however Yahoo! has shown lack of adaptability to user's requirements and also hasn't responded to the innovation showed by its competitors. Secondly, Yahoo! spam feature has also shown discrepancies time and again resulting into many unsatisfied customers. As a result, its rivals have provided with better substitutes which are slowly taking away Yahoo's users.

Bargaining Power of Suppliers

The supplier tends to have a bargaining power if they have tendency of altering or affecting the decisions of the enterprise. The key tactics used for this purpose are increasing the prices of the supplies or reducing their quality at the given price. As far as bargaining power of suppliers is concerned, this factor has major threat mainly because as far as the in-house development is concerned, there are thousands of software developers and system architects available to replace them. Hence, loss of a single supplier tends to have no impact on Yahoo! business.

Bargaining Power of Customer

Yahoo! customers have a really high degree of bargaining power and have a greater tendency of affecting its decisions. Firstly, customers have various search engines available in the market having better features than Yahoo! In simple words, for email services, customers have hotmail and Gmail, Taboo instead of Yahoo! auction and YouTube as a replacement for Yahoo! video services. There is a greater degree of similarity between these services and the products of Yahoo! And this lack of differentiation provides customer a greater edge over decision making power of Yahoo! The switching cost of Yahoo! customers is rather low, for instance, customers can check the product prices on many websites by a few mouse clicks. According to Dess et al. (2007), "The Internet and wireless technologies may increase buyer power by providing consumers with more information to make buying decisions and by lowering switching costs," therefore, it reveals that the decreasing switching costs can enhance the bargaining power of customers.

Competition in the Industry

The industry of competition is really high in the industry where Yahoo! is operating. There are huge barriers to exit in the form of Termination of a large number of servers, personnel, goodwill and legal issues which would cost million dollars for Yahoo! To quit the business. Yahoo! has built its brand value laboriously at great costs and such cannot be easily ignored. Moreover, Yahoo! handles much personal and other confidential or vital information belonging to users. Unprecedented lawsuits and bad brand equity for any brands associated with the closed operation if suddenly withdrawn

Strategic Plans of Yahoo!

Yahoo! has only goal in front of it which is to restore its former glory. Recently, Yahoo! has been going through major turmoil due to constant changes in leadership and also because of lack of employees' support and external factors as well. On the other hand, most of its strategic alliances have either failed, closed down and have been unavailable. The current situation has given rise to major need of a sound strategic plan which would allow Yahoo! To exploit its strengths and opportunities as well.

Recent change in leadership and hiring of Marissa Mayer shows a shift in the vision of management of Yahoo!. Mayer has shown various measures which mainly appear to bring change from within. Theses attempts have been focused on employees' motivation which includes bringing innovation into overall Yahoo! culture which was reflection of a software house formerly.

Another major strategic plan which has been followed by the management of Yahoo! is the new aggressive approach. The same management has stayed by the earliest mistakes committed by former presidents, CEOs Yang, Bartz and then Thompson. The management is now ready to make its office holders accountable for whatever their assigned roles are and is also ready to get rid of any shackles which are attached to its growth. The most recent display of such behavior is the layoff of Bartz and forced resignation of Thompson.

Yahoo! has been also planning to cut its operating cost greatly by closing down its non-profitable ventures such ventures as Geocitoes etc. As a result of this aggressive approach, Yahoo! has also filed claims against Facebook demanding its share of patent fee as the major expenses in terms of patents used by Facebook are purchased by Yahoo! over time. Also, an aggressive attempt of questioning effectiveness of Microsoft Bing is another clear example that Yahoo! wants its alliances to provide revenues and not just support. As a result of this approach, there is a clear gap between the standards estimated and revenue generated by Microsoft Bing and but due to loud hue and cry by Yahoo!, it is providing Yahoo! with the capital fee which results in achievement of this gap.

The new strategic plans are aimed at providing better user service, revamping its search engine optimization and also exploiting and building its strengths and opportunities. The new leadership believes that Yahoo! needs to be small, efficient and robust organization which can compete with the giant like Microsoft and the smart organization like Google. As of now, it is apparent that Yahoo! management has finally decided to take things in its hands and being aggressive in its approach.

That is the basic strategic move that is evident by recent Yahoo! activities however Yahoo! CEO Marissa Mayer has not made many disclosures about her current vision of Yahoo! And the strategic moves that she has in her bags. Her move entails improvement of Yahoo! search and email services. Also, she has a considerable eye on the current market share of Yahoo! And also the trends shown by its stock. Also, maintenance of user base of Yahoo! email is also one of her major concerns. This isn't the first time we've heard that Mayer is looking to improve Yahoo's core products. Last month, one source told All Things Digital's Kara Swisher that under Mayer, Yahoo is "becoming a technology company again," adding that her focus is on "platforms and products." Her consideration of employees' morale is also worth praising and may have significant impact on employees' loyalty towards Yahoo!.

Financials

A thorough analysis of the financial statements of Yahoo! For the year ending 2011 provides a greater outlook of how Yahoo! is currently doing. There is a clear pattern of decline in profit except for the year 2007 where company showed a profit of USD 2 Million.

The exhibit A illustrates the condensed balanace sheet view of Yhoo! Inc. For past five years (2007-2011). Simple analyis illustrates how Yahoo! has been losing its share of market by constant decline in its overall value generation. Other than year 2008, there is a rather discouraging trend reflected in the financial statements of Yahoo! which precisely became worse in the year 2011. 2011 was the crucial year for Yahoo! As there were three permanent and two interim CEOs replaced in this year and the subsequent year as well. Even the deal with Microsoft and Facebook support tend to have no effect on the balance sheet of Yahoo!

A thorough look at key statistics and major ratios given in Exhibit B. also supports the trends projected from Exhibit A. ROI on Yahoo! investments has been showing negative dimension in the last financial year i.e. 2011. Exhibit C. gives a view of Yahoo! cashflows for five financial years. From 2008 to 2009, there was a positive growth shown which continued up till 2010. However, due to various external variables and many closures, Yahoo! was forced to show decrement in its gross sales and net profits sucsequently despite the positive growth of Yahoo! Inc. itself. In the year 2011, there was a negative growth of 14.85% as compared to the tremendous growth in the prior year which was upto 105.97%. This main growth was accredited to online advertisement which gave major business to Yahoo! Strategic alliances like Facebook, also helped it establish internal profits.

Key ratios given in Exhibit D. have shown a rather encouraging trend in the overall economic growth of Yahoo! Although capitalization and EPS rates have shown a decrease over five-year span but profit margins have increased mainly because of strategic alliances instead of individual business model.

The net non-cash gain that was attributed by Alibaba Group initial public offering ("IPO") of Alibaba.com Limited ("Alibaba.com"), the business to business e-commerce subsidiary of Alibaba Group, and a non-cash loss of $30 million, net of tax, related to the impairment of our direct investment in Alibaba.com. For return on assets, Yahoo! has shown an increment of 3.36% and return on equity up to 8.81 & as per the statistics provided by SEC as of 30th June, 2012. Furthermore, return on capital is 3.9% which is lesser than the overall industry output.

Gross margin has shown 69.23% of the overall sales made in the last financial year with the leveraged free cash flow margin equivalent to 13.54%. Timeline analysis shows discrepancies between industry norms and Yahoo's output. Total debt to equity ratio is 0.3% which almost consistent with the industry norm however, total liabilities total assets ratio is comparatively lower than industry average by around 1%. Fixed assets turnover has been showing a slow but positive trend of 2.9 times the fixed assets which is an encouraging indicator. However, account receivable turnover is still comparatively lesser than the industry average. There are not many financial indicators which are showing a positive trend as the gross profit of the company has shown a negative increase up to 2.81% with negative increase in revenue by 10.59%. Also, tangible book value of the company has also decreased by 4.4%.

As compared to clear cut indicators in 2012, 2011 was an year of financial uncertainty and disappointments for Yahoo!. Company, In 2009, there was a pre-tax gain of $67 million in connection with the sale of our Gmarket shares and a gain on the sale of our direct investment in Alibaba.com of $98 million. In addition, in the year ended December 31, 2009, Yahoo! recorded net restructuring charges of $127 million related to our cost reduction initiatives. In the aggregate, these items had a net positive impact of $18 million on net income attributable to Yahoo! Inc. However, these trends suffered greatly as per Yahoo! disclosure in its financial statements 2010. The reason was this decrease was given as the loss sustained by Microsoft Search agreement. Despite the pre-tax gain of USD 66 million and USD 186 Million respectively on sale of Zimbra and Hotjobs respectively, Yahoo! incurred expenses in terms of restructuring, up to USD 58 million. However, this loss was recovered in the next quarter in terms transition costs (Yahoo!, 2012).

The reason for revenue decline 2011 was also credited to Search Agreement with Microsoft which made Yahoo! To alter its revenue representation and made it shows transitioned revenues with Microsoft. The non-cash gains worth USD 25 million due to diluted ownership of Alibaba group resulted in net loss of USD 33 million which was incurred because of assets impairment of Yahoo! Japan. A negative increase of USD 24 million was also attributed to the income of Yahoo! Inc. As a result of net restructuring aiming at overall cost reduction.

These trends explain the possible causes of decline in income of Yahoo! Inc. As shown in their financial statements. However, an encouraging fact was the recovery of Yahoo! losses from Microsoft which is again expected in this quarter and also the cost cutting strategies adopted by Yahoo! management in 2011-2012.

Yahoo! Stakeholders & Other Strategic Partners

Yahoo! not only has external competitors to handle; it also has internal angry stakeholders to combat with. With change of five CEOs in last four years, Yahoo! has been going through an internal turmoil which makes its management kneeling down to investors wishes every now and then. Resignation of Jerry Yang in 2011 was one such example where Yang was initially made to leave the office of CEO and then later on ultimately leave Yahoo! For good.

Recent examples of internal turmoil are the requirements from stakeholders to change the Chairman Office holder. Other than that, wishes of stakeholders regarding revamping of board of directors is also one of the expressions showing lack of faith in the company's management which resulted in the change of management in 2011. Daniel Loeb of Third Point LLC has been the key player in many decisions made since 2010 which includes letting go of Yang, layoff of Bartz and also forced resignation of Thomson. It is Daniel Loeb who has acquired 5.1% shares of Yahoo! In 2011 and has also demanded change of Chairman as well.

He wrote to SEC, "From the failed Microsoft sale negotiations, to a subsequent bungled and disappointing search deal with Microsoft, through a series of misguided CEO selections, and most recently the Alipay debacle, this Board's failures have destroyed value for all Yahoo stakeholders…Against this background, it is evident that merely replacing the Company's CEO -- yet again -- will not be enough to alter the direction of the Company. Instead, a reconstituted Board with new Directors who will bring fresh eyes, relevant industry expertise and increased investor alignment to the table is immediately necessary. (Carlson, 2011)"