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Specialist
Former VP at Yahoo!
Agenda
- Yahoo and its key segments and properties
- Growth considerations and implications of completed and potential corporate actions
- Potential for an IPO and AI-related risk
Questions
1.
How would you characterise Yahoo? The company has a long history, with a lot of twists and turns. What does it consist of now? There seems to have been much M&A activity, alongside some divestitures, over your lengthy tenure.
2.
You seem to be looking at Yahoo in terms of three segments – owned-and-operated, adtech and search – where the focus and investment has been increasing, particularly in certain verticals within the owned-and-operated business. You mentioned the three mainstays being sports, finance and mail. It seems to me as if the company has been de-emphasising its adtech business. You mentioned the reduction of the SSP [supply-side platform] business, the outsource deal with Taboola and the sunsetting of Gemini, and search seems to be in a steady state and not particularly noteworthy in terms of market share, while remaining a big business in other contexts. Does this framework prompt you to expect growth to be driven by Yahoo’s owned-and-operated segment? What is the company doing to drive related gains?
3.
How should we think about the revenue mix across Yahoo’s three business segments? I imagine a lot of the monetisation that goes on, particularly of owned-and-operated, takes place through the adtech part of the business.
4.
You’re 50/50 as to whether Yahoo will continue owning and investing in its DSP [demand-side platform] segment. If you were making a decision such as that, what would you do with it?
5.
You characterised Yahoo’s search business, not just the owned-and-operated segment, as contributing the lion’s share of revenue at the company. Breaking down search and owned-and-operated vs adtech, would that be an 80/20 split? What might this be?
6.
Within Yahoo's three segments, if we group search and owned-and-operated together, it seems as if 60% or 65% of that joint portion is what you would characterise as more traditional search, and the remaining 35% is from the ad platform piece. Is that a reasonable way to think about the company?
7.
Within Yahoo’s owned-and-operated segment, when considering the other 35% or 40% to be generated by a majority of sports, finance and mail, is that equally allocated? Is there one of these subsections that comprises a more lucrative or significant portion of the company’s revenue mix?
8.
Search and mail – two very critical sources of revenue – are legacy offerings to a large extent, which you alluded to. Given the age and lack of investment you noted with these businesses, there seems to be a lot of upside to a reinvigoration and more focus, investment and talent, such as a chief marketing officer who can be responsible and manage the e-mail business more closely. How should we be thinking about it? Do you see that as a negative and a risk, or do you see that as an opportunity and a positive?
9.
The two vehicles you’ve highlighted from a vertical standpoint, sports and finance, are both transactionally-driven areas that were tremendously popular during the pandemic, and it seems as if there’s been, if not cooling off, then definitely not as much of a focus on those areas. It’s not lost on me that Yahoo breaks out its verticals by sports and fantasy, perhaps acknowledging that while there’s some overlap, it wants to keep those areas separate. It acquired Wagr, a company involved in sports betting, in April 2023, and it sounds as if you think given its PE sponsor’s other interests, bridging sports and fantasy together would be a logical alliance, perhaps manifesting in a broader combination to bring sports betting to the platform. Why do you think this venture has taken so long?
10.
Yahoo’s partnership with MGM was launched in 2019, before the pandemic, and has been going on for almost four years. The company has an offering called Yahoo Sportsbook, and MGM still seems to be pretty prominent – the website reads, “Yahoo Sportsbook powered by BetMGM.” It sounds as if you think that deal is in place, but Yahoo may be either trying to exit that deal or waiting for it to end to forge alliances with more related properties. When would you expect an update on that front?
11.
The fact that we’re asking, “I know Yahoo had this agreement, I don’t know if it’s still going on, I’m not sure when it’s ending,” demonstrates that the company has not been particularly aggressive or visible in its actions. Maybe that changes with a new chief marketing officer, or perhaps, as we’ve been discussing, there is an interest in a transition to another core partner or two who may be more aligned with current leadership. What’s your take?
12.
You referenced Jim Lanzone, Yahoo’s CEO since 2021. In a recent Financial Times article, he alluded to the possibility of an IPO, noting the need to have most, if not all, of your ducks in a row. One key factor, as you noted, is revenue growth. Where is revenue growth currently for the company? If it said, “We’re not making any major changes in terms of the DSP, we’re not going to be changing the way we’re doing sports betting online,” where might its organic revenue growth rate average annually over the next three years?
13.
If a company is looking to go public, especially for Yahoo, it probably needs to do a couple of things. One is to show a strong growth rate, another is to broadcast healthy and improving margins. In his conversation with Financial Times, Jim Lanzone made a point of talking about how profitable the company was. There seems to have been a lot of heavy lifting over the last two years since a PE sponsor bought into the company, including the reduction in spend on the ad platform side, the outsource relationship with Taboola and other efforts that probably support the margin profile. Is there anything else the company could do to help with its cost and expense base? I’ve been following Yahoo for a long time, and this has always been a knock on this business – it was always less profitable than its peers and competitors. Has that been normalised to a large extent, or is there still a lot of work to be done?
14.
A PE sponsor acquired Yahoo in September 2021. Following things on the ad platform side, including the sunsetting of Gemini and the outsourcing of other efforts to Taboola being completed, what was the impact on the size of the employee base in 2021-23? Was it 10% or 20% lower?
15.
What do you see over the next couple of years from Yahoo? You mentioned the possibility of an IPO. Is that something you expect the company to pursue sooner than later? You noted a potential deal with a player such as Caesars or Venetian. Do you see that occurring? We projected a potential 5% revenue growth. What kind of margin profile or EBITDA would you expect from the company?
16.
It sounds as if you see a very binary set of choices for Yahoo – either it can pursue many internal improvements, achieve some benchmarks people are looking for and pursue the IPO, or if it can’t do that, then it’s going to be selling assets to generate more value. Your point might be, and the fact that the company hired a chief marketing officer you see as effective would suggest that, at least, it’s going for the first option. When do you think the fail-safe point is, where the company says, “We’ve tried this, it hasn’t worked, and now we’re going to go to plan B”? Is that 2024?
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