There is a bit of buzz around the presentation Bear Stearns Internet analyst Robert Peck gave a couple of days ago. It recommends a broad strategy for Yahoo to get their act together in the social networking space, and recommends a near term acquisition of one of the big players.
I’ve embedded the full presentation below. It is a broad overview of social networking in general, which Peck breaks down into four distinct types:
Peck also notes that social network users are not all teenagers – the largest user group is 35-54 years old:
Peck also notes that social networks have incredible reach, page view growth and boast very high engagement (lots of time spent on the sites. He estimates that by 2011 social networks will control 12% of online advertising.
He then goes on to build an argument that Yahoo should acquire Facebook, something they tried and failed to accomplish last year. Compare his valuation model below ($4.5 – $7 billion) to the model Yahoo put together last year ($1.6 billion):
There is a lot more information in the presentation to digest. See below for the entire thing. Also, while it’s easy to tell Yahoo they need to go buy Facebook, it’s not clear that the company is for sale at any price. The public markets would likely value Facebook beyond even $7 billion at this point. Somewhere down the road it might be Facebook buying Yahoo, not the other way around.
Interesting post. Isn’t today supposed to be the day the TC20 are announced? Or did I get mixed up?
The fact that Second Life is even mentioned in the report invalidates it.
I’m not entirely convinced that Yahoo must buy a social network. Remember, Yahoo bought the first social network, Geocities, back in the 90’s for $3.5 billion. Since the purchase, Yahoo has let Geocities languish into nothing.
The Bear Stearns analysis is fine for dissecting the current demographic makeup of the social networks, as well as a comparative valuation for Facebook. It does not, however, provide any strategic analysis or insight as to how a purchase of Facebook now, or any other major social network, would improve Yahoo’s future fortunes.
I think the Bear Stearns report is limited in it’s usefulness, and certainly useless as an assessment as to why Yahoo needs to buy a social network.
@alaska,
that is the best assessment of this report anyone can make. second life has to be one of the most over-hyped sites there is.
Yahoo won’t be the only ones that will need to open up and have social networking feature:
AOL has the community, but hasn’t opened up, and with Plaxo opening their platform up today, this is the way to go.
Here’s my predictions on the space, many of them are already coming true!
http://www.web-...ocial-networks/
lol – the Second Life mention.
Yahoo! will need FB to distribute its massive content. Buy now or feel sorry later.
Yahoo has a social networking strategy:
360
Delicious
Yahoo Answers (friend list, answer network, etc)
Geocities
Flickr
YIM (Yahoo Messenger)
Did I miss any? However, the problem with having six different strategies in a single space “social networking” (seven if you include Yahoo Personals) is that people don’t want go blog in one place, share photos in a second, answer questions in a 3rd, find a date in a fourth, create a personal page (geocities / 360) in a fifth, etc. It’s a nightmare for consumers who want stuff simple.
Myspace, facebook, hi5, bebo, etc, do one thing really well: connect you visually with your friends to help you keep in touch. Name one current Yahoo product that fulfills that simple promise well? Not one from what I’ve seen…and the confusion internally matches what we see externally. Most of the Yahoo people I used to work with that understood the fundamental problem with their schitzophrenia have since moved on.
If they buy a 3rd party, the only way it’ll really add value is if they figure out how to start selling through more ads on that site too & extend their display advertising platform to include said 3rd party. However, the eBay display ad deal hasn’t added much (yet) growth to their bottom line…so, I have a hard time believing a social acquisition would do so either.
Still, the social brand (if they acquire one) could at least give them back a bit of “cool” to their image, which they sorely need.
I really don’t see the need for them to buy one. who here has a yahoo account for one reason or another? Lets not forget they have several network sites already and just need a less featured social app to plug these into.
I think they’d get better value for money investing it elsewhere. I can’t see them wiping out their cash reserves on something that might be old news in 24 months.
Thanks for the chuckle, favorite part (ie monetizable).
Umm.. Bear Stearns?
Those geniuses over there can’t even figure out that buying loans sold to deadbeats is not a good idea. Even a fool could’ve seen the sub-prime debacle coming a mile away.
Good review Mike. I am not sold that they need to buy anyone. I would rather see them innovate in this space and come up with the “next big thing” vs. just buying a network.
Buying a network like facebook might not equate to immediate success anyway.
Boy have the financial firms changed since I worked at Credit Suisse First Boston!
It was said previously, but I think it needs repeating. Yahoo has a social site similar to Myspace/ Facebook. it is called Yahoo 360.
In addition, Yahoo easily ties its IM into social networking as well.
In addition, Yahoo has Yahoo Answers which is very addicting.
The fact that the analyst overlooks it, to me, means that the analyst is focused on social networking hype and doing the real research required.
Second Life is nothing new. This was predicted in a book called “SnowCrash”
yahoo has really dropped the ball over the last few years…(not in chronological order)
1) they buy geocities, let it die and then sit and watch friendster, myspace and facebook dominate the social networking space.
2) they take a pass at buying google when larry and sergey still hadn’t figure out a way to monetize search…only to see the boys dominate search. Google will be the single biggest reason yahoo will soon cease to be an independent company.
3) brought broadcast.com only to see youtube, lastfm, pandora, itunes come in and build valuable properties in online video and music.
Don’t get me wrong, i’m a big fan of yahoo. They have been the most valuable internet property for most of their existence. No other internet company has come as close to ‘being all things to everyone’ as yahoo. They had the right vision in picking up companies in these emerging spaces, but never had the skill to fully develop those businesses into anything meaningful.
Wtf is this social network paradigm bullshit? Social networking is web2.0-speak for MEMBERS.
Last I checked, Yahoo has PLENTY OF MEMBERS. You want to check profile? Yahoo Profile. You want to check blogs? Yahoo 360. You want to check pictures? Flickr or the defunct Yahoo Pictures. You want news? Yahoo News. You want email? Yahoo Mail? You want IM? Yahoo IM?
So okay.. how do we make Yahoo better? I know, let’s dumb it down! Let’s make it SO STUPID EASY to use by making it look like Facebook! Log in to yahoo.com and you get a picture of yourself and your inbox. You can also get feeds to latest news or your friends news and then you can type up all your rantings and stupid lives in the 360 blog. OMG JERRY YANG are you listening? I just solved your problem.
Don’t buy Facebook, just make Yahoo.com WHITE and BLUE and DUMB and call it a social network. You can call everyone a Yahooligan (I know Yahoo already has Yahooligan) and let them check their email, IM, feeds, and pictures on one page.
At this stage of the social network craze, I say to yahoo , ” sit still”. People change directions on a dime. All these social netoworks are the hula hoops of tomorrow.
We’re rebuilding the wheel constantly and calling it something else shiny?
What is the core functionality of Facebook? Messaging, posting on each other’s profile (walls), and adding/poking each other. Every other functionality that Facebook has, every other web company already has developed. How much better has any of these social networks made messaging, profiles, and adding each other? What company out there has truly made something innovative in “social networking”?
Facebook doesn’t have anything else innovative, rather they “opened” up their website as a “platform” and in some grand wizardy convinced everyone else to make a feature for them. What a great pyramid scheme. 10 years from now we’ll remark at how lame this all was.
Perhaps Yahoo! will look to make a move for The Social Search Engine? Might as well give it a shot, no pun intended! Beer, wine and spirits oh my!
http://www.soci...earchengine.com
Looks like the Web2.0.1beta MBAs are whispering more loudly than I imagined.
Ha ha. Given Bear Sterns rather poor assessment of the sub-prime mortgage market, of which they were heavy players, and in which they are now taking a heavy beating, I wouldn’t put a lot of stock in any analysis by Bear Sterns in any area.
Personally, I just don’t see that there is huge money value in social networking over the long-term. Once people begin to understand that all their information is aggregated and combined, allowing them to be easily identified by employers, the government and just general crazy people, many will return to hiding their identities online. Then these social networking companies will go bottoms up.
@Johnson
They only $3.2 billion to bail out their fund. What’s a little billion here and there? Oh wait… no one is willing to buy any of their debt. LOL.
Those numbers seem off.
Yahoo never figured out how to grow 360 and certainly can’t monetize it. Why not buy a few smaller social networks that are in the black?
yahoo: bear sterns must form a mortgage risk strategy
FB is way overrated, as is Bear Sterns report on “Social Networking”. FB works as long as people use it. It’s like phone lines: only of value when they’re transferring communications. FB’s only been in the game a short while, and most people just login, checkin with their friends, then leave. Now people bag on Y!, but Y!’s been around how long? Also, when people login to Y!, they usually surf, and stay logged in. They may end up anywhere, even searching on Google, but the results often land people right back on a Y! property and all that traffic is logged. Plus they own some of the hottest social networking apps out there right now: flickr, delicious, answers, etc. My point: Y! is actually sitting on the largest repository of social networking data out there right now. Y!’s challenge is to 1) wake up to that fact and 2) figure out how to do something useful with all that data and create revenue streams from it. If they do those things Y! could emerge the real Social Networking leader. The problem is the longer they stay asleep, that gives everyone else a chance to catch up. And Y! buying any “social networking” site right now would just be a waste of money and a huge distraction from that goal. Y!s got everything they need right under their noses, it’s just so frustrating so many of them are oblivious to it.
Good luck to Yahoo , it’ll buy its way out of jail anyway but brands get in the way too and TC has very recently given glowing reviews to two smaller yet established social network players , Ning and Tangler, who could really help each other out as Ning is class white label social networking app that lacks decent forum functionality and web integration beyond badges whereas Tangler seems to have those angles well covered but lacks a classy all round social networking package like Ning whose users are prepared to grow their network for free and then pay to expand and ‘ own their network and decide whose ad service they want to run.
disagree with people here, fecebook is not a fad. they are growing users. they get better profile data than yahoo, because people are motivated to tell legit facts about themselves to form better networks.
its also about timing.
there was a company called opentext doing free-text search before the googlers even started college. where are they now? you can be too early.
Who is this Alaska Miller?? Always astute analysis.
I closed both my Facebook and Myspace accounts just yesterday. I guess I don’t understand what the big deal is.
Tech crunch 20 what a racket – $1,000 bucks a pop x 100 companies to participate if you did not make the cut – you plan to squeeze 100k out of the start up community you claim to support – what a joke
@ hornswaggled
how do you ‘close’ your facebook and myspace accounts? no way fb and myspace would have a ‘close account’ option. do they?
Facebook is the AOL of the current bubble.
@kent
They do.
Facebook has an option to “close” your account without really closing it. Anytime in the future that you log back in, you can revert your “closed” account to active.
Myspace has an option to delete your account but that’s actually permanent.
Kent: Yeah they both do. Facebook closes your account instantly with email confirmation and Myspace gives you 48 hours to change your mind or it will be closed after email confirmation. Just an FYI Facebook was easier to close overall.
I’m in full agreement with Johnson here… already the social network bubble is starting to burst. People are getting paranoid about who has access to what information. It’s fun to start with and then people realise the security scares. Surely Yahoo should be making investments into the future rather than jumping on an ever slowing bandwagon?
Bear Sterns report does not mean anything ! There previous reports are just a proof of how bad their research and judgements have been. Facebook is nothing new, just the strong PR and Mark Zuckerberg’s own effort of creating a market value for his site by coming up with his own figures which are just not based on any facts and figures. The only good thing about this site is they have come with few good fancy names like wall, social graph social timeline etc ,,.. which by the way the timeline for Facebook is not very long as like every social setting there is charm in the beginning and than people move to newer arenas like MIRC, ICQ, Friendster etc. Rumors about IPO for Facebook is going to be the most current example of .com bust, as there is only hype hype hype backed by no strong product. I am a big FAN of yahoo and in my opinion this is going to be disastrous for them to buy any social network. When it comes to making deals Yahoo has not made or utilized the deals like they should as missing out on google when YAHOO was so strong is just one example and the buying of geocities, another one. Yahoo should focus on core elements of social dilemma and come up with something entirely new as the existing social web has touched its peak, its only going to go down now unless someone brings out something out of the box.
umm…I ain’t no genius or nuthin’ but how does someone go from comparing numbers in 18-24 age group (7 years), go to 25-34 (10 year group) and then jump to an age category of 35-54 (20 year group!!) and use this as the backbone of an argument that Yahoo is missing the boat because they’re not focused properly on the one age group (according to the presenters’ fuzzy math) that represents more than double the population of the other nearest demographic group on his bizzaro chart…..and not get booed the hell out of the building???? no wonder Bear Stearns has a poor reputation for analysis with some of the other posters here…. that’s the best job of doctoring facts and figures to suit your own agenda since “The Case for WMD’s in Iraq.” shady…just shady.
Anybody knows what’s the revenue of Facebook now? It’s all talking. Where is the money?
Why would yahoo buy another social networking site? Aren’t most of the recent buys all social networks? Does yahoo even have a way to monetize all this stuff?
@desik: And what makes you think Yahoo are not in acquisition talks with both Ning and Tangler. Both are a fit for them. Both would be relatively cheap now (Ning less so though given Andreeson’s involvemnt)
Jeremy, RedStapler, and AlaskaMiller really nailed it, Yahoo has plenty of social network parts that are absolutely massive in aggregate. They simply haven’t found a way to integrate them. You could even argue that Yahoo Groups is a significant network of long tail smaller social networks without all the AJAX and techno-sophistication. It is also quite massive in and of itself.
Bear Stearns analysis of social networking, while admittedly a snapshot, is also quite simplistic. As we’ve said in report after report, social networking on the Internet is evolving into the digital manifestation of a person’s real-life social groups, complete with fan clubs, activities, local gathering places, and popular hang-outs. Real life is complex and to think that the Internet will boil these connections down to four broad categories is, as I mentioned, simplistic.
Hudson, Ning is really what Yahoo 360 should have been: A way for Yahoo to move its massive Yahoo Groups asset over to a more robust experience for users (and one that is much more easier to monetize than email).
PS: Scribd widget is useless! Link to a real pdf instead please.
Bear Sterns analysis is worthless. Yahoo! already has its own social networks, and some of them are going strong: Flickr.com is absolutely fabulous, and Yahoo! Answers is the best in the field. Yahoo 360 might be rather lame compared to FB, but for many ppl from overseas that’s what they have been using for years.
I agree with Jim Kerr that Yahoo Groups! needs revamping. It is going to be huge if it works out. From my own experience, no one has really figured out to improve substantially group-based discussion platform like Yahoo! Groups and Google Groups.
Yahoo: “Bear Stearns must stop making Jumbo loans to Crackheads”
Shame that yahoo was in talks with twitter and failed to make that happen too. Over what didn’t add up to very much. Flickr was an incredible buy for yahoo, but they seemed to have lucked in to that one and not know why it works.
Bear Stearns knows about what, exactly. These phonies on wall street huff and puff. Its all bs. Social networking is going to flame out. Yes, FLAME OUT. Why? Its just part of the process. Everytime a network gets large, people begin to hate it. That’s the whole point. Be in, be cool. If she’s in, I’m in. I’m in, you’re out. If they’re in, we’re out. It’s like fashion. If it includes everybody, its not cool anymore. So when can you tell? For example, as soon as the grade school kids or the XXLs start wearing some style, its not cool anymore. Is that so hard to figure out?
I don’t think this is quite the right time for the boys at Bear Stearns to be spouting off about what some other company “must do” given their own brilliant strategic move of losing billions in a hedge fund overweighted in the “sub-prime” non-sense.
That’s as rich as Lindsay Lohan lecturing someone on the finer points of sobriety.
Yahoo! already has all the social network features it needs with one exception. And that’s the Me Page. The public profile where other people can see what I do across all their properties and all the things I do on non-Yahoo properties.
So what they need to do is to take all that cool My Yahoo! function and turn it inside out and re-launch it as Me Yahoo! The next stage is to introduce Following and Followed by friends lists and aggregate the same data across those.
Of course exactly the same applies to MSN and Google. So which megaportal is going to do this first? None of them need to buy Facebook. They’ve already got all the technology and all the accounts.
Yahoo owns the best social network ever created, the one responsible for the 2 in 2.0… Flickr!
Just put the direction of the company into ludicorp’s hand and watch yahoo raise from the dead.
Ever since Fbook opened up the platform I have been saying it’s more likely that in next 3 yrs Fbook buys what’s left of Yahoo rather than Yahoo buying Fbook. Good point, Michael. Yahoo is the one that feels like AOL before the meltdown, not Fbook. Fbook will be a $30B company in less than 3 yrs.