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August 3, 2007

Bear Stearns: Yahoo Must Form A Social Networking Strategy

Michael Arrington

89 comments »

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.

  • Sphere It

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Comments

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  1. N Pam

    August 3rd, 2007 at 2:19 pm

    Interesting post. Isn’t today supposed to be the day the TC20 are announced? Or did I get mixed up?

  2. Alaska Miller

    August 3rd, 2007 at 2:29 pm

    The fact that Second Life is even mentioned in the report invalidates it.

  3. No Surprise

    August 3rd, 2007 at 2:30 pm

    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.

  4. kent

    August 3rd, 2007 at 2:33 pm

    @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.

  5. Jeremiah Owyang

    August 3rd, 2007 at 2:33 pm

    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-strategist.com/.....-networks/

  6. 80s.mobi

    August 3rd, 2007 at 2:34 pm

    lol - the Second Life mention.

  7. Deals and Coupons

    August 3rd, 2007 at 2:35 pm

    Yahoo! will need FB to distribute its massive content. Buy now or feel sorry later.

  8. Jeremy

    August 3rd, 2007 at 2:38 pm

    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.

  9. Darren Stuart

    August 3rd, 2007 at 2:43 pm

    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.

  10. Chris

    August 3rd, 2007 at 2:43 pm

    Thanks for the chuckle, favorite part (ie monetizable).

  11. trevo

    August 3rd, 2007 at 2:44 pm

    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.

  12. Allen Stern

    August 3rd, 2007 at 2:47 pm

    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!

  13. RedStapler

    August 3rd, 2007 at 2:48 pm

    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”

  14. kent

    August 3rd, 2007 at 2:50 pm

    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.

  15. Alaska Miller

    August 3rd, 2007 at 3:06 pm

    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.

  16. Dominic

    August 3rd, 2007 at 3:08 pm

    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.

  17. Alaska Miller

    August 3rd, 2007 at 3:11 pm

    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.

  18. Paul Bunyon

    August 3rd, 2007 at 3:11 pm

    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.socialsearchengine.com

  19. EH

    August 3rd, 2007 at 3:16 pm

    Looks like the Web2.0.1beta MBAs are whispering more loudly than I imagined.

  20. Johnson

    August 3rd, 2007 at 3:22 pm

    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.

  21. Alaska Miller

    August 3rd, 2007 at 3:25 pm

    @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.

  22. Suspicious

    August 3rd, 2007 at 3:38 pm

    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?

  23. whoopie

    August 3rd, 2007 at 3:51 pm

    yahoo: bear sterns must form a mortgage risk strategy

  24. ParseError

    August 3rd, 2007 at 3:52 pm

    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.

  25. desik

    August 3rd, 2007 at 3:53 pm

    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.

  26. whoopie

    August 3rd, 2007 at 3:54 pm

    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.

  27. naysayer

    August 3rd, 2007 at 4:17 pm

    Who is this Alaska Miller?? Always astute analysis.

  28. Hornswaggled

    August 3rd, 2007 at 4:25 pm

    I closed both my Facebook and Myspace accounts just yesterday. I guess I don’t understand what the big deal is.

  29. http://www.techcrunch20.com/ what a racket

    August 3rd, 2007 at 4:28 pm

    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

  30. kent

    August 3rd, 2007 at 4:29 pm

    @ hornswaggled
    how do you ‘close’ your facebook and myspace accounts? no way fb and myspace would have a ‘close account’ option. do they?

  31. Anatoly

    August 3rd, 2007 at 4:30 pm

    Facebook is the AOL of the current bubble.

  32. Alaska Miller

    August 3rd, 2007 at 4:31 pm

    @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.

  33. Hornswaggled

    August 3rd, 2007 at 4:40 pm

    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.

  34. UK Poker Man

    August 3rd, 2007 at 4:56 pm

    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?

  35. Holy 2.0

    August 3rd, 2007 at 5:15 pm

    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.

  36. warren

    August 3rd, 2007 at 6:39 pm

    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.

  37. TimH

    August 3rd, 2007 at 6:42 pm

    Anybody knows what’s the revenue of Facebook now? It’s all talking. Where is the money?

  38. carlity

    August 3rd, 2007 at 7:03 pm

    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?

  39. Hudson

    August 3rd, 2007 at 8:11 pm

    @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)

  40. Jim Kerr

    August 3rd, 2007 at 9:06 pm

    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.

  41. Jim Kerr

    August 3rd, 2007 at 9:08 pm

    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).

  42. mike

    August 3rd, 2007 at 9:24 pm

    PS: Scribd widget is useless! Link to a real pdf instead please.

  43. YoungVC

    August 3rd, 2007 at 10:24 pm

    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.

  44. KirkH

    August 3rd, 2007 at 10:32 pm

    Yahoo: “Bear Stearns must stop making Jumbo loans to Crackheads”

  45. anonymous

    August 3rd, 2007 at 10:49 pm

    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.

  46. anonymous

    August 3rd, 2007 at 10:51 pm

    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?

  47. Rohan

    August 3rd, 2007 at 11:30 pm

    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.

  48. Julian Bond

    August 4th, 2007 at 12:00 am

    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.

  49. Fabricio Zuardi

    August 4th, 2007 at 1:46 am

    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.

  50. Mike Alquino

    August 4th, 2007 at 2:15 am

    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.

  51. Json

    August 4th, 2007 at 4:10 am

    Alaska Miller wins the thread.

  52. Zorba

    August 4th, 2007 at 5:01 am

    The power of social networks is that non-technical folks are using it extensively.
    A few weeks ago tech crunch posted an article showing that traffic through these sites was growing faster than email sites and other portals.
    This is where money online will be made n the future and Yahoo needs to buy Facebook. If it does not and it goes to Google or Microsoft, they will fall further behind…

  53. jccodez

    August 4th, 2007 at 5:50 am

    i would stayaway from facecrook if I were Yahoo…

  54. jccodez

    August 4th, 2007 at 5:52 am

    Fbook will be a $30B?

    based on what, revenue? they can’t even get decent advertisers and their numbers are completely questionable.

  55. Dominic

    August 4th, 2007 at 6:08 am

    One thing certain about people and their habits on the internet; they change. Social Networks are ‘ cool” today. Tomorrow it’s something else. Once people get involved in other things in their ‘ real life’, even their web usage changes. While it is not really a good example, it IS a good example, eg: AOL. They had their heyday and then things changed when people changed. Anyone who thinks FB will be a $30 B company is probably smoking something grown in the AOL/TimeWarner garden, or a FB addict. Both are dangerous.

  56. The Musicians Network

    August 4th, 2007 at 9:43 am

    I agree with many of you in that Yahoo is probably better off figuring out how to better integrate the services they already have into a more singular “social network”. Why not just let the users use their existing logins to access a single site that has the features from all the other services.
    Besides, I don’t think Facebook would sell.

  57. mark sendo

    August 4th, 2007 at 11:05 am

    I don’t understand why “niche” social networks were not included as a fifth category. They probably represent the fastest growing segment for social networks in general.

  58. ej

    August 4th, 2007 at 11:29 am

    Great post and I always love the comments.
    I don’t see why should Facebook should sell to Yahoo or Mr. Softie. The $7-$10 billion number would be the only reason.
    I’m not sure Yahoo could purchase it, and get much out of it. It seems they would just be buying eyeballs and maybe a search deal.
    As others noted, this space is subject to big changes. Myspace is a hideous, slow, malware filled site, with 29,000 registered sex offenders (since booted). The layout is vulgar, and the pages take forever to load. I think it will still be popular with the youngsters.
    Facebook looks infinitely better, and with the applications, seemingly more customizable. I love posting articles from the Times, TC, and other places on there.

  59. jcricket

    August 4th, 2007 at 12:50 pm

    Dominic has it exactly right. I remember when I first used the Internet. Spent gobs of time posting on Vax Notes and then on USENET. Once I got a real job, my interest in those things faded. Once I got a family, my interest in spending more time in front of a computer screen (esp. on things like “poking” people or filling out quizzes or “where have you been” applications) faded dramatically.

    Sites like FB and MySpace will always be popular with people who have more than enough time on their hands for diversion (i.e. high school and college kids). But real adults, with jobs and responsibilities and families will never have more than a passing interest in social networking. They might use it for its “utility” (to plan a college reunion, find someone’s latest email address, etc.) but they’re not going to spend hours and hours or time on these sites, and thus the valuations are bubble-icious.

    It’s so silly that less than 10 years later people are still doomed to repeat the past (”we swear it’s different this time. Fundamentals don’t matter. It’s all about eyeballs”). Those of us who lived through the last bubble should know better.

  60. SutroStyle

    August 4th, 2007 at 1:08 pm

    This “reports” are probably caused by something the majority does not know. Perhaps Bear Stearn was helping underwrite Facebook’s IPO, and they for some reason decided to explore acquisition route- maybe something is slightly wrong with the IPO preparation.

  61. KwangErn Liew

    August 4th, 2007 at 2:02 pm

    Yahoo! already offers MANY services that is part of socialising. What they are lacking is a very simple idea to kick it all off so well all other so-called competitors will be thrown off.

    Question is, why the heck is Yahoo! so stupid not to realise it? Or rather, what the heck is wrong with their management that they can’t seem to get their heads together to work hard? Must be the money, again.

  62. David Mackey

    August 4th, 2007 at 4:26 pm

    Yahoo acquiring Facebook seems like a good idea, if they can swing it. Facebook almost feels like Yahoo. The interfaces and design methods - mesh, unlike say meshing Yahoo with MySpace. On the other hand, they could also acquire Xanga. A smaller but great social network.

  63. jim peake

    August 4th, 2007 at 4:36 pm

    Can someone tell me the revenue per thousand visitors with the tollowing sites?

    yahoo
    face book
    myspace
    aol
    microsoft
    flickr
    google (i know they are # 1)
    etc.

    It is not how much you sell it is how much you keep.

    Hey, in my view the name of the game is not about fads but about traffic. once you have that traffic you want to refine and segment that traffic and provide RELEVANT content and RELEVANT ads. not sure why Wall St. is so concerned about Yahoo given their traffic numbers and everyone else’s.

    Wall street has gotten it wrong before and they are probably getting it wrong now. someone tell them it is about location, location, location….and Yahoo has location, the finest real estate on the net. all they have to do is provide relevant content and advertising. game over…..almost…..not unless msft buys them and then google has someone in their rear view mirror.

    – jim peake

    http://www.speechrep.com

  64. RustyS

    August 4th, 2007 at 10:06 pm

    Even though Yahoo and Facebook would be an ideal cultural fit, Yahoo doesn’t NEED to buy Facebook . . . not at the current web 2.0 bubble price anyway. Let Google or Microsoft (who can afford to take the hit on the ludicrously over-projected advertising revenue they will NOT get out Facebook) be the sucker there. Or just let Facebook go IPO and then laugh when the company with as much hype as the iPhone posts revenues that are a tiny fraction of Yahoo’s.

    Yahoo still has arguably the finest portfolio of specialized social and subproperties out there (I wish they’d do more with Jumpcut.) Yahoo just needs to create their own centralized social portal that does a better job of integrating the strengths of all these properties while also allowing open access to other platforms.

  65. whoopie

    August 4th, 2007 at 10:28 pm

    the problem is for yahoo is that they are trying to fight a war on too many fronts

    for example, do you see google and facebook going into direct competition? not really, i don’t see google promoting orkut in the US at all. google is happy to do algorithms and monetization. facebook is doing pageviews.

    yahoo is trying to do both.

    it doesn’t matter if everything happening on facebook was done on yahoo three years ago. do you know who uses yahoo 360? nobody. mostly red state forty-somethings taking their pants down for each other. its a shitty demographic. facebook’s demographic - thirtysomething honkeys with college degrees…this is something people want to market to.

    i agree facebook, on the surface, is more or less bullshit. but sometimes bullshit, -late to the game bullshit-, will still win out. look at the growth rate in signups on facebook. this thing is not done accelerating let alone levelling out or even stalling.

  66. JJ

    August 4th, 2007 at 11:53 pm

    Looks like the new CFO for facebook is doing a good job, using his contacts at the wall street :)

  67. Raj

    August 5th, 2007 at 12:34 am

    Y! is where great companies go to die. However, I must agree with many that Yahoo probably has the must UNLEVERAGED user base on the internet. If I were a Private Equity company, I would buy Y! instead of facebook (in an LBO, you only really need $3-$5B on hand to do this). You would also require a much lower WACC (17% is quite high in my opinion for this calculation, and has been used to fudge horribly generalized CPM valuation into some kind of decent valuation). Yahoo’s WACC is around 9% today.

    Facebook, on the other hand, has the most LEVERAGED user base imaginable - they do not make money, but demand a premium valuation due to some “social graph” mumbo-jumbo that has not yet made a dime, and most likely never will (advertising through friends….that sounds like a great business model). The fact is, yahoo probably has the greatest social reach in the world, but doesn’t realize it (or it does, and is just waiting to fool us all). A facebook IPO? The day that happens is the day AllAdvantage.com and Pets.com come back and IPO. The Facebook IPO will be exactly like the Vonage IPO (or less).

    In the analyst’s case, they show Facebook 2007 EBITDA of $122 million? ARE YOU INSANE! They may have REVENUE of $70-$80M a year (mostly from a non-performing Microsoft deal). The rest is from virtual gifts. VIRTUAL GIFTS??? Virtual gifts are a tax on stupidity. And growth? All future advertising dollars will be in the hands of third-party apps - are they going to charge for API calls?

    BTW, if I used the same assumptions as our friends at Bear Stearns to value Yahoo (same WACC assumptions, and same CPM), the valuation of Yahoo! comes out to a present value of around $257B. Its trading for $35B - come on people, its a BARGAIN!

    Beware of Analysts - they are mostly inbred legacies with no business sense and are generally retarded - Mike, I expect better from you then to post this garbage on your awesome site.

  68. Jason McMinn

    August 5th, 2007 at 6:35 am

    Remember in 1999 when Yahoo! just HAD TO HAVE a “broadband strategy: according the analytsts? Then they overpaid $6.6 billion for Broadcast.com.

  69. adam cassel

    August 5th, 2007 at 9:53 am

    I think the report is an excellent example of how analysts and WS/VCs justify valuations/sell valuations. And that’s about it.

    One number/data point that to me represents the core driver of the valuation, as has been mentioned above, is that the average demo age is in the 30 - 50 age group or “cohort”.

    I dont beleive that at all. I would like to see what the methodology was and the source data for that conclusion/analysis.

    Spend any time on facebook looking at profiles, as an example, and it owuld be hard to concuylde that the average user is over 25, now there is no methodology behind my statement, its hearsay at best, but at least I know thgat and state it up front.

    I think this 30 - 50 claim will be debunked and is total vapor. I would have to say that Bear is a questionable at BEST source of analysis.

  70. jcricket

    August 5th, 2007 at 9:54 am

    “…demand a premium valuation due to some “social graph” mumbo-jumbo that has not yet made a dime, and most likely never will…”

    Yep, as I said, welcome to 1999 all over again. How many times can you hear “this time is different” before learning that bubbles are all the same!!!

  71. Laurent Emolument

    August 5th, 2007 at 2:42 pm

    Yahoo need to clean out their top management and replace it with people who actually understand the internet in 2007. Re-appointing Jerry Yang as CEO was a mark of desperation.

  72. Mick Liubinskas

    August 5th, 2007 at 10:19 pm

    It will be interesting to see if Facebook can maintain the ECPM’s as they grow. Google managed to do it despite it being unlikely in the early years. Unless Facebook starts charging or revenue sharing with the applications that want to build on (off) it, then I’m not sure how truly scalable it is at very large numbers.

    I agree that Yahoo has lots of these elements, but they are unable to make them work together and there is no ’survival of the fittest’ with the application components. I can see this happening with Facebook. Acquisition will be easy but retention and return will be hard.

    Mick de la Tangler

  73. SW

    August 6th, 2007 at 9:20 am

    I really don’t see why anyone in their right mid would buy Facebook at the valuations being banded around, dont you just love Ibanker and their wonderful spreadsheets? yes, Yahoo clearly has the user base and needs to do a much better job of aggregating their current crop of social networking experiences—it would be nice if someone at Yahoo could come up with a strategy instead of simply buying companies and ‘hoping’ things will work out! You have a tough job Jerry, this time round its gonna be tough!

    I have seen a few new Social Networking sites just ready to launch Beta which are so revolutionary and special that they have the potential to do exactly what MySpace, Facebook, YouTube have done before—effect change. Everything is cyclical and who’s to say that in 12 months a site such as Capzles.com wont be a Facebook killer? My advice to Yahoo or anyone—don’t buy FB, overvalued, work with what you have—but smarter, or get one of these new and exciting sites just coming out which have killer apps and lever the crap out of your user base.

    What do I know though………….

  74. Alex Ho

    August 6th, 2007 at 11:00 am

    That second chart is flawed, the age groups all have a age range of 7 years while the 35-54 age range has a 19 year range so that group having the biggest percentage is not that surprising considering it has more than double the amount of people in that age group!

  75. DB

    August 6th, 2007 at 11:10 am

    The “older” group, 35 - 54, is the only group with a 20 year age range
    If create a “younger” group with a range of 12 - 34 (same % of total internet users as the 35 - 54 group, 38%), the older group is accounts for a lower percentage of users for each of the cited sites other than Friendster (it doesn’t take a genius to guess why)
    Finally, I would be very interested to then see how much time the user groups spend engaged in interactions on the respective sites. My guess would be that the younger group probably spends more time on the social networking sites.

  76. Jason Altenburg

    August 11th, 2007 at 9:13 am

    If they did have a social site, I’d probably get banned. Just like when I got banned from Yahoo! Answers for being drunk.

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