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Comment by anton_tarasenko | Hacker News Reader

Yahoo controls 8% of search traffic and costs $4bn. Google controls 64% of search traffic and costs $558bn. That's a 17-fold difference in the price for 1% of the traffic. Even more if you take US search traffic only (to exclude Yahoo Japan).

Verizon can get rid of the costly parts of Yahoo (mostly its media business) and have its own small Google to make cash. That was $1.8bn per year in 2015, while Yahoo's overall revenue stands at $3.9bn (Asia excluded). So Verizon buys the company at 1x revenue.

Who would quit such a deal?

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Yahoo! earns less than Google per search [1], has few other properties, is trashing its already-moribund brand and keeps growing its legal liabilities. Consider, too, the political/headline risk Verizon would inherit.

Yahoo! (like Twitter, in my opinion) may only find a buyer in that sort of financial purchaser who doesn't mind looking bad resurrecting corpses. Unfortunately, those bidders are notorious low ballers.

[1] http://marketingland.com/yahoo-microsoft-rps-guarantee-42680

Private equity turn around guys that slash the employee base, take on massive debt, restructure everything but often extract a lot of value. I can see it happening.

> So Verizon buys the company at 1x revenue

However, they are hemorrhaging money. You don't generally buy for revenue unless you're buying a small startup, where the growth rate is exponential and you'll become profitable once you hit economies of scale.

Yahoo has already ostensibly hit economies of scale, is stagnant in terms of growth, and is losing both money and eyeballs. What part of that is attractive to the balance sheet? You might not even be able to milk it to its demise, as it's currently unprofitable.

I don't know man. but if you loan me $4bn I will buy Yahoo and run it myself. I too don't understand how they can't make Yahoo a success. They have a couple of great products that people use like Fantasy sports and Finance.

And mail would be just fine if they'd remove all the crap so it would run faster.

Lots of non techy still uses yahoo mail, and that won't change as long as the service exists.

I dunno - I feel like it's committing Dunning-Krugers to say, "Just run Yahoo! better, sheesh." because there's a ton we can't see on the surface of the company, looking in, that the business currently has to cope with.

If anything, these two hacks being announced years later, along with their voluntary NSA backdoor, demonstrates that Yahoo! has skeletons in their closet.

It is, but at this point what have shareholders got to lose? By the way, I'm available. I went on record in my book 21 years ago that Yahoo was my favorite web directory (the term 'search engine' hadn't been coined at that point) so I've been following Yahoo since not long after it was a gleam in Jerry Yang's eye. At this point I figure that makes me as qualified as anyone else to run it.

Inquiries to my username...@gmail. Go on Yahoo board, ask me why I switched and you might learn something useful.

>Lots of non techy still uses yahoo mail, and that won't change as long as the service exists.

And how many of those people pay money for Yahoo mail other than indirectly through the "crap" you want to get rid of?

User metrics may not look so great. I have no idea what Yahoo's are but over the next few years most of those mail users are going to be accessing through the phone or checking their webmail a handful of times a year until they forget they have it. They could keep habitual users for decades but that won't be worth billions of dollars.

I used the phrase "management assisted suicide" recently, which basically means figuring out how to maximize return to shareholders given a future that guarantees death.

Yahoo lost $650 million last quarter, why do you think anyone would take the deal in the first place?

IP. Yahoo!'s patents are valued between $4B and $8B, depending on who you ask.

That's probably completely wrong. The patent landscape has changed dramatically in the past 5 years. The likelihood they could extract significant sums of money from these patents drops every day.

I'd really love to read the summary of the patent landscape that explains that.

This might be a good starting place, "Software Patents: A One-Year Review of Alice v. CLS Bank" (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2619388)

Like I said, depends on who you ask. The point isn't the amount but that some people value it for the IP, not net income.

I mentioned this in another comment but how does Yahoo even know that its intellectual property wasn't taken?

Is it unreasonable to suspect that a company that has had multiples breaches of security of this extent might also not have had its IP taken out from underneath them as well?

when you patent something it's always in the public domain, that's the point of patents, except that the ownership isn't public domain just the knowledge of a particular tech. but yes, nothing guarantees that tech they had in the pipeline isn't being stolen right now.

but if the details of a patent have been stolen the patents still have value, except for when the exact implementation of a patent can be circumvented due to access to plans.

What if you ask Verizon?

If you ask Verizon, this leak was a great way to get a better price on a deal they already wanted to have happen.

with the way things are going, they just need to wait a few more months to get a even better deal.

They make plenty of money gross. Fire 80% of the staff and they'll be very profitable net as well.

You are assuming that other costs apart from salaries are negligible and that firing 80% of the staff will have negligible effect on revenue.

They are pretty big assumptions to make.

First assumption, other costs are negligible: no, I'm not. Every dollar spent on salary is a dollar that doesn't go to profit.

Second assumption: letting 80% of staff go won't hurt. For that, I simply have to describe what I've heard from friends / coworkers / scuttlebutt about working at yahoo. But there are a lot of eng doing maybe a couple hours of work per day.

from

https://finance.yahoo.com/quote/YHOO/financials?p=YHOO

under opex it looks like there's plenty of fat to cut.

By that logic, businesses would never employ people because it's a cost that doesn't go to profit.

And the fat on that OPEX you linked is the writeoff from the Tumblr purchase.

For companies where employees add little/no value (yahoo!), then yes.

They may be afraid they can't maintain that 8%, especially with all the negative press.

Y! search marketshare is falling. I don't have the numbers in front of me, but I seem to remember their search revenue falling faster than marketshare, ie even their revenue per search is declining. Lots of Y!'s money from display/brand advertising on their site families, which is why Y! mail is so crucial. Unlike google where display ad revenue is on other sites, Y display ad revenue is on their sites: mail, dating, news, finance, sports, etc. Y! mail in particular was a key leg of this monetization strategy which is why its neglect is so appalling from a financial perspective. See also the giant RMX fuckup -- Y! should have been ADX/appnexus but yahoo did what yahoo does.

Am I missing something, or is it 1/8 of Google's search traffic, according to your numbers, not 1%?

Grandparent was using "for" as in "per". The 1% is irrelevant. It could be any unit of search.

"That's a 17-fold difference in the price per 1% share" "That's a 17-fold difference in the price per 8% share" "That's a 17-fold difference in the price per search"

Ok, I read it as paying N for X share of search traffic, not shares of stock.

stock?

>Yahoo controls 8% of search traffic

Isn't Microsoft the one providing search results? If it is, then Microsoft ultimately controls the traffic, not Yahoo.

Yeah, but Yahoo could point to Google just as easy. That's where all Mozilla's money comes from. Just Yahoo has too many employees vs. Mozilla.

Google has lots of platforms and products. It controls ads delivery up to the OS and the browser.

Whatever yahoo has in comparison is negligible.

Is Search traffic really correlated with revenue? I was under the impression Google was mostly ads revenue.

Uhh yes and where do you think they show the ads?

Oh search sure, but I thought they would get more views on things like DoubleClick ads embedded in other pages.

Search ads are the majority of google's revenue. They make money on ads embedded on other pages but nothing like they get from search ads.

Searches are also what drive relevance on other pages' embedded ads. Because you search on Google, they know how to target ads when you are browsing elsewhere.

For Q3 2016 Google earned over 70% of its revenue and 80% of its advertising revenue from "Google websites" [1].

Google websites include search as well as YouTube, Gmail, et cetera. AdSense, AdMob or DoubleClick revenues make up the bulk of the other 20%.

[1] https://www.sec.gov/Archives/edgar/data/1652044/000165204416... pages 31, 33

Good to know. I guess I have trained myself over years to skip the "sponsored results," and did not expect for them to be so important.

They are way more effective than basically any other form of online advertising, because the user has effectively just typed "I have intention to purchase X" into the search engine, and you as the advertiser get to be the first result they see.

(Also most people honestly don't know the difference between sponsored results and real search results)

A search ad is worth way more. Someone browsing the news isn't necessarily looking to spend money. A person searching for a book title(or any item or category) is probably looking to buy it. That data, intent data, is the key to their success in ads, because the person seeing the ad is way more likely to convert

The RPM (revenue/thousand pageviews) on non-search pages is significantly lower than on a search page since the intent is not there.

Revenue per search is at least an order of magnitude higher (maybe 2) than revenue per ad view.

Yahoo has three of the most popular sites on the internet: sports, news, and finance.

That's like saying Apple is worth $600 billion, Motorola is worth "only $12 billion", but has 1/10 of Apple's market share, so therefore it must be a great deal to buy Motorola. Wait, actually that's exactly what Google thought - and they quickly saw the error in that sort of thinking after they purchased it.

Do you see how that argument is flawed? Leaders in a market tend to be worth much more and have much higher profits than even the 2nd player in the market, let alone the third or fifth. When you have a small percentage of the market, it's also much more difficult to make something out of it, than it would say for a market leader to go from 30% market share to 50% market share (and billions of dollars more in revenue).

We could repeat the argument for a small social network that has a much lower market value than Facebook per user, and so on.

I don't recall any analysis of the Google/Motorola deal pointing to a rationalization like this. I do recall Motorola's CEO announcing on an earnings call that if Motorola didn't soon find market sucess with Android it would be willing to start suing other Android ODM partners with its patnet portfolio. Given how quickly Google cancelled all its other product lines, and even sold off the cable box and network equipment business, and then finally sold to Lenovo, it seems like it was always clear in retrospect that Google bought Motorola to peaceably unwind without causing a civil war to the whole platform ecosystem they were building. That being said, I think you did very accurately call out the parent comment's reasoning and exactly what's wrong with it in cases like this. When companies are at a deep, deep discount to their market-leading peers there's usually a reason.

This isn't a good comparison. Google specifically bought Motorolla to use their patent portfolio as a cudgel to keep all the other Android OEMs in line.

> Google specifically bought Motorolla to use their patent portfolio as a cudgel to keep all the other Android OEMs in line.

Not just Android OEMs but other tech giants - remember this was not long after the Nortel/Rockstar episode. The patent cold war was heating up with proxy battles and occasional direct skirmishes; Google found itself with a 'patent-gap'. Fortunately things are much saner now after a change of management at several belligerents.

I thought they sold Motorola because all the other OEM's were threatening mutiny, specifically Samsung was creating their own OS bec they were worried about being priced out of the market.

I question the long-term value of being the 3rd or 4th biggest fish in the pond. I mean it's not chopped liver but the gap is always gonna be widening due to network effects.

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