Yahoo

Market Cap.:
Cash & Short Term Investments:    1,431        (Millions US$)     (Sep 30, 2002)
Total Assets:                                         2,696
Long Term Debt:                                  90
Total Liabilities:                                    510
Shareholders Equity:                         2,156

How does it make money?
    85% of Yahoo's revenues is from advertising.  Its most important asset is its largest viewers on the web worldwide.  Therefore its future growth totally depends on how it could hold this largest number of audience.
    Is banner ads really that effective?  "Forbes" (Dec 11, 2000) gave us an example:
"Pepsi paid an estimated $8 million for a promotion on Yahoo in which drinkers identified themselves and received prizes for entering data they gleaned from bottle caps.  In two months Pepsi picked up the names, ages, sex, addresses and consumption levels of 2 million people.  That cost a fifth as much as getting the same data from mail-in promotions - and took a third of the time.
    For advertising on the net, it will offer marketers mass reach, with a customized, close-up intimacy they never had before.  And it will offer instant feedback on every ad.  The advertiser will know how many people saw an ad, who they are and how many reacted with a further click or a purchase.
    On the other hand, the banner ads are only a small portion of the page.  It is easier to ignore than those ads on television and radio.  This may be improved when the use of broadband becomes more popular.  The ads then could be added with attractive graphic, video and audio messages.

Is it a monopoly-type business?
    Yahoo reaches 60% of all net users worldwide.  If an advertiser tries to reach its potential customers on web, he can't count Yahoo out.
    Because of its leading position, it is able to charge its customers at a higher rate.  As "Forbes" wrote on Dec 2000:  "Elsewhere in cyberspace the cost of ordinary banner ads has fallen 75% in a year, to less than $5 per 1,000 impressions (CPM: cost per thousand).  That's the cost of a one-centimeter display ad in a paper with 40,000 subscribers.  At Yahoo, targeted ads can draw a $156 CPM.  That works out to the equivalent of nine times the cost of a 30-second TV spot during a top U.S. sporting event.  Yahoo's email tailed to specialty groups are even pricier - a CPM of $300, triple the price of a full-page ad in a business magazine.
    Its major competitors are MSN.com and aol.com which offer similar services.  Internet users are usually jumping around various web sites and will not stay with only one.  It is almost impossible to be the only dominating player.  Switching around various web services is very common.  Viewer royalty is not easy to establish.  Once there is a cool site and new service, the users will be attracted to it massively and simultaneously.  In order to stay on the top, the company has to constantly upgrade its service, technology and launch out new products.
    This will create an all time uncertainty of its future success, as the internet community and the technology are rapidly changing.

Is it in a great potential market which could lead to a sizable increase in sales for at least several years?  Does it have a strong demand?  How big is the market?
    Has Yahoo already reached its maximum revenues by capturing 60% of the web population?
    Internet is still a very young business.  The population of internet users is still far from saturated and it is growing strongly.  There are plenty of room for expansion especially outside the U.S.
    The usage of internet among the "old economy" is still at a testing stage but it is getting more common.  Therefore, there is a very good prospect of advertising spending on the net.
    Yahoo relies 85% of its revenues on advertising and does not have subscription fees as AOL.  However, it has the greater opportunity to reach the world market, which is still very young to be explored.

What makes the company different from its competitors?  How does the company sustain its competitive advantages?
    Yahoo offers 400 different services: email, instant messaging, photo albums, personal homepages, shopping, bill paying, games, auction, news, and etc.  However its competitors are also offering similar service.  Because it is able to team up with other large content providers.  For example, in news it has wider choice of contents from Reuters,
 

Does the management have a determination to continue to develop products that will further increase total sales when the growth potentials of currently attractive product lines have largely been exploited?

How effective are the company's research and development efforts in relation to its size?

Does the company have an above-average sales organization?

Does the company have worthwhile profit margin?

What is the company doing to maintain or improve profit margin?

Does the company have outstanding labor and personnel relations?

Does the company have outstanding executive relations?

Does the company have depth to its management?

How good are the company's cost analysis and accounting controls?

Does the company have a short-range or long-range outlook in regard to profits?

Will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will dilute existing shares?

Does the management talk freely when things are going well, but "clam up" when troubles and disappointments occur?

Does the company have a management of unquestionable integrity?