The Case of Yahoo!

About this Case

Yahoo! was born in the early 1990s, surrounded by empty pizza boxes. It was the brainchild of founders David Filo and Jerry Yang, computer science PhD students.

This report presents the case of Yahoo! at the close of 2007. Once the darling of Wall Street, the brand’s stock price has fallen and so has consumer, advertiser and investor confidence. Five key questions are answered from a brand management perspective. Recommendations include conducting a Brand Report Card, devising a set of metrics based on Brand Equity Ten, and developing an ongoing Balanced Score Card going forward. The case comes from Kevin Lane Keller’s Best Practice Cases in Branding (2008).

Sources of Brand Equity. How they Changed.

Throughout its career, Yahoo! has developed a number of sources of equity.

When it began in the early 1990s, the brand found early success due to its brand elements: a memorable name, irreverent associations, meaningfulness in the mind of the consumer, and its likeability. This, and a successful marketing campaign, helped diffuse the new technology and to educate the market about the product category (Do you Yahoo!?)

The initial success of its branding efforts led to strong equity from a user base who felt comfortable using the approachable, “wacky” web portal to help them search for things on the internet.

When founders Filo and Yang realised the user-base could be monetised, the next source of equity came from advertisers who were given a compelling value proposition. Banner advertisements could be featured on the search pages that attracted so many. The ads were able to generate around 20 per cent click rate. Yahoo! was considered the best place to advertise on the internet.

A further source of equity was developed through the creation of e-commerce capabilities for vendors. The ease to establish online, branded stores was greatly enhanced by Yahoo!’s shopping directory and user base.

The purchase of an email provider in 1997 allowed Yahoo! to start inviting users to register for free web email services. This led to even greater advances in user ‘stickiness’ and data collection for advertisers wherein search queries were matched with the most appropriate advertisements.

Later, another source of equity emerged through Yahoo!’s interactive entertainment. This came about through partnerships with a variety of web entertainment organisations, including sports, the Olympics, popular movies and television shows (Keller, 2008).

How Yahoo!’s marketing program contributed to the company’s success.

The marketing program for Yahoo! was an early success and lauded as a “awesome  marketing machine” by Fortune magazine.

At the heart of its early success was the brand. The name was memorable, likeable, meaningful, adaptable and repeatable (Keller, 2005). The brand identity elements (including the yellow and purple colours, the exclamation symbol, and the mnemonic of the yodel). The brand personality was strong on irreverence which made it resonate.

The consistency of the messaging was a distinguishing feature in the marketplace at a time when competitors were constantly changing names, taglines and positioning.

The marketing program was also successful in effectively reaching and positioning to three markets each with a coherent, yet individual message. These were the users (Yahoo! was easy and helpful), advertisers (we’re the experts and market leader), and investors (we are professional).

Other marketing programs that contributed to Yahoo!’s success included its decision to enter into sports marketing, which differentiated it from the pack even further as well as arming it with many cross-promotional opportunities in stadia and on television. This led to the establishment of a number of old media partnerships.

During expansion into international markets, notably across Asia, Yahoo!’s grassroots marketing programs used the key insights that word of mouth was the driver n the decision process for these markets.

Tactical executions included a contest to link campuses, which attracted 25,000 entries; computer camp for school students; distribution of Yahoo!’s messenger CD through university campuses and an outreach program for senior and country clubs. These activities helped Yahoo! target different segments in meaningful ways.

Other marketing programs that fuelled interest and spread word of mouth involved experiential campaigns in which technology was ‘branded’ and triallable – a key diffusion aspect of innovations (Rogers, 1962).  Wrapped taxis in San Francisco and Boeing aircraft were used to paint a distinctive picture of the technology and Yahoo!’s leadership role in its delivery. Such activities were more effective than simply traditional ad spend in that they engendered buzz, public relations and publicity.

Personal selling was well-deployed with the appointment of Wenda Millard to enlist a number of lucrative mainstream advertising clients. These relationship-building efforts also encompassed the concomitant development of data capabilities that delivered what was of value to advertisers – chiefly, precise ROMI statistics (McGregor, 2013).

Future Marketing Program Recommendations

In the future, Yahoo! will need to maintain this strong understanding of what ‘value’ means to users, advertising, investors and other stakeholders. In this regard it may benefit from implementing brand tracking measures.

In terms of the product itself, Yahoo! may benefit from innovation, particularly in the areas of entertainment and interactivity. The number and variety of its partnerships provide it with a competitive advantage that will be difficult to displace.

Following on from the successful grassroots marketing programs, and combining them with new innovations that enthral users and delight advertisers, will help the brand remain vital to its stakeholders, as suggested by Gerzema & Lebar, (2008). It will also ensure that the marketing programs are culturally relevant and meaningful, which will aid Yahoo! in its internationalisation.

Evaluate Yahoo!’s strategy of selling services. What impact, if any, will it have on consumers perceptions of the brand? How can Yahoo! get more people to pay for more of its services?

Balancing the revenue streams, so that Yahoo! is not entirely reliant on advertising alone, makes strategic sense. In a knowledge economy, good many good strategies lie in services and if the right mix of technology and innovation is created, consumers will be willing to pay for it if they see value (Le, 2004)

However, the strategy is also problematic in that some of the services now provided for a fee were once offered for free.  Le et al have found that consumers believe that “services which were once free should remain free” (2004). As Yahoo!’s Geoff Ralston said, “We have absolutely trained people to expect to get things for free.” This could be deleterious in terms of brand perceptions. If the expectation is not met, consumers have a negative disconfirmation, which may then flow on from perception effects to performance effects and then financial effects (Rajagopal, 2008)..

The challenge is not only to avoid widespread negative sentiment, and brand switching, but to entice users to pay for services. To achieve this, Yahoo! could consider adopting a freemium model (Jacobson, 2013) in which there are basic services still offered for free (such as email accounts) but with advertising and limits, albeit generous,  to data storage or email file sizes.

This could garner a critical mass of users, some of whom could be directed to purchase more valuable packages that would allow them email without advertising, ability to customise, or secure virtual private networks and so on.

Such value-added packages could cater to the corporate segment of the market. These paid services could include items such as hosted intranets, branded virtual conference suites, and online executive entertainment such as games, virtual reality and interactive sports feeds ‘corporate boxes’.

Innovations that add more value to those segments which would be willing to pay, whilst retaining the free services, would be the best option for Yahoo!’s brand perceptions and performance.

Should Yahoo! work more on growing its international presence or should it work more on strengthening its domestic position?

Yahoo! is well-placed to expand and enter more international markets through a strong and integrated global strategy.

The approach should be underpinned by the global brand but in ways that are relevant to individual markets. Yahoo! has a vast number of strategic partnerships around the world and has successfully entered China though a partnership with Alibaba.com. This method of partnering with local firms is a strategically sound way to enter new markets as the insights and understanding of the local partner is often critical to success in a new international market (Fletcher & Crawford, 2012).

It could be suggested that entertainment – in all of its culturally and nationally expressed forms – could be Yahoo!’s defined strategy from this point on. It has the competitive advantage of established old media partnerships, as well as the independence to be flexible, in exploiting new opportunities transnationally as they arise.

In this way, Yahoo! would serve as the purveyor of interactive and rich experiences within culturally-nuanced, strategic partnerships worldwide, to serve audiences with sport, music, gaming, major events, and so on.

This would inject the brand with key qualities of differentiation, relevance and esteem (Pahud de Mortanges & Riel, 2003), which would drive its difference and deepen its relationships. Like Red Bull is synonymous with extreme sports, Yahoo! could become known as the as the platform for delivering truly rich entertainment experiences.

At the same time, Yahoo! should also seek better synergies  by reviewing its brand portfolio and focusing on fewer aspects of a user’s online experiences. Its broad range of products – from finance, travel, search, music, video, games, photo sharing – some branded, some not, may have varying levels of value to the users and the company.

Understanding whether the portfolio makes sense would be important for users and therefore, Keller’s Brand Report Card (2000) would be useful in providing management an opportunity to conduct a brand inventory and exploratory using focus groups in order to elicit consumer insights to set a new direction.

If the portfolio was found to make sense and perceived as of value to users, strengthening this ‘daily’ Yahoo! experience could be made by purchasing popular, start-up innovations  and then rebadging these offerings with the Yahoo! brand.

What do you think is the biggest risk to Yahoo! at the time of this case? What should the company do about it?

The biggest risk to Yahoo! at the time of this case is the erosion of consumer trust and confidence that resulted from failing to deliver its planned and announced improvements to its paid search engine.

This dissipation of positive perceptions risks flow-on damage to brand performance and then flow-on damage to financial performance (Lassar et al, 1995).

Advertising revenue is at risk of decline as Yahoo! has provided Google with a stronger foothold in the interim between 2004 and 2007 after the new Panama search tool was finally released. In addition to ceding this revenue, Google poses a further risk as it began beta-testing its Gmail service in 2004 and, although much later than Yahoo! who already had 181 million registered users, poses a glimmer of danger that could have been extinguished much earlier.

The chunk of actual and potential registered users lost was equivalent to lost revenue and gave a solid leg-up to Google who already had the highest market share in paid search queries. In this sense, it is possible that Yahoo! has failed to appreciate who is in its competitive set (Aaker, 1996).

These woes are symptomatic of Yahoo!’s failure to focus at this time and to chase the realisation of a mission to see how “broad they could build the audience” (Keller, 2008 p. 266 ), rather than consolidating its core strengths and continuing to lead the market with innovations.

Yahoo! should mitigate this risk by now focusing on its strengths and rationalising products that are unprofitable or from which synergies cannot be found.

To this end, management should prepare a Brand Report Card (Keller, 2000). Future measures of brand tracking should also be implemented with instruments that are sensitive enough to detect minute changes in perception, performance and financial measures.

As Yahoo! is engaged in a number of branded and non-branded sites, services and activities, Aaker’s Brand Equity Ten model looking at loyalty, perceived quality and leadership, associations and differentiation, awareness and market behaviours (1996) could prove useful in weighting and managing its brand portfolio.

A simple, meaningful, actionable, repeatable and time-bound new system (Munoz, 2003) should then be installed to accurately gauge and guide the brand, so that it delivers on all its performance categories in a way that best befits Yahoo!’s products and markets.

Refining such a Brand Equity Ten could then inform the development of a simple Brand Score Card (Crosby & Lunde, 2008) as a dashboard instrument for ongoing reporting and control.

This would be the synthesis of the areas of importance on each level of the company’s performance, including customer value and satisfaction, innovation and new product development, through to the company’s desired financial outcomes. The key will be for Yahoo! to find the measures that work best for it, and consistently apply them.

Conclusions

Despite stellar initial marketing efforts, successive changes of focus have resulted in a brand that has an uncertain position in the mind of the consumer at the close of this case in 2007. By refocusing and using appropriate blend of brand performance measure – consistently – Yahoo!’s strong brand equity can be revitalised.

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References

Aaker, D (1996) “Measuring Brand Equity across Products and Markets”, California Management Review, Vol 38 (3)

Crosby & Lunde (2008) “The Brand Score Card”, Marketing Management, 17(3), pp12-13

Le, Zhang, Nguyen, Chiu (2004): “Fee-Based Online Services: Exploring Consumers Willingness to Pay”, Journal of International Technology and Information Management 13(7) pp131-144

Fletcher, R & Crawford, H (2012), “International Marketing: An Asia Pacific Perspective” 5th Edition, Pearson Education

Jacobson, S (2013) “Mastering the Art of Freemium Sales”, Inc website,

Retrieved on 30 August 2013 from http://www.inc.com/sean-jacobsohn/3-secrets-for-mastering-freemium-sales.html

Keller, K (2008), “Best Practice Cases in Branding: Lessons from the World’s Strongest Brands” 3rd Edition, Pearson / Prentice Hall

Keller (2000), “The Brand Report Card” Harvard Business Review, Jan-Feb pp147-157

Keller, (2003) “How do brands create value?” Marketing Management, May/Jun2003, Vol. 12 Issue 3, p26-31

Lassar, W., Mittal, B., Sharma, A. (1995) “Measuring customer-based brand equity”, Journal of Consumer Marketing, 12, (4) pp11-19

McGregor, J (2013), “Strategic Brand Management: Unit Guide”, Monash University.

Munoz, T & Kumar, S (2004), “Brand metrics: Gauging and linking brands with business performance” Brand Management, Vol 11 (5) pp 381 – 387

Pahud de Mortanges, C. & Riel, A (2003) “Brand Equity and Shareholder Value”, European Management Journal, Volume 21, Issue 4, August 2003, Pages 521–527

Rajagopal, (2008) “Measuring brand performance through metrics application”, Measuring Business Excellence, Vol. 12 Iss: 1, pp.29 – 38