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Should Yahoo (YHOO) Go Down The Netflix (NFLX) Road?
Posted by: Intelligent Speculator (IP Logged)
Date: April 10, 2014 07:17AM

It’s fascinating to see how quickly the ecosystem plays are evolving. They are rolling out new products, acquiring others in order to extend their reach and increase the lock-in effect. At this point, there are 6 clear contenders which in a way already look like winners:

-Apple (AAPL)
-Google (GOOG)
-Amazon (AMZN)
-Microsoft (MSFT)
-Facebook (FB)

Some would argue that Amazon has little to do with the others but I’d argue that over time, they will increasingly compete. Facebook offers a different kind of ecosystem/platform but looks strong and established enough to warrant its spot.

The Difficult But Not Impossible Task

It is also possible for players that do not own their “ecosystem” to do extremely well. It’s a major challenge because the product must be so unique and such a strong brand in order to make it very difficult for those players to launch a competing product or to put significant pressure on pricing, etc. I’ve argued for example that players such as Spotify and Pandora (P) in the music sphere will continue to struggle.

There Is Hope

TripAdvisor (TRIP) and Netflix (NFLX) are two brands that have clearly done very well and are unlikely to disappear anytime soon. Netflix is by far the best example. Why? It has a strong brand, strong content agreements and has started (with great success) to produce its own content. Yes, most if not all of the platforms I mentionned are involved in video and competing to an extent with Netflix. But the video company is strong enough to force its hands:

-Apple features Netflix in its App store and as one of the main apps on the AppleTV
-Google features Netflix in its Android app store
-Amazon just launched its new FireTV which will include Netflix
-Microsoft’s xBox also offers a platform to connect
-Facebook has a partnership to get Netflix users to use “Facebook connect”

Thus, I’d argue, Netflix is in a an ideal position to not only avoid being threatened by those players but instead to profit from the expansion of those players.

Back To Yahoo

There has been talk about Yahoo’s transformation and while building a few apps has been nice, it’s not enough to compete. For all of the discussion about apps such as Yahoo! Weather, they have lost a lot of momentum because it was so easy to replicate. In fact, Apple did exactly that by “improving” its weather app in its latest iOS version. Yes, Yahoo has Flickr but it needs more.

yhooYahoo’s Strengths

I’d argue that Yahoo’s content and core portal is its best product but the problem is that there’s no way the portals will “promote” it. As per “TheInformation”, Yahoo has been trying to buy its way onto handsets in order to get more active users but it’s proving extremely difficult.

The alternative is building something unique that will give enough incentive to users to download that Yahoo can then link all of its apps/content together as Facebook has gradually started to do. It would be a very long term process but honestly, I don’t really see an alternative. In an increasingly mobile world, getting eyeballs is a much more difficult proposition.

Being able to create a video platform that would include exclusive content but also its own shows seems like a bit of a long shot but I do think that if it did work out well, it could become a game-changer.

chart source: WSJ



Stocks Discussed: YHOO, AAPL, GOOG, AMZN, MSFT, FB,
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