Yahoo! and Alibaba: David’s No Longer Dancing with Goliath - He’s Writing the Tunes

Despite its continuing travails, the near 20-year-old web search company Yahoo! appears still to have a market capitalization of just over $40 billion. Not bad, you might think, considering its history of decline that mirrors the inexorable rise of Google.

But there are lies, damn lies and statistics. I’d estimate Yahoo!'s core value actually is only about $4 billion.  Why?  Because its 16 percent stake in the recently NYSE-floated Chinese e-commerce giant Alibaba is worth approximately $37 billion.

Toppled giants

Without what has turned out to be a very savvy investment its core value would put the one-time Goliath in a bracket with that other toppled giant in the war for internet domination, AOL, which currently weighs in at around $3.5 billion in value. To put that in perspective, Yahoo! made nearly three times that by selling Alibaba stock soon after the IPO

But Yahoo! has always been acquisitive.  It’s made over 100 purchases starting in September 1997, with the web search engine Web Controls, right up to September 2014 when it took over the Indian document handling firm, Bookpad.

Under CEO Marissa Meyer’s leadership, Yahoo!‘s attempts through acquisition to get off the bell curve of inevitable, laggardly decline and onto the `S` curves of re-inventive success  have massively increased with many months seeing multiple buys  announced.  14 Davids have disappeared into Yahoo!'s maw so far this year  - from Aviate which made an intelligent home screen for the Android OS to social media  transformation business Vizify  to Flurry’s mobile analytics.  And that was after a busy December 2013 when Yahoo! closed in on five businesses.

From saviour to nemesis

Of course, these are wholesale acquisitions, not partial investments, and it remains to be seen how they fare within Yahoo!

Alibaba too is a salutary lesson for any Goliath – that the David you invested in could not only help your survive and thrive but could start to dwarf you changing the markets in which you operate. The paradoxical ultimate outcome of your search for relevance being your own demise as your potential saviour becomes your nemesis. 

And as an entrepreneur be careful what you wish for, even with a minority investment, it seems, you could get more than you bargained for and may up accidentally end up running the show. On the other hand, that could suit you fine.

That’s something Meyer and her board will have hanging round their neck in coming months as financial analysts around the world work out how to value Yahoo!’s share price going forward. The share price, for instance, dropped nearly 10 per cent after the IPO as investors saw no need any more to hold Yahoo! stock in order to get a bit of the Alibaba action.

Maintaining meaning in the market

But such movements are the daily stuff of the financial markets and Yahoo!'s valuation being linked to Alibaba’s isn't necessarily a bad thing.  The partnership still presents a major strategic opportunity, one that Yahoo! has needed for years as it’s struggled to reinvent itself and maintain its meaning in the market.

One of Yahoo!'s  problems, which is shares with many US-originated corporations, not to mention sports organisations, is that, despite thinking itself a global brand, it is actually very US-centric in its operations , right down to the vast majority of its  acquisitions being from North America.  Note: for those of you European entrepreneurs thinking Yahoo! might be a good exit, the reality is 50 per cent of acquisitions of European Davids are done by European Goliaths.

But this US-centricity could work in its favour in this case.  It doesn’t take a great leap in imagination to work out that Yahoo!’s US brand presence and traffic – it ranks third in the US for total internet traffic – and historical relationship could make it good partner to enable Alibaba to build an online retail marketplace in U.S.

A man with a plan?

Some of Alibaba's recent activity in this respect may be portentous. It’s launched the Esty-alike speciality shop marketplace 11 Main and has made $200 million investments in both the daily deals site Shoprunner.com and messaging app company Tango.  All of these could be the building blocks of a sustained assault on the US retail market.  And, of course, Yahoo! may now be part of Alibaba's larger plan to drive traffic to expand the U.S. arm of its existing business.

If I was a book maker I’d be taking bets on Alibaba getting past the partner thing pretty quickly eventually swallowing Yahoo! Whole. After all, control could be acquired for what it might consider small change. However if I were the betting sort I’d be thinking just because it could do it doesn’t mean that it should. In trying to create ecosystems and deliver shareholder value why buy second hand damaged goods when you have the power and resources to build brand spanking new?

After all, look what happened when AOL acquired Time Warner.  It all seemed good on paper but a very expensive reality soon dawned.  He may be a man with a plan, but as an English graduate will Alibaba founder and CEO Jack Ma have learnt the lessons of history? Let’s hope so, if only for the sake all the Davids queuing up to form part of his future success story.  

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Be Honest, Drive Change, Man Up - Dealing With Tech PR’s Perennial People Problem

I was recently a judge of `Employer of the Year` category of the UK National Business Awards.  That entailed spending a long day hearing ten successive presentations from a shortlist of firms derived from all sectors of the economy and all parts of the country justifying why each deserved the prestigious award. 

By the evening I could not be anything other than hugely  impressed with the way all the businesses were being run.  Particularly the way that they demonstrated that engaging and enthusing their employees was central to their business success.  

How different, then, to find that recent research conducted by recruitment consultancy Zenopa in the UK has identified that tech PR agencies are facing a mass exit of executive talent in the coming years unless they start listening to what really matters to their employees and act upon it.

Of those surveyed, just 25 per cent stated that they saw themselves in agency tech PR in five years’ time. The remaining 75 per cent were either unsure (50 per cent) or said that they will leave (25 per cent). Only a third predict themselves being employed in an agency in five years’ time, although 63 per cent believe they will still be in PR.

Culture and personal development

The study which surveyed 158 young tech PR professionals working in agencies highlights that PR employers are still failing to understand, and act on, what employees are seeking both in terms of company culture and personal development.

In this respect, 46 per cent of those surveyed craved a `family feel` to their working environment with a further 39 per cent preferring working in a `creative environment`.  Just 12 per cent wanted to work in a results-driven environment. One wonders in the latter case if they understand the relationship between giving the clients what they want – results – and the cheque that lands in their account at the end of the months.  That’s Generation Y for you, I suppose.

Anyway, overall, 41 per cent claim are working in a culture that doesn’t fulfil them.

Facing a talent drought

Of course now that we have exited the recession and business is back on track for a lot of tech PR agencies. Yet again, though, their owners are facing a very serious talent drought that, long term, will impact their ability to service accounts let alone build successful businesses and certainly, ultimately, exit by sale or MBO.

The fact that three quarters of their employees either won’t commit or don’t see themselves working for a tech agency in five years’ time should be of great concern to agency management and investors. Not least too the clients tearing their hair out at the revolving roster of  faces that seems to appear at every client review.  

Nevertheless, a culture that people want to work in isn’t a `nice-to-have`, it is a business fundamental that allows and firm to attract and retain the best people. After all, an agency is simply a management framework for good people to do great work. Unsurprisingly, for candidates looking to move, the survey revealed agency culture is number one on the list of things that they’re looking for in new employer.

Mind the gap

Scarcely believable in what should be a consulting business, it’s not just in creating a satisfactory working environment where agencies are falling short but in personal development of employees too.

The survey also found that 85 per cent of respondents feel it is important that they are included in formulating their agency’s business plan and strategy, yet only 67 per cent feel that this is actually happening. 96 per cent stated that it was important to them that they worked in a company where their business ideas were listened to and taken into consideration, but just 79 per cent feel this happens in practice.

89 per cent see value in a structured competency and appraisal system, but just 64 per cent state that such an approach is a reality in their agency.  This is something I find particularly amazing in this day and age having implemented such a system twenty years ago.

This wastage of potential talent is breath taking. 82 per cent of those surveyed would like to be given additional responsibilities outside of their ‘normal’ role in order to gain new skills, but one in five (18 per cent) state that this isn’t happening at their current agency

Lastly, 80 per cent feel it is important that the agency’s values and vision is incorporated into their daily work ethic, yet this is only perceived as happening in 65 per cent of cases

Wake up call

Clearly getting employee buy-in to the company strategy and direction is fundamental and yet clearly as an industry, tech PR is failing to engage staff per se, never mind in the bigger picture.


But should anyone be surprised that people want to work in an agency where they are clearly valued, a career path is mapped out for them and where they are exposed to new challenges and opportunities?   Business 101, really.
 

The standard agency fare of boasting about `duvet days`, having an office that looks like a teenage architect’s bedroom or throwing endless boozy socials isn’t the way to recruit the best minds in the business and keep them there.

Hopefully this study will act as a wakeup call and encourage tech PR agencies and tech divisions of generalist agencies to up their game. And as Steve Earl, managing director, Europe at Zeno Group succinctly tweeted after attending a breakfast seminar held to discuss the results `Priorities as I see them: be honest, drive change, man up.`

Wise words.  And if that's going to make the difference, then that works for me.

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