Yahoo (NASDAQ:YHOO) has been going mobile in a big way lately. The portal site has partnered with Nokia and Samsung to integrate its content on their phones, and is also developing apps for the iPhone and for Android-based smartphones.
These initiatives are helping Yahoo attract millions of smartphone users to its platform, where it sells display advertising in competition with major portals like Google (NASDAQ:GOOG), Microsoft’s (NASDAQ:MSFT) Bing, AOL (NYSE:AOL) and New York Times (NYSE:NYT).
We estimate that this incremental traffic could create a 10% upside to our price estimate for Yahoo’s share value. Our analysis follows below.
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Yahoo’s smartphone initiatives
Nokia and Samsung partnerships: Yahoo recently partnered with Nokia and Samsung to distribute communication services and content across their smartphones. Yahoo will integrate Yahoo! Mail and Messenger services with Nokia’s Ovi Mail and Chat services, and will also integrate Yahoo! Maps with Nokia’s mapping and navigation services. In an earlier article, we explained how Nokia can leverage its relationship with Yahoo to gain market presence in the U.S.
Android and iPhone apps: Yahoo has released a few apps on the iPhone and Android platform to attract mobile users. For example, its Sketch-a-Search iPhone app lets users search for nearby restaurants and other businesses by simply drawing a boundary on the phone’s map with a finger. Yahoo has also developed Android apps that push Yahoo mail and help users view and download attachments.
Mobile traffic boost
Worldwide, Yahoo averaged about 590 million monthly unique visitors in 2009. We currently expect this number to increase to around 770 million by the end of the Trefis forecast period. You can drag the trend-line in the chart below to create your own unique visitor estimate for Yahoo and see how it impacts the company’s share value.
Yahoo gets a total of 170 million monthly unique visitors in the U.S. per Comscore, a web traffic analysis site. About 45 million of those visitors (26%) access Yahoo properties from their mobile phones, according to Yahoo’s second-quarter earnings report.
Globally, the smartphone market is growing about 1.5 times faster than the PC market. We expect the smartphone installed base to increase from around 700 million in 2009 to around 2.1 billion by 2016. By contrast, we expect the PC installed base to increase from 1.2 billion in 2009 to 2.4 billion by 2016.
We conclude that the booming smartphone market could help Yahoo attract a total of about 1.1 billion monthly unique visitors worldwide by 2016, or 39% more than our baseline forecast of 770 million.
Assuming that Yahoo’s revenues per page from mobile users converge with revenues per page from PC users, we estimate that the expanding smartphone user market could produce an upside of 10% to the our $19 estimate for Yahoo’s stock price.