Yahoo Japan Has the Traffic, But Google Has the Mobile Tech
Once upon a time, long long ago, Yahoo (NASDAQ:YHOO) used to be a real contender in the Internet search market. Those days passed with the rise of Google (NASDAQ:GOOG) and Yahoo’s search capabilities have now been handed over to Microsoft (NASDAQ:MSFT) via a Yahoo-Bing search agreement where Bing powers search results on Yahoo.
But PC-based Internet searches are passé. Mobile search is the new gold rush and once again Yahoo is left looking up to others when it comes to delivering a technology platform. This time it’s Google instead of Microsoft. Yahoo Japan is launching a “Yahoo! Phone” in Japan that is powered by Google’s Android mobile phone platform. [1] While Yahoo tries to make the most of its dominant position in Japan, it’s hard to forget that the company faces serious challenges in the U.S. market and that even the success of a Yahoo phone will mean little for the core Yahoo business.
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Why Japan?
You may be wondering why Yahoo is launching its Yahoo! Phone in Japan. It turns out that Yahoo Japan is the dominant search player in Japan. Yahoo Japan accounts for a significant portion of Yahoo’s “strategic investments”. As shown in our breakdown of Yahoo’s value below, strategic investments account for about 36% of the $17 Trefis price estimate for Yahoo’s stock. The Trefis price is currently about 30% above the current market price.
Decline in Western Markets Has Forced Yahoo to Look Eastwards
With Yahoo steadily losing out in both search and display ad segments in the U.S., [2] the company is steadily moving towards Asia-Pacific where its markets are still relatively intact. With the Yahoo! Phone, it intends to provide pre-installed Yahoo services such as Yahoo Japan Home, Yahoo Japan Auctions and Yahoo Loco (Yahoo’s location-based service) which should enhance traffic for Yahoo’s content.
But Google Also Benefits & Upside for Yahoo is Minimal
The main catch of the Yahoo! Phone is that its powered by Google’s Android. In many ways, this is a stark reminder that Yahoo must rely on the expertise of its competitors to promote its own content and services and in the process is helping to evangelize Google’s Android platform. While the Yahoo! Phone might provide Yahoo with increased traffic, the positive impact for Yahoo shareholders will be minimal.
See our full analysis for Yahoo
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