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esxokm (< 20)

Yahoo's Future: Media Conglomerate?

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January 06, 2015 – Comments (2) | RELATED TICKERS: YHOO , LGF-A , FB

Recently, reports indicated that Yahoo may have been interested in buying Scripps Networks Interactive. The latter owns cable channels related to the reality-TV genre such as Cooking Channel, Travel Channel, and Home and Garden Television. Scripps currently has a market cap of about $10 billion at the time of this writing. Yahoo, with a market cap of $47 billion and flush with money from the Alibaba IPO, is the subject of speculation in the realm of mergers and/or asset collection.

Yahoo's CEO Marissa Mayer should be thinking along those lines, because Yahoo and its shareholders would benefit from some significant change in its business model. Even though the stock has risen and Mayer has done interesting things, the company's identity as a portal-plus probably still weighs on the mind of many Wall Street mavens.

Perhaps 2015 could be the year Mayer sets the company on a completely different, yet relevant, course. Branching out into other media areas, expanding beyond the portal business model, would be wise prescriptions to follow.

Not only would learning the cable business pay dividends for Mayer, but it would be a springboard to using content to differentiate Yahoo. Just as she took the show Community from broadcast to web distribution, so too could she take aging reality shows and repurpose them on her site. From there, she could increase engagement of her users and make money off their social interactions.

The point is, Yahoo needs to move deeper into Hollywood and start to play the content game. People turn on a TV to access content, and the younger demos are migrating their viewing habits to the web.

This leads to a thought experiment about scale and competition. It's oftentimes been said that Yahoo should merge with AOL. Not a bad idea, considering what the implications could be.

First, a competitor is neutralized. Combining AOL's and Yahoo's various engines of online engagement would lead to cost-cutting and less fragmentation for the two businesses.

Second, Yahoo could use that scale to buy a studio. Lions Gate Entertainment is a name that is always hypothesized as a takeover candidate in any thesis about the stock. Imagine a combined AOL/Yahoo buying Lions Gate and then using its online presence to promote the movies and television shows that are released by the Hollywood player.

It almost seems preordained. Companies on the web that rely heavily on social media to create sticky environments for visitors will eventually come to the conclusion that great content leads to diversified revenue streams, opportunities to increase brand equity, and reductions in marketing expenses for filmed entertainment. Yahoo knows the social media and advertising games, it's made many acquisitions in those areas; at some point, it would be wise to increase the stakes in the game of storytelling.

Facebook finds itself in a similar position. It is the social network. And there is nothing more socially engaging than the stories its users find fascinating on the big and small screens. Eventually Facebook will figure it out: it will have to start producing movies.

Yahoo - unless it someday merges with Facebook, a probable longshot - will need to get ahead of that future, to figure out the vision for itself. Whether or not it does anything with AOL, the important thing is to look beyond its mission statement; it isn't just a company based on technology, algorithms, and math. There's an intangible that needs to be explored. Yahoo needs to create fictional mythologies that resonate with the millennials; after that, it can widen the demographic net.

The key is for Yahoo to connect with its visitors in a more comprehensive way. It is no longer a portal. It is a media conglomerate in the making.

2 Comments – Post Your Own

#1) On January 06, 2015 at 3:21 AM, valunvesthere (23.03) wrote:

Marissa Mayer buying CNN? Jan. 02, 2015 - 2:06

In Touch Weekly’s Kim Serafin on the rumors that Marissa Mayer is interested in acquiring CNN. 

 

Marissa Mayer Has Surprising Interest In Buying A Cable Channel, Yahoo Sources Say Nicholas Carlson Jan. 1, 2015, 11:08 AM

Here is a perhaps crazy idea that sources tell us Yahoo CEO Marissa Mayer and her top executives have considered for saving the company: buying cable networks.

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#2) On January 06, 2015 at 4:48 AM, esxokm (< 20) wrote:

Thanks for the links.

Buying CNN would also be interesting, but I think Yahoo would be better off not getting into the news game. In fact, I think the broadcast networks in general should get out of the newsgathering business. Telling stories should be their primary link to value.

I believe I forgot to mention in the above that if Yahoo and AOL did indeed merge, before embraking upon acquiring a studio, the company should sell Huffington Post. Taking the money from that asset and concentrating on filmed entertainment is probably the preferred way to go, in my opinion.

Thanks again for the comment... 

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