Decision

Future Goals for Yahoo & Criteria for their Decision:• Yang and Filo do not want to lose ownership of Yahoo!• Co-founders wish for little interference from the external parties• Co-founders do not want to dilute Yahoo’s Image• Yang and Filo continually want to develop leading technology and extend the

reach and appeal of Yahoo! to consumers worldwide

Our Recommendation:• Yahoo! should form Short-Term Corporate Sponsorship

▫ Renewable at the end of every year▫ Promises sponsors advertisements on Yahoo! and Yahoo! affiliated sites

Analysis - VC Funding , Merger & Not Deciding Now

Pros Cons

Sequoia VC Funding

• Receive resources necessary for growth of Yahoo! (money, consulting, management team)• Adds credibility to Yahoo’s brand (future investors have perception that someone thinks that the idea works)

• Founders lose 25% ownership of Yahoo!• Founders lose an element of control of Yahoo!

Sell Out/Merge

• Immediate money for the founders• Ensure that Yahoo! would exist, just that it might no longer be known as Yahoo!

•Founders lose complete ownership (control and future revenues)•Yahoo! loses identity

Not Deciding Now

• Retain full ownership of Yahoo!• Founders do not give up possibility of better deals

• Founders do not get much needed money and resources • Founders lose time in decision- making

Analysis – Corporate Sponsorship Pros:• Retain “100%” ownership of Yahoo!• Receive resources (money, consulting, management team, and free web space)

from the corporate sponsor• Leverage on the brand name of existing sponsor• Avoid established portals to develop competing services against Yahoo!

Cons:• Possibly lose partial control over the company as goals and vision of corporate

sponsor might be different from founders of Yahoo!• Commercialization of Yahoo! might taint its image as “selling out to corporate

America”

Pros for Corporate Sponsorship far exceed the cons as1. Contract can be spelt out such that co-founders still allow limited interference by

sponsors2. Commercialization forms part of Yahoo’s revenue model

Economic Analysis• Estimated advertising value of Yahoo! users in 1994 is $166,667• Estimated advertising value of Yahoo! users in 2000 is $16.7 million

(assuming no change in “market cap” of Yahoo!• This estimate changes depending on Yahoo!’s popularity:

Estimated advertising worth of Yahoo! Users in 2000

0.0E+00

5.0E+01

1.0E+02

1.5E+02

2.0E+02

2.5E+02

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Fraction of WWW users who are Yahoo! Users

Ad w

ort

h (

millions o

f dollars

)

“market cap” in 1994 (8.3%)

The market cap and growth of Yahoo! is able to convince the corporate sponsor to give Yahoo! a good sponsorship!

Reality Test

Risk Mitigation Strategy

Contingency Plan

Severity

Probability

Commercialization might taint Yahoo!’s Image and reduce traffic to the site

• Improve the technology and provide better services to the users

• Use PR to explain the situation and retain public support

• Terminate sponsorship with the sponsor company

High Low

Interference from the corporate sponsor might negatively affect growth of Yahoo!

•Maintain good communication and cooperation between the two parties to ensure win-win situation

• Directly interacting with sponsor company and inform them of the situation

• If the above doesn’t work, terminate sponsorship

Medium Medium