The Future of Yahoo!

Yahoo's shares fell 33% since the start of the year, profit fell 38% in the third quarter to $159 million, what does the future hold for Yahoo! ?

There is no doubt that Yahoo is still a very profitable company, with profit of $159 million in a quarter, but can they stop profit from dropping or increase profit? The only way they can win against Google, if at all possible, is through research and development and coming up with better services. Google recently shut down Google Answer because it was not profitable, but Yahoo succeeded in Yahoo! Answer, gaining a market share in the Answer area, and making profit. However, that alone is certainly not enough for Yahoo to compete with Google. Google reported a profit increase of 92% in the third quarter to $733 million, Yahoo's profit is nowhere near that figure.

Will Yahoo! eventually go out of business? Currently I believe it is possible. If their profit continue to fall.

R & D is often the most costly activity in a firm, using up human resources as well as hardware, software and other resources. Innovation is the key, but for innovation to happen, they need the right resources.

Purchasing other successful firms and drive traffic to Yahoo is possible, however, it depends on how much cash Yahoo has to spend. Yahoo's stock would not be as attractive as the price is low and may continue to fall, so they need to buy with cash.

The only comparative figure against Google is sales figure. Yahoo is still behind at $1.6million against Google's $2.7 billion, while Google's sales figures are unlikely to fall significantly in the near future, and may even increase, Yahoo has the potential to increase sales and profits too.

Would Google takeover Yahoo? In my opinion, no. Google has no reason to takeover Yahoo, it will not make them more profitable, and they may face monopoly lawsuit problems. A little competition is also good, and Yahoo is not a big threat. It would also be more satisfying to beat Yahoo than to takeover it.

So what does Yahoo need to do to save itself?

1. Increase sales
2. Stop profit falling, and increase profit
   
3. Invest in R&D to come up with an innovative service

As said before, Yahoo is still profitable, however, if they do not become more profitable and increase their cash and/or stock value, they have no grounds against Google, simply sustaining current profit level will not work, and they will not be able to sustain it in the future, as more profitable companies have more resources to further increase their service and take competitive advantage.