Where the Money Is
The chips are down for Yahoo!, and the portal is hoping new corporate business can lift its badly sagging top and bottom lines.
The company last week touted its business service as it stunned Wall Street with the joint announcements that Chief Executive Tim Koogle will step down and that company revenue will be $50 million to $60 million below first-quarter projections of $232 million.
To help get the train back on track, Yahoo! is dressing up a version of its popular consumer portal as something corporations can use for their intranets and extranets.
Yahoo! officials spoke confidently about the Corporate Yahoo! product, which was introduced in June and targets enterprises that want a customized information portal based on the popular My Yahoo! interface. Corporations can integrate their proprietary content and applications with Yahoo!s offerings, and all of it can stay behind existing firewalls. Yahoo! has signed up 18 large corporate customers so far, which have made the service available to more than 800,000 users.
"The developing Corporate Yahoo! business is doing well, and business services will likely represent a larger share of revenue in 2001 than we indicated two months ago," said Susan Decker, chief financial officer and senior vice president of finance and administration at Yahoo!.
Two months ago, Yahoo! said its business services unit would contribute 15 percent to 20 percent of overall revenue in 2001. The largest share of Yahoo!s revenue, which analysts estimated at 80 percent, comes from advertising. The third revenue stream comes from premium consumer services, which Yahoo! is primarily still developing.
JLT Services, an insurance company, is licensing Corporate Yahoo! for its employee portal and is offering a different version to affinity groups. McDonalds uses the product to deploy information to employees and franchisees. Other Corporate Yahoo! customers include Bayer, Reuters and Seagate Technology.
"We are intrigued by the prospects for the Corporate Yahoo! enterprise information portal, given the recurring revenue opportunity," Anthony Noto, an analyst at The Goldman Sachs Group, wrote in a recent report.
Customers sign annual contracts and pay maintenance and platform fees, as well as licensing fees based on the number of users. U.S. Bancorp Piper Jaffray estimated that Yahoo! charges corporations $10 to $30 per user per year. No ads are run on the corporate portals, Yahoo! said.
Yahoo! President and Chief Operating Officer Jeffrey Mallett said demand for the enterprise portal is increasing both in Europe and domestically.
Guy Creese, research director at Aberdeen Group, said Yahoo! faces competition in the space from numerous players, including Microsoft, enterprise information portal suppliers such as Plumtree Software and Viador, and syndication services such as NewsEdge.
"The issue is whether Yahoo! comes to peoples top of mind" when theyre building an enterprise portal, Creese said. "I think market visibility is an issue for this specific market because everyone knows who Yahoo! is, but they dont necessarily know Yahoo! does this."