What happens to the Yahoo search engine if the company is sold and divided up piecemeal to companies and investors? One agency partner believes the engine could disappear and technology sold off to become the backbone for Internet-connected devices.
Yahoo has received nearly 40 "expressions of interest" from possible bidders including Verizon, AT&T, Time, and numerous private-equity firms, according to one report, and advertising agencies have their own opinion on the future of the Internet company founded in 1995.
If the core Yahoo search business ends up in the hands of private equity firms, it will most likely become an "asset in need of a home," according to Adam Lavelle, chief growth officer at Merkle. "I wouldn't expect the PE firm to have the operational and leadership experience to drop significant money into a development roadmap or product innovation," he said.
It would become an asset with a caveat. While Google, Amazon, Netflix, and others don't need it, Lavelle believes the PE would likely strip out costs and find a way to re-package and restructure the business to make it appealing for another media or technology company to swoop in and acquire the search business.
Scott Shamberg, president at Performics U.S., believes it's more likely that Yahoo will sell pieces and assets. Yahoo Mail and the traffic to the portals have value, for example. There's little brand value in Yahoo's search business, which is a shame, he says, because "when I sat down with the product leads at CES they spoke about some really interesting features" in future product releases.
Citing Yahoo product leads, Shamberg called the feature "live search," the ability to tie dynamic keywords to live events. "They invested in product development, but they spent so much time chasing everyone else I don't think they can catch up," Shamberg said. "If a PE firm acquires Yahoo's search business, it will likely bundle it with another technology."
When asked whether he sees value in their native advertising business, Gemini, Shamberg said: "I would bundle it with a content system or maybe any of the telecom companies like Comcast, AT&T or others looking to deliver more content themselves."
The brand shifted, and search became de-prioritized even before Mayer came on board as CEO, Shamberg said.
A meeting scheduled for next week between Yahoo and hedge fund Starboard could put the final nail in the coffin for Yahoo's search business. The company's CEO Jeffrey Smith, who wants a seat on the board, has been pressuring the board demanding a shakeup at the company and the resignation of CEO Marissa Mayer.