yahoo! acquires inktomi march 19 th, 2003. yahoo!

Yahoo! Acquires Inktomi

March 19th, 2003

Yahoo!

Yahoo

A leading provider of comprehensive online products and services to consumers and business worldwide

No.1 Internet brand globallyNo.3 most used search engineHeadquarter: Sunnyvale, CaliforniaGlobal network is available in 13 languages

Leading search sites

Site Unique

visitors (000)

Aver.daily

unique

Visitors(000)

Total usage

minutes

(000,000)

Ave min

spent per

month

MSN Search 49,686 7,315 542 10.9

Google Sites 41,328 8,348 849 20.6

Yahoo! Search 42,574 5,680 397 9.8

AOL Search 38,112 7,187 1,078 28.3

Yahoo and its search engine

Yahoo is named as an editorially produced directory of websites

But it never owned significant algorithmic back-end search technology of its own

It aggregates services and content to pioneer the concept of a “portal” site

Its search technology is outsourced

Yahoo

Search providers

AltaVista

Inktomi(1998)

Google (June 2000)

Inktomi (March, 19, 2003)

Yahoo’s strategies on its search business

Improve relevancy and comprehensiveness of search results

Enhance and improve quality of its most-searched terms

Increase marketing resources invested to continue building Yahoo!Search brand

Improve directory matches to offer consumers results within relevant categories

Inktomi

Services

WWW search servicesContent networking productsEnterprise searchPaid inclusion services

History

Established in Contract with Yahoo 1998-2000 In 2000 stock traded at $234Yahoo switched from Inktomi to GoogleShortly Inktomi was traded at $1.50

Just Before the Merger Inktomi stock is traded at $1.50 Restructuring efforts

Sale of enterprise search software to Verity Reduce investments into content networking

products group Focus on the Web search services

Who needs Inktomi?

Microsoft – largest portal customer (20.8% of total Web search services revenue)

Contract expires in December 2005

AOL – one of the largest portal customers (17.5%

of revenues)

Ceased its contract with Inktomi in August 2002

CompetitionAltaVistaAsk JeevesFAST Search and TransferGoogleOvertureLook-SmartNorthern Light

Financial Performance

Revenues

0

50,000

100,000

150,000

200,000

250,000

2000 2001 2002

Year

$

0%

20%

40%

60%

80%

100%

% of revenue

2000 2001 2002

Revenue SourcesOtherServices

MaintenanceServices

WebSearchServices

Licenses

Strategic Fit of Yahoo and Inktomi

A powerful combination Yahoo!’s global reach and commitment to and Inktomi’s outstanding engineering expertise and leading search technology, providing the best user experience on the Web

Strategic Fit of Yahoo and Inktomi

Achieve their mutual goal of making the Inktomi-Yahoo! search offering the standard bearer for searching on the Web

Strategic Fit of Yahoo and Inktomi

Create one of the most relevant, comprehensive and highest quality search offerings on the Web for both Yahoo!’s affiliate partners and Yahoo!

Strategic Fit of Yahoo and Inktomi

Offer more value to consumers and businesses through programs such as paid inclusion, which provide higher-quality commercial search results

Strategic Fit of Yahoo and Inktomi

A way of getting Google off of that page and being able to be more aggressive in trying differentiate and market themselves against Google

Strategic Fit of Yahoo and Inktomi

Give Yahoo! an important new tool and revenue source in an increasingly competitive marketplace

Strategic Fit of Yahoo and Inktomi

Unprecedented ability to monitor Internet users’ behavior and deluge them with tailor-made advertising based on one's surfing

Potential Risks and Uncertainties

Reaction of customers of Yahoo! and Inktomi to the acquisition

Yahoo!'s ability to successfully integrate Inktomi's operations and employees

Inktomi has never turned a profitGeneral economic conditions

Potential Risks and Uncertainties

Yahoo’s directory is difficult to scale:

hundreds of thousand of people needs to be hired to try and comprehensively categorize the current Internet

Inktomi’s search has traditionally organized

pages automatically based on page content

and meta information How do the two systems work together?