The Scorecard: Winners & Losers of Yahoo, Facebook Connect Deal

19 thoughts on “The Scorecard: Winners & Losers of Yahoo, Facebook Connect Deal”

  1. Good analysis (well, at least I agree with it).

    It looks like Yahoo! has made a series of decisions for short-term benefit that have crippled its long-term prospects.

    It is sad enough to see Yahoo! weakened. Seeing an unprincipled organization like Facebook become a critical public resource is even worse.

  2. Facebook becomes the ultimate social aggregator with the eyeballs and data to deliver highly targeted ads (if users will pay attention to them).

    Yahoo continues its course of defining itself as a media property and less as a search and social network. They have an uphill struggle. The technology factor is greatly diminished as stated in this post.

    Google has never been a social network. They continue to be an search, advertising, and applications service. Technology is Google’s sweet spot and justifiably so.

    AOL faces a long battle against Yahoo and MSN and all the other media properties to attract users/viewers and advertisers.

    My thoughts.

  3. With roughly 300M monthly users, Yahoo Mail is equivalent in size to Facebook. Long before the rise of Facebook did Yahoo have the makings of the world’s largest social network – one based on email addresses. Unable to capitalize on this vast network to deliver a better advertising platform, they have signed an agreement to outsource this lucrative opportunity to Facebook.

    Ceding identity to Facebook accelerates Yahoo’s demise. Yahoo’s perennial core competency is selling branding advertising to a massive, unique audience viewing high quality content. By correlating a Yahoo ID to a Facebook ID, Yahoo more than cedes identity: they cede exclusive knowledge and access to hundreds of millions of users, billions of impressions and tens of billions of dollars in revenue to Facebook.

    Facebook will know all that Yahoo knows about their users. Facebook will have a larger audience, a better ad targeting platform and eventually more advertising market share than Yahoo.

    In short, Om is right: this move is disastrous for Yahoo and a coup for Facebook.

    http://expostfacto.posterous.com/the-scorecard-winners-and-losers-of-yahoo-fac

    1. Thanks Tom for your comments.

      I am surprised that not many are realizing the importance of this deal — it is a company defining deal and Yahoo is going to live to regret it.

      Facebook is slowly going to suck the life out of Yahoo via access to the contact list. 🙂

  4. I agree that Facebook is becoming the arbiter of online identity. However, I don’t think that it’s because of this deal with Yahoo! There has been a clear trend in the last year towards Facebook connect. Several sites are using FB connect as their exclusive mode of user authentication.

    The Yahoo! deal is significant, but FB becoming the king of online identity was gonna happen anyway.

    I would also add that another big loser to FB connect is OpenID.

  5. Well said, Om.

    Facebook is going to win the “real identity” game and with it, the pole position for delivering demand-creation ads (as opposed to search’s demand-satisfaction ads) more efficiently.

    I do think, however, that there is space for Yahoo! in the world you describe. Bing delivers demand-satisfaction revenue to Yahoo via search, and Facebook delivers demand-creation ad revenue with better targeted brand/display ads. Yahoo sits in the middle and integrates these search and social experiences along with its own media properties and ad selling into a package for a large subset of the world’s internet users. Given its (still) massive reach, Yahoo commands very high shares I’m sure, and in the meantime keeps its capex low… making it a very efficient business.

    While it’s not a perfect analogy, I can’t help but think of the PC market. Intel and Microsoft have historically extracted the lion’s share of profits from the PC market, yet Dell has operated a very nice business for a good long time by (essentially) efficiently intelligently integrating Intel and Microsoft. And Dell has the option to swap out its parts if a better option comes along.

  6. Om, you mentioned the ‘signing of a deal’ and yet I didn’t see any reference to a deal being signed in the Yahoo Press Release. Are you sure there was a deal structured or did Yahoo just decide to integrate their Facebook Connect relationship more deeply.

    If a deal was signed it’d be interesting to know the terms.

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