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by James Perrin on 2nd March 2011
Yahoo inc. (the controlling company of Yahoo) are said to be in talks to sell their 35 percent stake in Yahoo Japan, according to insiders familiar with the discussions.
Yahoo Japan has been set up as a joint venture in which Yahoo inc. hold a 35 percent stake. It is believed they are ready to sell up, with the stake reported to be worth between $7 – 8 billion (£4 -5 billion). There is no confirmation as to who they will be selling to, but reports suggest that it could be to Softbank Corp who already own 42 percent of Yahoo Japan.
Any deal with Softbank won’t be as black and white as a simple sale with both parties already having a vested interests in the Chinese internet company Alibaba. With Yahoo likely to focus on this after the sale of their Japanese stake, it could make things all the murkier with Softbank. The proposed deal looks like it may still be some way off though, with Softbank going as far as saying that there’s “no truth” in the reports [source: Yahoo looks to cede stake in Japan unit | Financial Times].
Whilst it’s difficult to determine what all this means, we can look at what Yahoo have been doing recently to attempt to demystify the whole thing. They’ve been struggling to compete with the likes of Google and Facebook for some time; as a consequence their future has become increasingly uncertain, resulting in the sale of other services. By selling assets, Yahoo can hope to reinvest in areas that are more in keeping with the company’s future aspirations, rather than past pursuits.
One way they’ve been doing this is by turning to content as a core service [see: Yahoo Increasingly Looking to Content to Fill Search Void]. As a way of monetising all this content, Yahoo turn to advertisers. The better the content, the more people will advertise – hence why, amongst many other things, they purchased Premier League highlights [See: Yahoo Flirt with Premier League Football and Foursquare to Kick-start Revival].
The upshot for Yahoo is an increase in display advertising – but guess what? They’re losing ground on Facebook in this department too. According to WebProNews eMarketer have indicated that Yahoo’s market share is at 16.4% in 2011 whilst Facebook’s share is at 21.6%. Again, Yahoo is struggling to compete with the ever expanding Facebook as advertisers look to use the social networking platform to promote their services [See: Facebook Leads the Way in Growing US Display AS Market].
The sale of the Japanese Unit will fuel speculation over Yahoo’s future and the direction they are looking to take. It could viewed as a way of generating much needed income – plug the gaps in the investments they’re losing money on. Or are the poor investment choices going to continue? Perhaps leaving the Japanese market to focus on China could pay dividends, if indeed it happens of course. Maybe the Yahoo execs have something else up their sleeve.
What do you think? Are Yahoo making an excellent strategic decision or is this another questionable fire sale?