Yahoo is going through an identity crisis. First it announced plans to spin off its stake in Alibaba. This was understandable given the lack of synergy between the two. In November however, Yahoo announced a deal with Google that would see Google search and ad technology powering Yahoo’s search results. The Google deal is exclusive and in addition to an existing arrangement Yahoo has with Bing.

1. Technology
86 | GlobeAsia December 2015
Y
ahoo is going through an identity crisis.
First it announced plans to spin off its
stake in Alibaba. This was understandable
given the lack of synergy between the two. In
November however, Yahoo announced a deal
with Google that would see Google search and
ad technology powering Yahoo’s search results.
The Google deal is exclusive and in addition to an
existing arrangement Yahoo has with Bing.
With the exception of areas it considers high
growth - CEO Marissa Mayer’s “Mavens” (mobile,
video, native and social advertising) - Yahoo
appears eager to offload responsibility for every
other part of its business to other players. Yahoo’s
decisions over the next few months will make or
break the company and investors are antsy.
Is Yahoo a search engine?
Some context is necessary. In the 1990s, most
considered Yahoo a horizontal portal. Most
portals included a search engine, but they also
included all sorts of content and ways to find that
Why Yahoo’s identity crisis could finish it off

2. December 2015 GlobeAsia | 87
will be to compete with Google.
Yahoo is ugly. Clutter has always
been a huge problem for Yahoo going
back all the way to the Inktomi days.
Because it defined itself as a web
portal early on, Yahoo’s homepage has
always been littered with graphics and
visual distractions, in stark contrast to
Google.
Unlike Bing or Google. Yahoo
doesn’t have a deep-pocketed parent
company it can rely on to promote its
other properties. Yahoo is forced to
put text links to most of its member
sites at the top of every search result.
The overall cluttered and text-heavy
appearance is rather unappealing.
Basch says Google’s minimalist style
won out over Inktomi’s clients, one
of whom was of course Yahoo. Yahoo
apparently didn’t get the memo.
Yahoo’s focus on Mavens
To be fair, Yahoo’s Mavens’ revenue
is the fastest-growing in its portfolio,
up 43% to $422 million from the third
quarter last year. It may be tempting
to look at what works and do more of
it. Yahoo has clearly learned that the
search business is a low-growth sector
but it still represents a lion share of its
revenues. It’s difficult not to think of
the company as a search engine first
when search revenues are at $870
million.
Ultimately those search visitors
drive users to Yahoo’s Mavens and
so it’s about time Yahoo steps up its
R&D. In a Securities and Exchange
Commission filing back in 2013
Yahoo admitted that a good 31% of
its revenue came from its search
deal with Bing. This number was
significantly in excess of their
previously provided ballpark figure of
“more than 10%.”
Is it wise then to offload such
a crucial part of one’s business to
companies that would otherwise be
competitors? There is a quote floating
around on the internet from former
Jason Fernandes
Tech commentator and the founder of SmartKlock.
MEDIA.GLASSDOOR.COM
directly with Yahoo or any of its
competitors.
Yahoo’s deal with Bing and Google
today is very different because these
companies each have their own
search engine competing directly
with Yahoo for market share. Inktomi
met an ignominious end in 2002
when it was acquired by Yahoo for a
trifling $250 million. One of Inktomi’s
early employees Diego Basch, wrote
a lengthy blog post a few years ago
explaining why Inktomi failed. The
blog lists a litany of reasons but a few
stand out because of their relevance to
Yahoo’s situation today.
Speed and poor design killed Inktomi
Yahoo is slow. According to web stat
agency Alexa. “63% of the sites are
faster.” This is atrocious if Yahoo’s
goal is to be peoples start-page. The
rating refers to the homepage and
not Yahoo’s search results but Yahoo
is bound to have speed issues with its
results page. As Basch says in his post,
since Inktomi merely powered search
engines, they had little control over the
design of those websites or speed with
which they rendered.
While not naming Yahoo
specifically, Basch says that for
personal use, Inktomi employees often
chose Google over Inktomi clients
(one of whom was Yahoo) for their
search needs simply due to speed and
simplicity.
Since other search engines had
to query Inktomi’s servers for results
they could never compete with Google
on speed, and the same is likely true
for Yahoo. Yahoo will be juggling
between using its own algorithms,
Bing and Google’s for its results.
Yahoo will have to communicate with
either Bing or Google servers before
returning results, doubtlessly delaying
things.
Common sense dictates that the
more Yahoo has to do between the
request and the results, the harder it
content along with free email accounts
in some cases. It’s worth remembering
a time when it was rare for search
engines to actually have their own
algorithms. With the exception of Ask.
com (then called AskJeeves.com) many
search engines instead contracted
offsite for their search functionality.
Inktomi, with a market cap of
$25 billion at the time, was one such
early partner of Yahoo, powering
its search engine. The company had
one of the most robust and reliable
search algorithms of its time but - most
importantly - Inktomi did not compete
Yahoo’s
decisions over
the next few
months will
make or break
the company
and investors
are antsy.

3. Technology
88 | GlobeAsia November 2015
Starboard Value LP has publicly called for Yahoo
to abandon its planned spinoff of Alibaba and
sell its core internet business instead! So analysts
are concerned about a possible (if unlikely)
nightmare scenario where Yahoo’s tax liability
for the sale of Alibaba could usurp 100% or more
of its potential gains. Without clarity from the
government on the possible tax implications, they
view this as an unacceptable level of risk.
Yahoo should focus on Mavens and search
Spinning off Yahoo’s core business is a terrible
idea if for no other reason than because its
apparently worth very little, according to Wall
Street. Yahoo’s stake in Alibaba is worth $30.7
billion today. Based on Yahoo’s current stock,
its valuation stands at 31.2$ billion, leaving its
‘core’ business valued at about $600 million - little
less than half the $1.3 billion cash on hand (a
situation HTC recently found itself in).
When a company is valued at less than half
the cash it has on hand some soul-searching is
in order, but getting rid of Alibaba in one go and
hoping that the tax implications aren’t severe is
not a strategy. Conversely, Barron’s criticism is
not the last word. Their story was controversial
and outlets like Business Insider and CNBC took
issue with the report, citing factual inaccuracies.
Whatever the truth, selling their stake in one
go in the absence of government clarification on
the tax bill is a terrible idea. Yahoo should slow
down its divestment plan so as to minimize its tax
liability. That would both mollify investors and
allow Alibaba to prop up its numbers for the next
several quarters.
If Yahoo is so keen to divest itself of anything
it should get rid of Tumblr, the $1.1 billion former
acquisition-turned-albatross and use the funding
windfall for R&D in the mobile space. Mayer has
correctly identified Mavens as a high-growth
area but Yahoo ignores desktop search at its peril.
Mobile users are looking for synergy between
desktop and mobile products and inconsistency
in focus from Yahoo will be apparent
It’s ironic that a company that defined the
search industry for the 1990s is so lost today, like
an overgrown awkward teenager desperate to
find themselves. Author Jarod Kintz wrote: “I
Google myself to find out who I am as a person.”
For Yahoo, who’s search results will soon be
served up by Google, this will soon be quite
literal. One can only hope that Alibaba or at least
Google can help Yahoo find itself.
Inktomi COO Dick Pierce dismissing the loss of
Yahoo’s contract, explaining that since Yahoo
represented less than 2% of Inktomi revenues,
Yahoo’s decision to move to Google’s search
engine technology would have “little impact with
respect to profitability.”
Maybe, and Siberia is a “little” chilly this
time of the year. Knowing how things turned
out for Inktomi, Yahoo’s dependence on Bing
(and now Google) should be troubling. Still
regulatory hurdles are expected to crop up for
this deal, most notably in India and the European
Union. This deal is far from done but the real
government problem for Yahoo could be taxes
from its divestment of Alibaba.
Alibaba: no ace in the hole
Yahoo’s effective subcontracting of its desktop
search business and betting instead on Mavens,
and even its $1.1 billion acquisition of Tumblr
would not be so risky if Yahoo’s stake in Alibaba
was on firmer ground. When Yahoo first began
offloading its stake in Alibaba, the Chinese
company was riding high and had a massive
valuation.
In September however, Barron’s wrote a
scathing critique blasting Alibaba for what
it said was a lack of clarity in its accounting
and predicting the stock could fall 50%. These
‘accounting concerns’ coupled with worries that
Alibaba’s perceived laissez-faire attitude towards
counterfeiting would invite regulatory scrutiny
has short-selling specialist Jim Chanos pitching
Alibaba as a short. Despite a strong Singles
Day sale for the company investors continue to
remain largely unimpressed.
To complicate things, Yahoo Investor
Analysts are concerned about a possible (if
unlikely) nightmare scenario where Yahoo’s tax
liability for the sale of Alibaba could usurp 100%
or more of its potential gains.

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5. A Media Holdings Publication6 | GlobeAsia December 2015
Book Review
104 Reinventing Indonesia:
Two decades of democratization
The broad sequence of events that led
to the fall of President Suharto and the
rise of democracy in Indonesia are well
known. But few of us know the details
of that period like former Coordinating
Minister for Economy, Finance
and Industry Ginandjar
Kartasasmitra and former
Harvard faculty member
Joseph J. Stern.
living the goodlife
112 The spirit of
Penfolds
Penfolds, one of
Australia’s oldest and
most iconic wineries,
has been on a roll
lately and continues its
unabashed headway
into Southeast Asia’s
largest economy.
Back Page
116 Whiteaway,
Laidlaw & Co.
Department Store
Columnists
16 Steve Hanke
Bank regulations continue
to hinder the US recovery
82 Jamil Maidan Flores
Ruling the waves in the
South China Sea
86 Jason Fernandes
Yahoo’s identity crisis could
spell disaster
96 Keith Loveard
Swimming like a fish ... again
98 Scott Younger
Development reality and
contents
Special Report
78 Conquering the airwaves
When President Joko Widodo announced
his work program to his cabinet ministers
in November 2014, one of the priorities
was to develop the eastern part of
Indonesia. For Communications and
Informatics Minister Rudiantara that meant
building telecommunications infrastructure
connecting the eastern part of Indonesia
with the rest of the archipelago.
Indonesia Economic Forum
90 A historic opportunity for Indonesia
The rise of the digital economy
and acceleration of infrastructure
development were the key themes at
this year’s Indonesia Economic Forum
(IEF). With speakers from the region
and around the world, the IEF provided
an ideal platform for business leaders,
policymakers and investors to gather to
discuss both the opportunities as well as
the challenges that confront the nation.
Interview
100 Liquid time
When HYT launched its revolutionary
liquid-engineered H1 timepiece in 2012,
it took the watch industry by storm.
Since then, the company has produced
a number of cutting-edge watches with
the latest H4 series incorporating a light
system that is powered by clean energy.
VOLUME 9 NUMBER 12 / DECEMBER 2015
82
nance
er
r
90
78

6. 8 | GlobeAsia December 2015
W
ho holds power in today’s
Indonesia? It is a straight-
forward question but the
answer is complex. Democracy, economic
growth and political fracturing mean that
there is no single center of power but
multiple sources.
In the past, the military and the
presidency were the main sources of
power. Today, however, businesses,
political parties, non-government groups,
the police, military and the media all
jostle and compete for influence.
Power is shifting from a small group
of political players to a wider constituency.
It is shared between the center and the
regions as every senior government
official is elected. So ultimately, it can be
argued, it is the people who hold ultimate
power in the country.
This shift in power has occurred over
the past 18 years as democracy has taken
hold. But it has been cemented over the
past decade with the rise of the middle
class as more and more Indonesians have
joined the consuming class. Numbering
50 million today, the middle class is a
growing force on the country’s landscape.
With swelling numbers and a bigger
stake in the economy, the middle class
will exert both power and influence
on a broader scale. They will demand
better quality public services and, more
importantly, they will not be afraid to
voice their displeasure.
Businesses, politicians and other
civil servants will have to adapt to this
new landscape. Spending power will
determine the fate of the country and
political rights once gained will be hard
to remove.
So the new Indonesia is more
complex but also more stable. Without a
dominant force, political power will ebb
and flow between the competing factions
but ultimately, they will all have to bend
to the public will.
The recent haze disaster provides a
wonderful illustration of how the new
diffused power is affecting politics in
Indonesia. As public discontent began to
rise and as stories of babies dying due to
the choking smoke began to appear in the
mass media, the government was forced
to take firmer action and even apologize
for not doing enough to manage the
yearly cycle of burning.
President Joko Widodo cut short his
trip to the United States to return home to
handle the growing crisis. It would have
been unthinkable just a few short years
ago for the president to cut short such
an important diplomatic mission to rush
home in such a manner.
The rise of the middle class will have
a direct and lasting impact on the political
and economic constellation of the
country. In most part, that is a good thing.
Shoeb Kagda
Editor in Chief
shoeb@globeasia.com
Editor’s Note
Editorial
Editor in Chief
Shoeb Kagda
Managing Editor
Yanto Soegiarto
Editor at Large
John Riady
Senior Editor
Albert W. Nonto
Contributing Editors
Steve Hanke
Scott Younger
Contributors
Frans Winarta
Jason Fernandes
Special Columnist
Jamil Maidan Flores
Reporters
Vanesha Manuturi
Dion Bisara
Art, Design and Layout
Gimbar Maulana
Elsid Arendra
Rudi Pandjaitan
Agustinus W. Triwibowo
Senior Photographers
M. Defrizal
Suhadi
Production
Assistant
Danang Kurniadi
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