YHOO Stock: Yahoo! Inc. Is Cooking Up Something Big

yahoo stockWhat Is Marissa Mayer Working on at Yahoo?

It hasn’t been a great year for Yahoo! Inc. (NASDAQ:YHOO), given investors in YHOO stock have seen their shares plunge 34% in value year-to-date. However, that might be about to change.

There are quite a few things happening at Yahoo right now: the company’s spinning off its stake in Alibaba, preparing for the launch of its mobile search and personal assistant app, and partnering with Google. Yahoo has also hired McKinsey & Company to help with its reorganization.

If Yahoo successfully goes through these changes, Yahoo’s stock price would have a much more bullish outlook.

Project Index: This Might Turn Yahoo! Around

Yahoo is working on something that could help turn the company around, “Project Index.” The product is designed to be a one-stop mobile search and personal assistant similar to Apple’sSiri,” Alphabet’s “Google Now,” or Microsoft’s “Cortana.” Project Index was scheduled to launch this year, but sources have said that its launch might be delayed. (Source: “Yahoo Hires McKinsey to Mull Reorg, as Mayer Demands Exec Pledge to Stay,” Recode, November 9, 2015.)

Yahoo CEO Marissa Mayer believed that Project Index would be a critical product for the company. The hope is that it will help Yahoo recover some lost ground in the search engine business. Sources say the product is getting more resources.

So, why would Index save Yahoo when companies like Apple, Google, and Microsoft already have their digital personal assistants? Well, according to Yahoo, the company’s advantage stems from its much older relationship with its users.

According to one source, “Gmail users have only had their accounts for 10 years. Yahoo! has many 20 year old accounts. Back then people used to email themselves a lot—store things. To surface that kind of data usefully is exciting.” (Source: “Inside Marissa Mayer’s plan to take on Google,” Business Insider, last accessed November 25, 2015.)

Mayer gave an example of how the product would work. If a user searches for “JFK” on their way to the airport, and Yahoo knows that the user was e-mailing about an upcoming flight, the app would know that the user meant the airport instead of the president. The app would also be able to provide flight details.

Partnering with Google

A lot of changes are happening at Yahoo. Recently, the company signed a non-exclusive deal with Google to provide search ads for Yahoo’s search results pages. (Source: “Yahoo’s Form 8-K,” United States Securities and Exchange Commission, October 19, 2015.)

Under this new three-year deal, Google will help power Yahoo’s search engine and also provide the search ads. Google will pay Yahoo an undisclosed percentage of revenue from ads, while Yahoo will pay Google for fees for requests for word or image search results.

Note that previously, Yahoo had an exclusive arrangement with Microsoft’s “Bing,” but can now work with other search ad providers. This means that Yahoo! effectively has three search engines at its disposal—Bing, Google, and Yahoo’s own search engine, which, according to Mayer, could provide the company “greater stability as well as choice and a better user experience.” (Source: “Edited Transcript of YHOO earnings conference call or presentation 20-Oct-15 9:00pm GMT,” Yahoo! Finance web site, October 21, 2015.”

The Bottom Line on YHOO Stock

Sure, YHOO stock doesn’t look like a top performer right now. However, it is in situations like this that opportunities start to appear. If the company’s reorganization successfully beefs up its core business and brings new products online, Yahoo’s stock price won’t stay low for long.

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