Yahoo!: A Case Study about Brand Valuation

Case Study

Efficient Auditing and Controlling

Bachelor of Business Administration

VWA Verwaltungs- und Wirtschafts-Akademie

Krefeld

Written by:

Leonie Matzick

Katrin Küsters

Torsten Krall

Thomas Kuhn

Gerhard Schumacher

Krefeld, July 18th, 2008

---

Table of Contents

I

Table of Contents

Table of Contents I

List of Figures IV

List of Tables VI

List of Abbreviations VII

1.

Introduction 1

1.1

Definition 1

1.1.1

Brand 1

1.1.2

Brand Equity 2

1.2

Problem Definition 4

1.3

Course of Work 6

2.

Framework of Brand Evaluation 7

2.1

The Internet Service Provider Yahoo! 7

2.1.1

The Company 7

2.1.2

The Funding 8

2.2

Brand Functions 12

2.2.1

Producer′s View 12

2.2.2

Sales Representative′s View 12

2.2.3

Consumer′s View 13

2.2.4

Yahoo!′s View 13

2.3

Meaning of Branding 15

2.4

Situation Analysis 16

2.4.1

Economic Framework 16

2.4.2

Acquisition as Relevant Cause for Brand Evaluation 17

2.4.3

A Brand′s Value in the existing Accounting Standards 21

---

Table of Contents

II

2.5

Method Requirements for the Cause of Acquisition 23

3.

Methods of Brand Evaluation 26

3.1

Classification and Choice of Methods 26

3.1.1

The Different Approaches 26

3.1.2

Finance Orientated Methods 27

3.1.3

Behavioural Science Orientated Methods 29

3.1.4

Integrative Methods 30

3.1.5

The Choice 31

4.

Methods of Brand Evaluation 33

4.1

Presentation of the Selected Methods Regarding the Case of

Acquisition 33

4.1.1

Brand Rating 33

4.1.1.1

Method Presentation 33

4.1.1.2

Critical Assessment 35

4.1.2

Millward Brown 37

4.1.2.1

Method Presentation 37

4.1.2.2

Critical Assessment 42

4.1.3

Interbrand 45

4.1.3.1

Method Presentation 45

4.1.3.2

Critical Assessment 52

4.2

Development of a new reliable Method 55

4.2.1

Framework 55

4.2.2

Application 55

5.

Conclusion 58

5.1

New Method as Objective Solution 58

---

Table of Contents

III

5.2

Outlook: A Standardised Method 59

Appendices 60

Appendix 1:

Model of the Interbrand Brand Valuation I 60

Appendix 2:

Model of the Interbrand Brand Valuation II 61

Appendix 3:

Yahoo!′s Brand Value Calculation based on Intebrand 62

Appendix 4:

Yahoo!′s Brand Value by changing only one Figure 63

Appendix 5:

Optimistic Calculation on Yahoo!′s Brand based on the

new Method 64

Appendix 6:

Microsoft Steps up Battle over Yahoo! Board 65

List of References 66

---

List of Figures

IV

List of Figures

Figure 1: Yahoo! 6 Months Stock Chart 5

Figure 2: The Web Portal www.yahoo.com 8

Figure 3: Advertising Solutions of Yahoo! 9

Figure 4: How Yahoo!′s Sponsored Search works. Step 1 9

Figure 5: How Yahoo!′s Sponsored Search works. Step 2 10

Figure 6: How Yahoo!′s Sponsored Search works. Step 3 10

Figure 7: Creation of an Ad 11

Figure 8: Reasons for Brand Valuation 18

Figure 9: Number of Registered Cases Between 1999-2006 on Counterfeit

and Pirated Articles 20

Figure 10: Classification of Methods of Brand Evaluation 27

Figure 11: Structure of Finance Orientated Methods 27

Figure 12: Icon Iceberg 33

Figure 13: Brand Rating "formula" 35

Figure 14: Advantages and Disadvantages of Brand Rating 36

Figure 15: Structure of Brand Evaluation Methods 38

Figure 16: Three Steps Model 39

Figure 17: Three steps of Brand Evaluation 40

Figure 18: Overview of the Interbrand Method 45

Figure 19: Interbrand′s S-Curve 49

Figure 20: Brand Value Change by Modification of one Figure 53

Figure 21: Brand Loyalty 56

---

List of Figures

V

Figure 22: Modifying Interbrands Brand Value by one Figure 63

Figure 23: Optimistic Calculation on Yahoo!′s Brand Value 64

---

List of Tables

VI

List of Tables

Table 1:

Worldwide Search Top 5 December 2007 11

Table 2: Annual Reports According to HBG, US-GAAP 21

Table 3: Requirements to a Valuation Method in Case of Acquisition 26

Table 4: Brand Rating Degree of Performance 37

Table 5: Top 100 Brands 41

Table 6: Top 20 Technology Brands 41

Table 7: Development of Microsoft and Yahoo! 42

Table 8: Advantages and Disadvantages of the BrandZ Method 44

Table 9: BrandZ Degree of performance 44

Table 10: The Financial Analysis of the Interbrand Valuation Method 47

Table 11: The Demand Analysis of the Interbrand Valuation Method 48

Table 12: The Brand Strength Score′s Components and their Weighting 48

Table 13: The Strength Analysis of the Interbrand Valuation Method 51

Table 14: Advantages and Disadvantages of the Interbrand Method 52

Table 15: I nterbrand Degree of performance 54

Table 16: Brand Discount Rate 58

Table 17: Model of the Interbrand Brand Valuation I 60

Table 18: Model of the Interbrand Brand Valuation II 61

Table 19: Interbrand: Yahoo! Brand Value Calculation with a Discount Rate

of 7.1% 62

Table 20: Lastest News on the Battle Microsoft verses Yahoo! 65

---

List of Abbreviations

VII

List of Abbreviations

CAPI

computer aided personal-interview

CATI

computer aided telephone-interview

CEO

Chief Executive Officer

e.g.

for example

EBITA

Earnings Before Interest, Tax, and Amortisation

ErstrG

Erstreckungsgesetz

etc.

et cetera

EUIBOR

EURI Intebank Offered Rate

EVA

Economic Value Added

GDP

Growth Domestic Product

HGB

Handelsgesetzbuch

IAS

International Accounting Standards

IFRS

International Finance Report Standards

LIBOR

London Interbank Offered Rate

m.

million

MBO

Millward Brown Optimor

MBA

Management Discussion and Analysis

NET PPE

Property, Plant, and Equipment after depreciation

NOPAT

Net Operating Profit after Tax

NPV

Net Present Value

p.

page

pp.

pages

PAPI

telephone-interview

RBI

Role of Branding Index

---

List of Abbreviations

VIII

S&P

Standard and Poor′s

TM

trademark

USD

United States Dollar

US-GAAP

Generally Accepted Accounting Principles of the United

States of America

WACC

Weight Average Cost of Capital

WAPI

web aided personal-interview

---