Yahoo looks to boost brand value as it spins off core business

Yahoo’s decision to spin off its core business is aimed at prove the value of the brand and its internet operations to advertisers, consumers and investors amid concerns over slowing growth and a turnaround plan that does not yet appear to be coming to fruition.

Yahoo Wireless Festival

Yahoo had planned to spin off $31bn stake in Chinese ecommerce business Alibaba but has instead decided to spin off all its other assets into a new company. The change of heart was driven by a concern that the original deal risked a high tax bill.

It remains unclear exactly what this means for the Yahoo brand. There are a number of options including a sale (Verizon has already said it could be interesting in buying its internet operations) or the creation of a new company with the same offering and same management but under a different name. Or it could just be business as usual. The deal is likely to take at least a year to complete due to the complicated financial wrangling.

What is clear is that the Yahoo brand is in need of some love. Yahoo is still the fourth biggest player in the digital ad market, according to eMarketer, having just been overtaken by Twitter.

However consumer perceptions of the brand are tumbling. According to YouGov’s BrandIndex its ‘Index’ ranking – a share of a number of metrics including quality, impression and reputation – has fallen by a statistically significant 1.2 points over the past year. It now has a score of 5.3 putting it 24th in a list of 45 online companies and behind rivals Google (4), YouTube (5), Facebook (9) and Twitter (20).

Its ‘Buzz’ ranking – a balance of the positive and negative things said about a brand – is also down over the past year to 0.2 points, putting it 28th in the list. Metrics including ‘Impression’, ‘Satisfaction’ and ‘Recommend’ have all experienced statistically significant declines over the course of 2015.

Yahoo believes the spin-off will reveal Yahoo’s true brand value. Shares in the company have increased over the past year but many investors buying up stock have been doing so to get their hands on a cut of Alibaba’s business, rather than Yahoo’s.

According to analysts quoted in the New York Times Yahoo’s business is valued at between $3bn and $8bn. Yahoo’s management believes Yahoo is “undervalued” and the separation will allow it to align its share price with company performance.

“We believe that we are tremendously undervalued and believe the best path to unlocking that value is to separate the Alibaba assets from our operating business and turn around the performance in our operating business.”

Maynard Webb, chairman, Yahoo

Yahoo has so far focused its turnaround on the three pillars of content, native advertising and mobile. CEO Marissa Mayer talked up all three and their importance to advertisers on the call.

However it could also spend a little time marketing the Yahoo brand and how it is changing to boost consumer perceptions and truly unlock its value.

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