I am Hollywood

[Chapter 1169: Yahoo's Next Move]

On August 14, Saturday, in the morning on the East Coast of North America, as countless media outlets debated the sudden halt by the federal Justice Department of its antitrust investigation of Microsoft, and what sort of impact that would have on the Nasdaq stock market the following week, Yahoo finally released its financial report for the second quarter.

In the second quarter of 1999, Yahoo's revenue reached $1.0322 billion, a significant increase of 172.5% compared to $399.7 million during the same period last year. At the same time, after reporting losses in the previous year, Yahoo achieved a net profit of $105.3 million in the second quarter.

Beyond its overall revenue, Yahoo's performance in various business segments was impressive.

Due to the substantial increase in online advertising expenditures by new technology companies in the first half of the year, Yahoo's core internet advertising business, including both its own platform and the Yahoo Advertising Network, generated total revenues of $811.3 million, marking an increase of 187.6% year-over-year, surpassing the overall revenue growth of 15.1% for the second quarter.

In the realm of the Yahoo Music Store, as a result of the ongoing success of the Fireflyer music player, the store generated $125.3 million in revenue during the second quarter, an increase of 66% compared to $75.3 million in the same period last year.

Apart from its main advertising and music sales businesses, Yahoo's corporate email and online payment services also achieved a substantial combined revenue of $95.6 million, indicating strong growth year-over-year.

With Yahoo's second-quarter results released, both the company surpassing $1 billion in quarterly revenue and achieving its first net profit exceeding $100 million turned heads within the entire internet industry. Furthermore, the report indicated that while Yahoo's advertising business would face a downturn due to the Nasdaq crash, the company's advertising revenue system, built on the long-tail theory, was expected to rebound quickly and sustain continuous growth.

Additionally, with the global promotion of Yahoo's mini music store devices and the successful integration of millions of songs from major record labels like EMI and Universal, the company forecasted that the music store's revenue over the next two quarters would not only be unaffected by the bursting internet bubble, but could also see a sequential growth exceeding 100%.

Even if the overall revenue situation for the second half of the year was expected to decline, Yahoo's projected annual revenue of about $3.5 billion, after seven years of building up, rekindled hope among many investors who lost faith in new technology industries following the Nasdaq crash.

Many recalled Eric's words from a New York Times interview last year: "In a vast market with a billion premium users, what is impossible?"

By mid-1999, the number of internet users worldwide exceeded 250 million. At the current growth rate, by 2002, that number was expected to reach 500 million, and by 2005, it would hit 1 billion.

It was foreseen that this doubling of user numbers would not only mean a simple doubling of revenues for internet companies. As the internet industry matured further, both individuals and enterprises would significantly increase their average spending on internet platforms.

In conclusion, the new technology industry was set to expand exponentially along with the growth in internet users. If Yahoo could generate around $3.5 billion in revenue this year, then in three years, or even six years later, it could very well exceed those revenue figures in profit alone.

As Yahoo released its financials, investors, having experienced nearly a month of panic, calmed down and began to realize that the new technology industry was undoubtedly more than just a bubble; it could indeed yield tangible revenues.

...

Meanwhile, on Wall Street, heavily impacted by the Nasdaq crash, capital began to seize this opportunity to create a chance for recovery.

Soon, optimistic remarks on the new tech market began circulating in the media, with many prominent Wall Street analysts shifting their viewpoints. They noted that even if the market contained a bubble component, after a month of plummeting, most of the inflation in the Nasdaq index had cleared out. In the coming years, the new technology industry was expected to remain robust.

...

The following day, Yahoo announced once again via its portal site that Microsoft would unconditionally relinquish its right to purchase 30% of Yahoo's shares. However, simultaneously, Yahoo's browser would maintain its position as the default browser on Windows systems by paying Microsoft a pre-installation fee.

In recent years, much discussion suggested that the rapid growth of Yahoo's portal was largely due to the traffic provided by the Yahoo browser, which was pre-installed as part of the Windows operating system.

Since last month, when Yahoo's five-year contract with Microsoft expired, the industry had closely monitored the situation. Now, not only had Yahoo effortlessly shed the burdens of the previous contract, but it also continued to secure the default browser status on the Windows platform. While it would pay a hefty fee to Microsoft, nearly all analysts recognized that Yahoo had benefited greatly from this collaboration.

Consequently, the implications of this news matched the impact of the federal Justice Department's sudden announcement on Friday to drop its antitrust investigation against Microsoft.

Some imaginative media sources even speculated, somewhat accurately, whether there was an inherent connection between these two unforeseen events.

Of course, the truth may never come to light.

And by this time, most people's attention had already shifted to the upcoming week's Nasdaq index.

...

As the week's long gathering approached its end, some executives with tight schedules began to depart.

On Sunday afternoon, Eric and Yahoo CEO Ian Gurney found themselves at a ranch on Tasmania, an island located over 200 kilometers south of the Australian mainland, covering more than 60,000 square kilometers.

During her time in Australia, Eric had asked Drew to purchase some land on this island. At this moment, including the ranch beneath their feet and the nearby mountains, Eric owned over 200 square kilometers of private land on this patch of the world.

Situated in a temperate maritime climate, this ranch in Northwestern Tasmania didn't feel cold despite being in the middle of winter. The surroundings were still vibrant and green.

With his hands in the pockets of his coat, walking alongside Ian Gurney, Eric admired the scenery and remarked, "Ian, do you know what Warren was most passionate about funding after establishing the Buffett Foundation?"

Ian Gurney was unsure if Eric was making a jest. The Buffett Foundation had a reputation for being stingy; over the years, its assets had grown much faster than its donation expenditures. Nevertheless, he smiled and replied, "It should be population control, right?"

"That's in recent years," Eric shook his head and explained, "Before the 90s, Warren was most concerned with preventing nuclear war. He was only generous when it came to projects addressing that issue."

Ian Gurney gazed up at the expansive sky above, "So, are you worried?"

In the event of a global nuclear war, Australia genuinely stood the best chance of staying out of it.

Eric nodded, "There's a theory about nuclear war that states if you were to drop a black pebble on a beach covered with millions of white pebbles, and people were to pick up one pebble each day, eventually, even though the likelihood is slim, one day the black pebble would be picked up, representing a nuclear war. In my perspective, the visibility of the black pebble among the white ones makes it far more likely to be collected than any of the white pebbles."

Ian Gurney contemplated in silence for a moment and then said, "I feel the chances of a large-scale nuclear war are still quite low."

"Who knows? When a nuclear warhead is launched, the attacker is bound to retaliate, then counterattacks will ensue. That leads to a deadlock. Unless God personally intervenes to call for a halt, the outcome can only be destruction. Unlike traditional warfare, there can be no victors in a nuclear war."

"Maybe I should also buy a farm in Australia," Ian Gurney chuckled, feeling the topic had grown heavy and took the initiative to drive the conversation elsewhere. "Eric, honestly, I personally have more confidence in the online gaming business than in cloud computing."

In the past week, Yahoo had reaffirmed its next developmental focus.

...

In Saturday's quarterly earnings report, Yahoo still hadn't separated the revenue contributions from its search engine business. However, in reality, over 30% of the $811.3 million in advertising revenue generated in the second quarter came from Google's search engine, which made all Yahoo executives acutely aware of the tremendous potential in the search engine business.

Consequently, in the next few years, the search engine business was set to become a priority for Yahoo.

After search engines, the next focus would be social networks.

Similar to Google, Eric had quietly ensured that Yahoo registered the domain for Facebook.

Given the explosive growth in global internet users, it was now time to prioritize promoting internet social networks. After several years of operating Yahoo's personal homepage and learning from experiences, the management team had drawn substantial conclusions about the development patterns of social networks.

Eric's basic plan was that in the coming years, Google and Facebook would set up individual subsidiaries, attached to the integrated Yahoo Network group. Meanwhile, Yahoo would go all out to develop its core search engine and social network, even at the cost of sacrificing other businesses.

However, during the proceedings, Eric also brought Yahoo's cloud computing initiatives, which had been in the works for some time, into focus.

In his memory, the rise of cloud computing would probably be a decade away.

But Eric believed that cloud computing businesses would not be restricted by the various stages of internet development. The reason it wouldn't arise until ten years later was that the internet industry at that time would only come to realize the vast potential of cloud computing and gradually understand the commercial operation models associated with it.

Having successfully promoted internet advertising business ahead of time, there shouldn't be any issues with Yahoo taking the lead in cloud computing.

With the burst of the new tech bubble, this presented an ideal opportunity for cloud computing to thrive.

After all, compared to traditional web hosting businesses, adopting a cloud computing model would eliminate the need for complex equipment purchases, website development, and ongoing maintenance. Each of these aspects could result in significant cost savings. In the upcoming years of a tightening capital environment for internet enterprises, cost control would be of utmost importance for survival.

Moreover, unlike Amazon, which had already established large data centers worldwide, Yahoo undeniably held an incomparable edge.

During the early stages of promoting cloud computing, Yahoo wouldn't even need to invest heavily to build brand new data centers. It could simply leverage its existing surplus computing and storage resources to build a framework for cloud computing, thus ensuring full utilization of Yahoo data centers.

Beyond search engines, social networks, and cloud computing, Yahoo would still maintain sufficient focus on its portal site, email, and instant messaging services, but in reality, these services would gradually lean toward the periphery of Yahoo's core business.

His previous life's experiences in the internet sector had proven that while these services could attract a large user base for companies, they were challenging to generate substantial direct profits.

As for the Yahoo Music Store, Eric had always viewed it merely as a supporting service for the Fireflyer player.

Of course, among all mainstream internet businesses, online gaming was undoubtedly one of the most critical components. However, during this meeting, Eric ruled out the proposal from management to focus on developing online gaming next.

...

"Actually, I also have high hopes for the online gaming business," Eric said as Ian Gurney shifted the discussion to that area. "However, based on recent years of trial and error, whether in North America, Europe, or even Japan, players still prefer console games. Certainly, like the story of selling shoes in Africa, the lower number of online gaming users compared to console games actually signifies a huge opportunity. Yet, online gaming is very much like film; as a creative industry, it carries high uncertainty. You can't just hire a random group of programmers to churn out a successful online game. In contrast, cloud computing can develop into a 'must-have' service. Moreover, since we've positioned Yahoo as a tech company, we must make necessary trade-offs across various fronts."

To speak of online gaming, the only title in Eric's memory that would genuinely interest him was Blizzard's World of Warcraft. Unfortunately, since he had not been paying much attention to the gaming industry, by the time he discovered it, Blizzard had already been absorbed into Vivendi's umbrella.

Luckily, the game wouldn't release for another five years.

If Vivendi followed its previous trajectory to acquire Seagram, the company would likely find itself in troubled waters due to overexpansion and the burdens of the entertainment industry in the coming years. Then Firefly might have the opportunity to acquire Blizzard.

However, even if they could rely on Yahoo's internet resources to further promote World of Warcraft in the future, Eric had no intention of diverting Yahoo's focus to online gaming.

After all, for many years after, the dominant gaming industry in Western countries remained console gaming, and Eric had not discovered any of the western internet giants growing through online gaming. Since this was not the correct developmental path, Eric would not let Yahoo waste time exploring this area.

*****

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