What does Yahoo and Big Tobacco have in common? Children.

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What does Yahoo and Big Tobacco have in common? Children.

September 17, 2012

Yahoo, once a golden child of the internet it has plunged into obscurity almost as complete as Friendster and MySpace. Having lost relevance across its entire product line, Yahoo is now taking a lesson from Big Tobacco and targeting children.

 

I am a social media consultant through my agency PRDA. The advice I give clients follows common sense and good business practice. Target your demographic and those that will most likely be loyal consumers. All statistics show that:

 

  • Ages < 24 are large consumers of online time, but represent a small portion of money spent online.

  • Ages > 24 spend less time, but spend a much more significant amount of money.

  • 35 -54 is where the real cash is. They spend a significant amount of time online and spend the most money.

 

So why has Yahoo decided to target the youngest age group with the lowest spending potential? The most obvious reason has been mentioned; they were competitively shut out of the more lucrative areas. But there may be something to this. Historically big tobacco made a killing (pun intended) off of addicting children to the brand. McDonalds’ success is due to the influence kids have on their parents’ wallets. And more recently, apps such as Instagram have seen stratospheric valuations based on zero revenue but fanatical Gen Z members.

 

The problem comes from Yahoo being a mature business. They are unlikely to get a stupid valuation based on a surge of activity from kids on their site. So how long can they go without paying the rent?

 

Business is in business to make money. It is unclear why fundamentals often go out the window when something flashy and exciting comes along. I will cheer the success of Facebook and Instagram, but I have a better chance of winning the lottery than repeating those achievements.

 

Much success,

 

Doug

 

Keywords: Social media, business, Yahoo, PRDA, Myspace, Friendster

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