Kleiner Perkin’s 117 slide ‘State of the Internet’ presentation should be reduced to one statement — mobile is taking over the world. With a limited screen size and a flat operating system (as opposed to a computer, which has a nested file structure), the smartphone also presents the ultimate challenge for companies and developers. To meet this challenge, Yahoo has followed Google and others, making mobile success the top priority.

THE MOBILE OPPORTUNITY IN UNDER ONE MINUTE

Users (you and me) tend to discover mobile apps one of four ways. We:

1. Look at the app store’s top apps
2. Search for programs that we already use on our computers
3. View advertisements (search, Facebook, embedded in our apps)
4. Hear via word of mouth

The first method (the app store) is the holy grail, because it’s free, can provide incredible scale and brings new users into the developer’s user base. To get the most downloads in this manner (from people happening across the app in the store), companies can either cross their fingers and hope that Apple features their product, or work the remaining three channels to maximize app store rankings.

Developers then try to make money off of their users, this is called ‘monetization’. There are three ways that developers monetize their apps:

1. Freemium — offering a free basic service and charging for a premium version of the app
2. Advertising — both selling ads to 3rd parties and cross-promoting their own products (monetization through cross-promotion is more difficult to explain, but is there)
3. In-app purchases — selling additional content inside the app. This can be new features, expansions, upgrades, or decreased waiting time

YAHOO’S PARADOX — A BIG COMPANY WITH SECOND RATE UTILITIES

Big companies (Yahoo) play an interesting role in the mobile economy. They have incredible assets — user networks (advertising reach), existing utility features (email, search, etc.) and deep pockets, but suffer from poor innovation and responsiveness.

These big companies can easily surface apps with their cash and advertising networks. Yahoo in particular owns an advertising network that makes a couple hundred million ad impressions annually (every time an ad is displayed, that’s one impression). This reach is incredibly valuable because only opportunity cost limits the extent to which Yahoo can pump advertisements about its own apps to viewers — any company trying to execute on mobile would kill for this scale (except Google).

Even with this reach, big companies have difficulty innovating at the rate of small companies, so tend to win in mobile by offering utility services (Gmail, Skype, YouTube, Maps). Yahoo’s problem is that its utilities are in decline, with less than favorable demographics.

So how is Yahoo doing with mobile?

THE RESULTS OF YAHOO’S MOBILE FIRST STRATEGY

Yahoo Fantasy Baseball — trend negative — the annual high water mark occurs each year on April 1st, and with each year, you can see that the download rank deteriorates faster and faster. Also downloads during the off-season (October through January) get markedly worse every year:

Yahoo Fantasy Football — trend unclear — downloads look strong coming into this season, with July 2013 outperforming July 2012, though a conclusive win eludes this app, as off-season (January through May) downloads deteriorated significantly year over year. Another directional pointer is the app’s relative position. A look at the top download charts showed the NFL and ESPN Fantasy Football apps in the top5, and Yahoo Fantasy Football just outside the top20 (first week of September):

Yahoo Mail — trend negative — The app cracked the top50 on only four days in 2013, all of which were in Q1. The app now hovers between the top100 and top150. To contrast, Gmail has ranked in the top50 consistently for the past four months:

Yahoo app — trend negative — This app fell of the cliff in 2013. I almost want to start making excuses for performance, such as this app must no longer is a critical part of Yahoo’s designed user flow:

Flickr — trend unclear — Yahoo saved this property from years of slow death in 2013, but the results since have been mixed. The fact is that it’s really just too soon to judge the success of the May announcement on storage space (link here), but the app seems to fall unless Yahoo releases and promotes a new version. The version released at the end of August is already outside of the top250, so I’m skeptical.

Tumblr — trend positive — Tumblr is the lone truly bright spot in Yahoo’s mobile lineup. The app maintains between the top50 and top100, which generates over 10k downloads per day (you need 23k downloads per day to crack the top50 of the free list). The app is no longer ascending the charts, but given the type of app, the current rank is a very respectable point to stabilize around:

So given this largely negative mobile performance, why am I hesitant to disparage Yahoo’s current stock performance? Read on for my last work about Yahoo:

WHY $30 A SHARE MIGHT MAKE SENSE

Alibaba (link here)

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Note: I analyzed iOS rankings for this post. iOS is considered the gold standard for two reasons (1) all of the top developers play in iOS first, so if you want to see how you stack up, you look here (2) iOS monetizes much better than Android, so look where the money is. That said — I quickly checked out Yahoo’s Android rankings, and found a much more constant picture — there is no high growth anywhere, but at least Yahoo is holding ground. While the data from Android is less negative than the iOS picture, it certainly doesn’t justify the bullishness around YHOO — only Alibaba does that!