Watch for a potential IPO of Yahoo, as its private equity owner Apollo executes a turnaround focused on profitability and leveraging its massive direct user base. The recent partnership where Yahoo took a 25% ownership stake in Taboola (TBLA) is a significant bullish signal for the ad-tech company. A major sports betting catalyst is approaching as Yahoo's exclusive deal with BetMGM ends at the end of Q1 2025. This creates a major opportunity for a new partner like DraftKings (DKNG) to gain access to Yahoo's large sports and fantasy audience. Lastly, investors should monitor the long-term risk to Google's (GOOGL) core search advertising model as AI threatens to disrupt the industry.

Yahoo (Private)

• The CEO, Jim Lanzone, is executing a major turnaround of the company, which was acquired by private equity firm Apollo for under $5 billion. Apollo has reportedly already recouped its initial equity investment by selling off non-core assets.
• The company is described as a "typical pre-IPO company," indicating that a return to the public markets via an IPO or a sale is the ultimate goal.
• Turnaround Strategy:
  • The company has been simplified, with general managers put in charge of key verticals like Sports, Finance, and Mail, each operating with their own P&L.
  • Every major product has been relaunched in the last 18 months.
  • The strategy has shifted from creating original front-line journalism to focusing on Yahoo's core strength: aggregation of content from over 1,000 sources, supplemented with analysis-driven media.
• Scale & Audience:
  • Yahoo reaches 90% of all US internet users each month.
  • A key strength is that 75% of its user visits are direct, meaning users are intentionally coming to Yahoo properties. This provides valuable first-party data for advertising.
• Key Verticals & Opportunities:
  • Yahoo Sports: Fantasy sports had its "biggest year ever," with new games successfully attracting new users. This is a major funnel for engagement and potential sports betting activity.
  • Yahoo Search: Despite being the #3 search engine by volume (behind Google and Bing), it is seen as a massive upside opportunity. The average Yahoo user performs very few searches per month, so even a small increase could lead to significant linear revenue growth.
  • AI Integration: Yahoo has aggressively integrated AI features across its products (Mail, Finance, Sports) and has made several "acqui-hires" of AI-focused companies like Artifact (from the Instagram founders), Symbol, and Vetted AI to accelerate its roadmap.

Takeaways

• Yahoo is a company to watch closely for a potential IPO. The turnaround appears to be gaining traction, with a focus on profitability, leveraging its massive direct audience, and integrating AI.
• An IPO would re-introduce a large-scale, consumer-facing internet company to the public markets, offering an alternative to the mega-cap tech giants.
• The company's success hinges on its ability to re-engage its huge user base, grow its subscription businesses, and capitalize on upside opportunities like search and sports betting.

Taboola (TBLA)

• Yahoo made a significant strategic change to its ad-tech business by offloading its native advertising business to Taboola.
• In exchange for this business, Yahoo received a 25% ownership stake in Taboola.
• Yahoo's CFO now sits on Taboola's board of directors.

Takeaways

• This is a deeply integrated, long-term partnership, not just a simple transaction. Yahoo is now a major shareholder with a vested interest in Taboola's success.
• Investors in TBLA should view this as a strong bullish signal. The partnership provides Taboola with access to Yahoo's massive inventory and direct user traffic, which should be a significant driver for future growth.

Sports Betting & Prediction Markets (DraftKings, BetMGM, Polymarket)

• Yahoo inherited what the CEO described as a "suboptimal" and exclusive sports betting deal with BetMGM from its time under Verizon.
• This exclusive deal ends at the end of Q1 next year (2025).
• Yahoo is now "talking to everybody" in the sports betting space to line up new partnerships.
• In the meantime, Yahoo has launched a partnership with the prediction market platform Polymarket, which is "off to a really good start."

Takeaways

• A major catalyst is on the horizon for the sports betting industry in early 2025. Yahoo Sports represents one of the largest and most engaged audiences of sports fans and fantasy players available.
• The end of the exclusive BetMGM deal opens the door for a new, potentially more lucrative partnership for Yahoo.
• Investors should watch for news of a potential deal between Yahoo and other major players like DraftKings (DKNG). Securing a partnership with Yahoo could provide a massive user acquisition channel and a significant competitive advantage.

Big Tech & AI (GOOGL, MSFT, META, NVDA)

• The CEO acknowledges that Yahoo competes with trillion-dollar companies like Google (GOOGL), Microsoft (MSFT), and Meta (META) in its various verticals.
• A key theme discussed is the potential for AI to "majorly disrupt" the search advertising model, which is the core of Google's business.
• The CEO believes it is not yet clear how the traditional cost-per-click advertising model will transition to a world of AI-driven "agentic" searches.
• Microsoft (MSFT) is mentioned as a key partner, as it currently powers Yahoo Search via its Bing search engine. This partnership is seen as an area with potential for improvement and growth.

Takeaways

• The discussion highlights a significant long-term risk for Google (GOOGL). While Google is a leader in AI, a fundamental shift away from the traditional search advertising model could impact its primary revenue stream. This is a critical theme for investors to monitor.
• Yahoo's relationship with Microsoft (MSFT) is one of both partnership (in search) and competition. Any changes to this search partnership could have a material impact on both companies.

Investment Theme: The "Dot-Com Bubble Was Just Early"

• The podcast touches on the idea that many failed companies from the dot-com bubble of 1999-2000 had the right ideas but were simply too early, lacking the necessary technology and unit economics.
• Examples cited:
  • pets.com's business model is now successfully executed by Chewy (CHWY).
  • Cosmo.com's instant delivery model is now executed by DoorDash (DASH).
  • Webvan's grocery delivery model is now executed by Instacart (CART).

Takeaways

• This serves as a valuable lesson for investors. When evaluating new or struggling companies, it's important to distinguish between a bad idea and a good idea with bad timing.
• The proliferation of mobile technology, high-speed internet, and now AI has made many previously unviable business models profitable. Investors can look for modern companies that are successfully executing on ideas that failed in a previous technological era.