Yahoo, Saved by the Bell

It was five years ago today when Yahoo signed a deal with SBC Communications, then the second largest phone company in the US. It was a sign of the times – a decidedly hip Yahoo was teaming up with the dowdy phone company, in a bid to over come the downturn.

SBC, since then has become AT&T and if all goes according to plan (like the BellSouth merger,) will truly become Ma Bell 2.0. For Yahoo that is good news, because many (if not all) of AT&T’s 8.2 million DSL subscribers use some Yahoo service or the other. It has been a profitable and stabilizing alliance, especially for Yahoo.

Back in the day when I had a DSL account, I got the whole package from SBC, just never bothered to use the CD that would have forced me to use Yahoo services. In fact I never used the SBC/Yahoo email offering, because frankly that was so mainstream. Mainstream is the right word. My sister uses SBC DSL and has a start page, which is well, Yahoo start page. It is also true of some of my non-geek friends.

Judging by the number of ads that pop-up just on the start page, and assuming that a measurable number of people are using the Yahoo services, AT&T must put a nice chunk of change in Yahoo’s pocket. However, since AT&T is a phone company, which means a tough business entity, there must be nice referral revenue flowing in the other direction. (Since publishing, a source has confirmed that Yahoo, does indeed pay AT&T for the traffic/referrals.)
The two companies don’t talk about the money that changes hands. Given that they are jointly celebrating their fifth anniversary, it must be some serious amount of cash. Not that there is anything wrong with it!

In recent times, Yahoo and AT&T have gotten even closer. Yahoo services are quite visible in AT&T Homezone triple play (DSL, Voice and Satellite) offering. Yahoo Messenger makes outgoing calls using the AT&T network. The AT&T alliance helped Yahoo sign up other phone companies including British Telecom and Deutsche Telecom.
The past, it seems has been perfect for these two partners, but deep down the future has to be tense. If you start stripping away the layers, it is Yahoo, which has an ongoing relationship with the consumers. The email accounts, the photo services or even the start page – those are Yahoo’s preserve. When a person switches from AT&T DSL, the relationship goes with Yahoo. A senior executive at one of Yahoo’s other phone company partner expressed big concern over this end-relationship, and posited that in the end it would become a thorn in their side. Of course there is the other option – AT&T buying Yahoo! Stranger things have happened!