Don’t call it a comeback

Yahoo's showing signs of motion after a long period in the morgue. But is it reborn, or just undead?

A conference call discussing fourth quarter earnings at Yahoo appears to have ignited a surge of optimism for the veteran web company’s prospects – just google “yahoo comeback” to find out – but are commentators getting carried away?

Yahoo reported a 14 percent rise in earnings during 2012’s final quarter, supported largely by growth in search advertising revenue, and pleasantly surprised investors: share price immediately jumped 5 percent, topping off a 25 percent six month rally.

Most encouragingly, in a call to analysts discussing the result, newly installed CEO Marissa Mayer said the company’s next investments would go towards the entrenchment of Yahoo services in users’ “core daily habits” – the most core of these (if you don’t mind the term ‘core’ being used as an adjective) being its search function.

The FT headlines this as Yahoo “taking on google in the search wars”, but I don’t know if I’d go that far.

To put things plainly, despite overall revenue growing 4 percent, Yahoo’s actual net income fell 8 percent year-on-year, a fact that seems to appear at the bottom of most reports on the results if it appears at all.

More to the point, even with search advertising revenues healthy, the company only presides over a small and shrinking slice of the search advertising market - 6.2 per cent in 2012 compared to 17.8 per cent in 2008 according to one research firm.

So why the sudden optimism?

Because, at the heart of it, everyone likes an underdog story. And this has all the ingredients of a great one.

Google, having dominated the search market since the advent of its PageRank function in the early 2000s, is an obvious Goliath, and has fallen prey to the same erosion of public trust that has afflicted other web giants – see also Facebook, Apple and Amazon.

Furthermore, Yahoo has a young and charismatic CEO who has obviously captured the imagination of analysts and investors alike. And let’s not forget she’s ex-Google – not only does this fact make the narrative more pleasing, it adds serious credibility to the idea of the near-forgotten nineties relic clawing back ground from a complacent rival.

Yahoo’s long-term prospects in the ‘wars’ for users’ everyday web activity remain dubious. At the very least, however, the current burst of media excitement has awarded it an early marketing victory.

Yahoo's Marissa Mayer in Davos this year. Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

Getty
Show Hide image

The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

0800 7318496