After a year at Yahoo, Mayer still sprinting to catch up
By Zach Miners
Since taking the reins as Yahoo’s CEO a year ago this week, Marissa Mayer has set out to revamp the struggling Internet company with a series of rapid fire acquisitions that could make even her former colleagues at Google envious.
In a strategy she has described as “a series of sprints,” Mayer has bought more than a dozen companies this year alone, mostly in pursuit of her goal of taking the lead in mobile, and to bring back the cool to a brand that was once the envy of Silicon Valley but somehow came to symbolize the very opposite of innovation.
She’s had some success, especially on the financial side. Yahoo’s stock has risen roughly 70 percent since Mayer started there on July 17 last year, and analysts expect a 12 percent jump in profit when Yahoo reports its quarterly earnings Tuesday.
Right now, “the only thing less cool than Yahoo is maybe Microsoft or Dell,” said Erik Gordon, managing director at the University of Michigan’s Zell Lurie Institute for Entrepreneurial Studies.
One measure of a CEO’s success is his or her impact on a company’s financial performance, and here Mayer can take only part of the credit. The reputation she accrued from her long history at Google—she joined the company in 1999 and most recently ran its important local and mapping products—could be one of Yahoo’s strongest assets, according to some. “She’s got this celebrity status in the Valley,” said Karsten Weide, an analyst with IDC.
“I think that’s one of the factors that has pushed the stock price higher over the past year,” he said.
But another factor has been Yahoo’s stake in profitable Chinese e-commerce giant Alibaba. “The majority of the share price increase has come from the appreciation in value of Yahoo’s holding in Alibaba, so Marissa cannot be credited with that,” said Andreas Andreas Pouros, co-founder and COO of technology consulting firm Greenlight.
Yahoo paid $1 billion for a 40 percent stake in Alibaba back in 2005, but it sold off nearly half that stake last year. Going forward, “the company will not benefit with as much appreciation as it previously has done, which in part helps explain some of Marissa’s actions,” Pourous said.
Yahoo’s shopping spree
Those actions include a slew of acquisitions designed to further her strategy to bring Yahoo back to life. Her plan is to excel at mobile, draw in a more youthful audience, and provide services that become a part of people’s daily habits, such as posting photos online and checking news, email, weather, stock prices and sports.
The list of acquisitions she has made is diverse. It includes MileWise, a flight rewards app; GoPollGo, a social polling service; Astrid, a to-do app; Qwiki, a mobile video app; Rondee, for making conference calls; and Summly, which summarizes news articles into snippets of text.
Some struggled to see how the grab-bag of acquisitions fit together. “I’m not sure I actually get it,” said Gordon of the University of Michigan. “A free conference calling service? We’re going to use that everyday? News snippets?” If Mayer explained how the acquisitions fit together, “the future would look clearer,” he said.
Perhaps more importantly, according to Gordon, “those mobile enhancements are not compelling enough to bring anybody back.”
Others are more optimistic. They see the deals as a way to acquire engineering talent that can be put to use improving services and building new ones. The value of the acquisitions could take some time to become apparent, Greenlight’s Pourous said. He gave Mayer an “A” for effort but said her final grade is “yet to be determined.”
If mobile is a cornerstone of Mayer’s strategy, then Yahoo’s mobile weather app could be an example of how the company is doing things right. Rolled out in April for iOS, the app has been praised for its polished interface, and for how it uses photos from Flickr to illustrate local weather conditions, which can provide nice exposure to users of the photo sharing service. It has a 4.5-star rating in the App Store based on more than 1000 reviews.
While it may not be easy to see how all the acquisitions fit together, some say the steps Mayer is taking—which also include redesigning existing services and killing off some older ones—are the steps needed to get Yahoo back on track.
“Marissa has to keep the company going, build on advertiser revenue, and expand properties, but do it in mobile-friendly way, and that means having to change the product set to accommodate new platforms,” said Brian Blau, an analyst with Gartner.
“It appears she’s going through all of the different products and services at the company one by one and attempting to salvage whatever she can, and adjust them to what I would consider a more appropriate set of products and services,” he said.
Mayer’s big move of the year was her decision to acquire Tumblr for about $1.1 billion. The deal was designed to expand Yahoo’s user base and broaden its advertising options, but analysts say the company will need to monetize Tumblr carefully, without driving away its young demographic.
The trick, said IDC’s Weide, is for Yahoo to integrate advertisements that appeal to younger people, and do it in a way that users won’t know the ads are coming from Yahoo. It will also have to figure out how to keep ads from appearing next to pornography or inappropriate content, he said. Tumblr allows some of that type of content, and it can upset advertisers, as Facebook recently found.
Advertising dollars are the lifeblood of companies like Yahoo, so it should well look to expand that business. Its display advertising business has been flat for several years, and its revenue from search advertising fell 40 percent in 2012 from 2010. Tumblr started putting ads in users’ feeds on the desktop in May, following the introduction of advertising in mobile streams in April.
University of Michigan’s Gordon thought Mayer may have made her big bet too soon. Instead of spending $1 billion on a purchase like Tumblr now, Yahoo might have been better off waiting until it had boosted its “cool” factor with a few smaller acquisitions. “Then you can buy Tumblr, and you don’t scare away all the [users],” he said.
Mayer also needs to keep her employees happy. On Fridays she holds “FYI” town hall-style meetings for the 3,000 workers at Yahoo’s Sunnyvale, California, headquarters. She has also extended maternity and paternity benefits to give mothers four months paid leave and fathers two months. New families can now expense up to $500 for things like laundry, house cleaning and child care.
She’s also generated some controversy, especially with a policy change that prevents employees from working from home. But that may not have harmed her reputation at Yahoo: According to data compiled by Glassdoor, which lets employees write anonymous reviews, Mayer held an 85 percent CEO approval rating as of July 10. And year to date, 12 percent of the company’s hires have been boomerangs—people who left Yahoo and have come back.
But ultimately, Yahoo’s products and services will be a crucial element in Mayer’s rebuilding strategy. In that regard, it may be hard to differentiate the company from other big online firms like Facebook and Google, which increasingly seem to be offering the same services as each other.
For Yahoo to compete, it has to offer a similar set of products and services to the other big online players, said Gartner’s Blau.
“Eventually they might do other things, but that could be five, 10 or 20 years out,” he said. “It’s too risky to make a complete left turn right now.”
Note: When you purchase something after clicking links in our articles, we may earn a small commission. Read ouraffiliate link policyfor more details.
Social Networking Apps
eBay CouponExtra 10% off luxury watches $2000+ with eBay discount code