Yahoo’s ad business continues to suffer despite its dynamic and world-famous CEO.
CEO Marissa Mayer’s step-by-step plan for turning around Yahoo is to…
1) Fix the culture.
2) Hire good people who can build good products
3) Attract big audiences to those good products.
4) Monetise those big audiences.
Right now, she’s stuck somewhere between step 2 and step 4.
She’s definitely fixed Yahoo’s culture (the employees love her) and she’s done a few dozen acqui-hires to bring in good people. Yahoo’s started to make some new products, like the stylish Yahoo Weather, and it’s seen a small uptick in its user numbers.
But monetization remains a huge struggle. According to eMarketer, Yahoo had the second most market share in the US online ad market in 2012 — when Mayer joined the company. Today, Yahoo is down to number four — below even Microsoft. That’s pretty brutal, considering how low a priority online media is for Microsoft.
You might think Mayer is on the heat seat at Yahoo, and needs to get these numbers fixed quick if she wants to save her job.
That is not the case.
Thanks to Yahoo’s large ownership stake in two very successful Asian Internet companies, Yahoo! Japan and Alibaba, Yahoo’s stock has been on a tear over the past year.
Soon, Alibaba will IPO and that will trigger a transaction that will net Yahoo billions of dollars in cash. Yahoo’s CFO Ken Goldman has been telling analysts that most, if not all, of that money will go to buybacks. So while Yahoo’s core business still looks unhealthy, it’s stock price is going to remain high over the next few years.
She’s got plenty of “air cover” — is the metaphor I keep hearing people use to describe her situation.
That “air cover” should keep the kind of shareholder activists that put Mayer in place at Yahoo away from the company, giving her lots of time to come up with some product that gets her from step 2 (good people) to step 3 (big audiences) to step 4 (monetization) in her plan. Eventually, the question becomes: can she do it at all, or is Yahoo too far behind to catch up?
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