RBC Capital’s Mark Mahaney slammed Yahoo’s business prospects in a CNBC interview on Monday, questioning why billionaire investor Warren Buffett would be interested in possibly backing a bid for the embattled internet giant.
Mahaney pointed to the growing duopoly of Facebook and Google in online advertising.
He doesn’t see a place for Yahoo in this industry, as evidenced by its years of stagnant growth.
“One of the biggest broad themes across the internet sector today is have-mores and have-lesses. Almost 60 per cent of global ad budgets are going to two names: Facebook and Google,” Mahaney said. “Yahoo’s growth rate in advertising has been zilch. Zero. Nothing. For about 5 years. That says something about the dangerous condition of that company strategically and operationally.”
Mahaney has a point. Despite years of trying to reignite its business, Yahoo’s revenue has remained mostly flat over the past 5 years. Yahoo CEO Marissa Mayer has instead focused on growing the so-called Mavens business, which stands for mobile, video, native, and social, but that part of the business saw its growth nearly halt in its most recent quarter.
“It’s very challenging to take a material stake in Yahoo today,” Mahaney said.
Mahaney’s comments were made in response to reports of Buffett partnering with Quicken Loans founder Dan Gilbert in a bidding war for Yahoo’s internet business. Gilbert is reported to be leading the bid, while Buffett is planning to offer financial support through his company, Berkshire Hathaway, according to the New York Times.
Mahaney was even more critical of Yahoo in a note published Monday. Calling Yahoo one of the two worst performing stocks in 2015 (alongside Twitter), Mahaney said Yahoo’s the “most fundamentally challenged” companies in the internet sector.
“It’s kind of hard not to see the revenue growth of Google and Facebook and the Ad Revenue challenges of Twitter and Yahoo as linked,” he wrote in the note. “There’s little Ad Oxygen for the likes of Yahoo in this reality.”
Despite all this, Buffett seems intrigued by the idea of owning Yahoo’s core internet business, which still draws one billion users to its site every month. Although it’s unclear what makes him want to take a stake in the struggling internet giant, Buffett gave a glimpse into what he thinks about Yahoo in a recent CNBC interview:
Their business has continuously slipped and they have made a lot of acquisitions in the last couple of years. And clearly, it has not turned around the company. I think that they have said that they expect revenue to be down in 2016 again. Something has to change there, obviously.
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