WHEN Marissa Mayer was young, she wanted to become a neurosurgeon. Instead she went into the technology business and was called to perform a different sort of life-saving operation, when she was hired to revive Yahoo, an ailing internet firm, in 2012. Her role as Yahoo’s boss has come with plentiful pay and plenty of setbacks, the latest of which occurred on October 20th when the firm reported quarterly profits below analyst expectations.
Ms Mayer’s three-year-long effort to save Yahoo has not resulted in the recovery many had been hoping for. When she was first hired away from Google, where she had been an engineer and early employee, she enjoyed cooing press reports. To welcome their new leader Yahoo employees reportedly made “Hope” posters like those from Barack Obama’s race for the American presidency, bearing Ms Mayer’s face instead. Yahoo was once a huge internet company, but lost out to more innovative rivals, and churned through four chief executives in the three years preceding Ms Mayer’s arrival, demoralising employees and investors. Perhaps expectations were too high for the young, ambitious, media-hungry new boss.
Yahoo’s share price has more than doubled since she took over, but that has mostly to do with the firm’s stake in the Chinese internet company Alibaba, which it bought for a mere $1 billion in 2005. Investors have seen Yahoo as a way to gain exposure to Alibaba, which only went public last year. Yahoo sold part of its stake in 2014 and is spinning off the rest into a separate company. Ms Mayer is hoping to avoid taxes on the transaction, but recently America’s tax authority has cast doubt on that possibility. Whatever the outcome, Yahoo will soon be a shell of its current self. Today it has a market capitalisation of $31 billion, but its core business is worth only about a tenth of that. Most of its market value stems from its stakes in Alibaba and Yahoo Japan, a separate company.
Since Ms Mayer took the helm at Yahoo, revenues and profits have fallen. This year the company will probably make $928m in pre-tax earnings, down 45% since 2012 and the lowest figure in a decade, according to Mark Mahaney of RBC Capital, an investment bank. Ms Mayer has focused on making Yahoo’s products snazzier and expanded into areas where it had been weak, like social networks and mobile advertising. She has spent around $2.2 billion on deals, buying Tumblr, a blogging platform, and BrightRoll, a video-advertising firm. But Yahoo’s share of online advertising spending has declined, while that of rivals like Google and Facebook has risen.
As the third-largest web platform in America after Google and Facebook, Yahoo has plenty of scale, but it does not offer the same level of specific audience targeting that competitors do. In a recent survey by Ad Age and RBC that asked advertisers to rank online properties according to their return on investment, Yahoo came in sixth after Google, Facebook, YouTube, Twitter and LinkedIn. Some onlookers say it was a mistake to hire someone with no experience leading a company and without expertise in or appreciation for the advertising business. Recently the firm has experienced a high degree of turnover among top management and employees.
Yahoo’s dim outlook is all the more striking when contrasted with that of AOL, which was sold to Verizon for a hefty $4.4 billion in June. Like Ms Mayer, Tim Armstrong, AOL’s boss, once worked at Google, and both were intent on turning around former internet behemoths that had fallen on difficult times. But Mr Armstrong was bolder in investing in growth areas, mainly distinctive content, video and technology that enables targeted advertising, says Brian Wieser of Pivotal Research.
When Yahoo stands on its own, without the cushion of a savvy Chinese investment made by a predecessor, it could become a target for larger companies. Private-equity firms, attracted to Yahoo’s $5.7 billion of cash, could be suitors, as might telecoms or media businesses. Ms Mayer might welcome the opportunity for a graceful exit. In business, unlike surgery, you can leave before you are finished.
Source : The Economist
Ms Mayer’s three-year-long effort to save Yahoo has not resulted in the recovery many had been hoping for. When she was first hired away from Google, where she had been an engineer and early employee, she enjoyed cooing press reports. To welcome their new leader Yahoo employees reportedly made “Hope” posters like those from Barack Obama’s race for the American presidency, bearing Ms Mayer’s face instead. Yahoo was once a huge internet company, but lost out to more innovative rivals, and churned through four chief executives in the three years preceding Ms Mayer’s arrival, demoralising employees and investors. Perhaps expectations were too high for the young, ambitious, media-hungry new boss.
Yahoo’s share price has more than doubled since she took over, but that has mostly to do with the firm’s stake in the Chinese internet company Alibaba, which it bought for a mere $1 billion in 2005. Investors have seen Yahoo as a way to gain exposure to Alibaba, which only went public last year. Yahoo sold part of its stake in 2014 and is spinning off the rest into a separate company. Ms Mayer is hoping to avoid taxes on the transaction, but recently America’s tax authority has cast doubt on that possibility. Whatever the outcome, Yahoo will soon be a shell of its current self. Today it has a market capitalisation of $31 billion, but its core business is worth only about a tenth of that. Most of its market value stems from its stakes in Alibaba and Yahoo Japan, a separate company.
Since Ms Mayer took the helm at Yahoo, revenues and profits have fallen. This year the company will probably make $928m in pre-tax earnings, down 45% since 2012 and the lowest figure in a decade, according to Mark Mahaney of RBC Capital, an investment bank. Ms Mayer has focused on making Yahoo’s products snazzier and expanded into areas where it had been weak, like social networks and mobile advertising. She has spent around $2.2 billion on deals, buying Tumblr, a blogging platform, and BrightRoll, a video-advertising firm. But Yahoo’s share of online advertising spending has declined, while that of rivals like Google and Facebook has risen.
As the third-largest web platform in America after Google and Facebook, Yahoo has plenty of scale, but it does not offer the same level of specific audience targeting that competitors do. In a recent survey by Ad Age and RBC that asked advertisers to rank online properties according to their return on investment, Yahoo came in sixth after Google, Facebook, YouTube, Twitter and LinkedIn. Some onlookers say it was a mistake to hire someone with no experience leading a company and without expertise in or appreciation for the advertising business. Recently the firm has experienced a high degree of turnover among top management and employees.
Yahoo’s dim outlook is all the more striking when contrasted with that of AOL, which was sold to Verizon for a hefty $4.4 billion in June. Like Ms Mayer, Tim Armstrong, AOL’s boss, once worked at Google, and both were intent on turning around former internet behemoths that had fallen on difficult times. But Mr Armstrong was bolder in investing in growth areas, mainly distinctive content, video and technology that enables targeted advertising, says Brian Wieser of Pivotal Research.
When Yahoo stands on its own, without the cushion of a savvy Chinese investment made by a predecessor, it could become a target for larger companies. Private-equity firms, attracted to Yahoo’s $5.7 billion of cash, could be suitors, as might telecoms or media businesses. Ms Mayer might welcome the opportunity for a graceful exit. In business, unlike surgery, you can leave before you are finished.
Source : The Economist
No comments:
Post a Comment