
Marissa Mayer’s Plan for Yahoo Takes Hold - smacktoward
http://www.nytimes.com/2015/01/22/technology/personaltech/marissa-mayers-plan-for-yahoo-takes-hold-the-question-now-is-time.html?referrer=
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discardorama
You have to read between the lines of the recent criticism of Mayer: she's
sitting on a load of ca$h from $BABA, and their eyes are set on short-term
gains. They want to butcher the company up, collect their pound of flesh and
be off.

I think she's on a decent path, and by replacing the old upper management with
the new hires[1], she seems to be putting the right people in charge. Yeah,
she made some mistakes[2], but that's a part of the game.

[1] [http://marketingland.com/yahoo-promotes-flurry-exec-lead-
adv...](http://marketingland.com/yahoo-promotes-flurry-exec-lead-advertising-
product-teams-114662)

[2] [http://www.businessinsider.com/marissa-mayer-on-henrique-
de-...](http://www.businessinsider.com/marissa-mayer-on-henrique-de-
castro-2014-5)

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exelius
I think Yahoo's current path is headed toward disaster. They're obviously
bulking up to be an ad tech provider in the online video space. So she's
taking the $23 billion (or however much it was) from Alibaba and spending it
on buying up ad tech companies.

But the problem with buying ad tech companies is that they're not a great
long-term investment. Microsoft learned this the hard way with aQuantive - $6
billion in value disappeared in under 18 months. The market is just too
fragmented, the services are commoditized and things can change almost
literally overnight. And Yahoo doesn't really own a lot of these customer
relationships the way Google and Facebook do - Yahoo is heavily dependent on
partners for sourcing their data. This is not a path that leads to success for
an ad tech provider; your competitors will look to disintermediate you and you
have very little room for sustained competitive advantage. It's not an
accident that the largest players in advertising own the portals through which
consumers access content: Google for search, Google (YouTube) for online
video, Facebook for mobile, Comcast for TV video.

And what's really happening is that the overall advertising market isn't
really growing, we've just seen online ads take over the budgets companies
used to spend on print advertising. So what happens when the next advertising
trend comes along? You've got to go out and buy more startups to fill the
hole; meanwhile your newly acquired companies are just taking business from
your older companies, so it's not a net value add. Companies tend to engage in
protective acquisitions that erode the bottom line.

Granted, I don't think Mayer has very many attractive options in front of her.
But CEOs rarely want to admit that it might maximize investor returns to just
hand out a large dividend and let the company fend for itself. And that's the
big argument: the investors would probably be better off taking that $23
billion and investing it in companies other than Yahoo. What is the exit
strategy for an ad tech company? Usually it's "get acquired by
Google/Facebook". Yahoo's strategy is "become Google/Facebook", but ad tech is
a zero-sum game, and Google/Facebook have sustainable competitive advantages.

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new299
This is pretty much the content of this article:

"Yahoo is showing progress. Revenue from the businesses Ms. Mayer created or
acquired are growing at an annual rate of 80 percent, she announced in Yahoo’s
last earnings update. She also said she expected overall growth to begin this
year, which is pretty much in line with her original, optimistic timeline."

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LandoCalrissian
What Mayer has been tasked with is an almost impossible mission, just stopping
the free fall is impressive in it's own right. People really love to dig on
her, and I can't help but think it's largely because she is a woman. She's
clearly not perfect and can be pretty callous towards employees, but it's not
like she is the first CEO in tech to behave that way.

I don't know what the future for Yahoo holds, but it's hard for me to say that
she has done a bad job so far.

~~~
Someone1234
> think it's largely because she is a woman

Really? I haven't read anything like that.

Seems to me most of her critics are from people who want Yahoo! to sell (or
merge) so they make tons of $$$$$$. Before she came in they were set to strike
it rich as Yahoo! went down in flames, now their money is tied up until she
"fails" (from their perspective).

These people have just lost faith in the company after several consecutive
failed executives promising similar things to Mayer. If she actually made
Yahoo! profitable again they'd likely change their tune pretty quick, but she
hasn't just yet, and she's spent a lot of "their" capital buying other
companies which has further upset them.

Honestly I've seen very little "she's a woman" criticism, and rather a lot of
broad criticism about the overall strategy. Although there has been a
discussion of her interpersonal skills (however I've also read that about a
lot of other, male, CEOs).

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andkon
It's called the glass cliff:
[http://en.wikipedia.org/wiki/Glass_cliff](http://en.wikipedia.org/wiki/Glass_cliff)

She takes over after years of neglect at a time of even more substantial
crisis, and yet gets and will take far more of the blame than her very
incompetent predecessors for Yahoo's failure. What's worth wondering is
whether her being a bossy boss woman was also responsible for her being
sidelined and pushed out from the OC at Google:
[http://www.nytimes.com/2012/08/23/technology/in-googles-
inne...](http://www.nytimes.com/2012/08/23/technology/in-googles-inner-circle-
a-falling-number-of-women.html?pagewanted=all)

~~~
wldcordeiro
Did she get pushed out? I thought it was her seeing an opportunity for a
higher prestige+pay as a CEO vs being a VP.

~~~
smacktoward
Not pushed out so much as sidelined -- it was clear that she was never going
to get promoted beyond where she already was at Google, so if she ever wanted
to move up she had to move out.

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Someone1234
What I find interesting is how big the "swing" is with articles about Mayer's
strategy. You see articles essentially calling her a Steve Jobs wannabe, while
others call her Yahoo!'s saviour (I place this one in that second category).

It will be interesting to see if her strategy pays off or not. It is certainly
bold.

~~~
debacle
The ones calling her a Steve Jobs wannabe tend to be backed up by numbers.
This article is backed up by cherry-picking third party forecasts.

That said, two years is a pretty short timeframe to turn around a 12.5k
employee company. A tumblr success may be her saving grace.

~~~
josefresco
I believe this is the article being referenced:
[http://www.nytimes.com/2014/12/21/magazine/what-happened-
whe...](http://www.nytimes.com/2014/12/21/magazine/what-happened-when-marissa-
mayer-tried-to-be-steve-jobs.html?_r=1)

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mhomde
My bet is that Microsoft will buy them to bolster their ecosystem (second
time's a charm), and Yahoo's strategy is still angling to get bought, the
question is just price.

Personally I have a problem seeing much value in Yahoo except maybe Flickr and
some other assets but maybe MS can use it to boost Bing or something

~~~
debacle
YHOO is going to be way more expensive now (possibly 10x the price) than the
last time MSFT tried to buy them. I think it's unlikely.

Edit: maxerickson pointed out my wrongness. YHOO will be much more expensive,
but the 10x number was in error.

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maxerickson
Microsoft offered $44.6 billion. Current market cap of Yahoo is $45.76
billion.

The market cap doesn't necessarily capture the takeover price, but I doubt it
is wrong by 10 times.

~~~
jcampbell1
Buy the company for $50B, sell the alibaba / japan stock for $45B, and the net
cost is $5B.

Let's not pretend like Yahoo is a $45B company. It is consistently valued
between +/\- $5B.

~~~
adventured
This isn't accurate.

If you dumped the Alibaba and Yahoo Japan holdings, Yahoo would be doing $1.x
billion per year in profit.

That $1.x billion would still be valued at a likely 15 to 25 times. Yahoo's
core business is worth a lot closer to $20 billion, and under no scenario
would it ever be valued at $5 billion.

The calculation you're using is backwards: it's the Alibaba & Yahoo Japan
assets that are being discounted. Typically assets and cash are _always_
discounted. It's earnings that matter the most, by far, when it comes to the
valuation.

And that's trivially easy to prove: your argument rests on the claim that $1.x
billion in earnings would be valued at 4x times. That would never happen.

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fspeech
Be careful about numbers. Yahoo consolidates baba and Japan earnings as 20+%
owners. Baba may be deconsolidated going forward. Does your $1b number take
the consolidation into account?

~~~
adventured
Yahoo has historically been capable of generating 15% to 20% net income
margins (before Alibaba contributed anything meaningful to their results). I
see no reason why they wouldn't be able to continue that in the future. Yahoo
has also become more efficient, having trimmed a lot of expenses from
operations.

Even if you were aggressive and pushed their net income down to $500 million
on $4.5b in sales, you're talking about a 10 pe ratio. That also would not
happen.

Even when things were at their absolute worst in the last ten years - pre
Alibaba - Yahoo still carried an $11 to $15 billion valuation. And that's the
absolute worst context post dotcom bubble crash.

The parent's position was that Yahoo's core is worth $5 billion. Well today
AOL is worth $3.7 billion (with not much on their balance sheet of
consequence). It's plainly obviously that under no scenario will Yahoo's
business be valued at $5b when AOL is commanding a $3.7b valuation.

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josefresco
Did anyone parse the earnings update to find the source of this assertion?

"Revenue from the businesses Ms. Mayer created or acquired are growing at an
annual rate of 80 percent,"

Growing as in revenue or usage or both?

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discardorama
That quote is from the last quarter.

~~~
josefresco
Hm, the article says "she announced in Yahoo’s last earnings update"

Still would like to know what products saw this growth...

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dkarapetyan
Who cares? Yahoo is just another ad company clamoring for eyeballs.

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taksintik
The market will decide. Numbers usually don't lie.

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jusben1369
That's so very interesting given we're talking about YHOO. The market drove
YHOO's stock through the roof over the last couple of years based on nothing
to do with the fundamentals of YHOO's underlying business.

