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Yahoo to Spin Off Its Core Businesses (nytimes.com)
328 points by _stephan on Dec 9, 2015 | hide | past | web | favorite | 282 comments

Yahoo had to do this. They had been hanging onto the belief that the IRS wouldn't tax their Alibaba spin out, a belief that they and their tax accountants alone believed.

Most telling is that Yahoo was up after the markets closed on this news. Heck Bloomberg just sent me a note saying the sentiment of the news on Yahoo was very positive, even the machines like this news:)

Sadly this probably means 3 things are going to happen in the next 6 months:

1) The CEO leaves, and is replaced by an interm CEO from a PE firm who will negotiate the wind down of Yahoo.

2) There will be a lot of companies coming to look at Yahoo. If a deal can be done quickly then I don't think there will be layoffs right away. If no deal can be reached quickly then in 6 months I'll bet there is a very large round of layoffs as the company shutters what it can't sell to make the rest of Yahoo look more appetizing.

3) If Alibaba buys the holding portion of Yahoo( Alibaba and Yahoo Japan) then look for Alibaba to seek to acquire the rest of Yahoo Japan.

From teh article:

> Yahoo’s shift in strategy comes as Ms. Mayer and her husband, Zachary Bogue, are expecting the birth of twin daughters this month

I hope she takes a full year off, if not more. The past 4 years couldn't have been easy on her. It will be interesting to see what she does next.

It's clear she's great at product design and not so good at people skills. Unfortunately, that doesn't fit well with becoming a CEO again.

This is cleverer than people are giving them credit for. It delivers immediate value to shareholders; it delivers opportunities for long term growth to shareholders; it creates one valuable Asian property that can acquire other properties and continue to deliver shareholder value; it creates a US company that is easier to acquire than it used to be, without the Alibaba share, and thus could be bought by a big media company that values all the core assets and will keep the engineers.

Everyone wins here. Managers win, of course, but shareholders, who have been patient, get short-term returns and the potential for long-term ones as well. Employees will see their jobs stay, because of this repackaging.

Yes, Mayer will be gone in a year, replaced by someone with experience selling a company. But it's been a good run. She turned Yahoo from a place with mediocre engineers into a decent place to work; she resuscitated existing brands and gave them a place in the world; and now she did some reasonably clever financial engineering.

Did she? Maybe I'm a bit more sceptical, but what did she actually achieve?

1. She failed at putting Yahoo back on the map. She spent billions on acquiring businesses that bring in close to no revenue. Maybe it's a great place to work, but if there's no money coming in, it won't stay great long.

2. She failed at financial engineering; she couldn't even get a tax free spinoff through.

I would've been happy to cut her some slack if she did one of these things right, and messed up the other one. Some people aren't meant to be product people and others just aren't financial engineers. But this is basically throwing in the towel.

Don't forget, this idea of a reverse spinoff didn't come from Marissa. It came from an activist investor, who are basically, master financial engineers.

I think you're being too harsh on the revenue side: they make a ton of money. They may not be growing that at the desired rate, or in the right markets, or be appearing to be innovative (or being actually innovative), but Y! has a ton of cash flow.

When Mayer took over, they had no ability to attract or retain any kind of tech talent. Now, they can do so at the same rate as any other ad company. That's a big change.

She didn't hit it out of the park, but she's delivered her shareholders a solid double.

> 2. She failed at financial engineering; she couldn't even get a tax free spinoff through.

She managed to keep a part of Alibaba stake. This reverse spin off will also be tax free.

She's throwing the company away she is currently CEO of.

The BABA stake had to be separated from Yahoo, but this is literally the worst possible way, aside from selling the shares + paying taxes, to achieve this.

What's so bad about it? The end result is the same as the original plan - one company with a stake in Alibaba, and another company with Yahoo's core businesses and the Yahoo Japan stake.

It's reminiscent of the endgame at HP, where the formerly profitable PC/printer division has been split off from Enterprise - possibly in an attempt to keep at least one afloat.

That's not proof of badness, but it does suggest desperation and lack of imagination.

> It's reminiscent of the endgame at HP...

It's completely different. Yahoo is not splitting up its core businesses.

They're taking a non-core asset (the Alibaba stake) that they can't sell without incurring a huge tax bill, and separating it from yahoo Core so that they can hand it over to Yahoo's shareholders (presumably in the hope that someone else - e.g. Alibaba - will step up to acquire it, thus unlocking the value for the shareholders), and re-focus on Yahoo's core businesses again.

There is a separate issue that the core of Yahoo is performing poorly, and that fact may well result in Yahoo Core being split up and sold off but it's important now to conflate the two issues.

They're looking for a buyer of the Yahoo spinoff, it's not going to stay independent. It will probably to be bought by vulture capital firms. Yahoo is basically dead.

> They're looking for a buyer of the Yahoo

Board feels Yahoo's core business is undervalued. The spin off will help clear the picture of how much Yahoo's core business independently value.

They are not looking for buyers (unless someone has a offer they can't refuse).

Too early to say that. They are not looking buyers, until the core business spin-off get priced reasonably, by the market.

Maybe they rename Yahoo "Aabaco" and the spin-off, Yahoo.

I don't follow your logic. That's like saying the new manager for the department store managed to keep the roof of the store intact while losing everything under the roof.

It depends on the condition of the roof. If the manager manages to keep it up long enough to liquidate and get some value from the merchandise that would be lost in an imminent collapse, then that's a level of success.

She had nothing to do with coming up with the financial engineering. From the article itself it says the hedge fund Starboard Value came up with the move and has been pressuring the board to do it for months.

The obvious question is, if it is so clever, why is it plan B?

Plan A, while fairly conventional, got shot down by the IRS.


So, the magic plan failed and now they are going with a real plan?

If I understand correctly, companies used to be able to spin off large amounts of shares tax free by bundling them with tiny segments of their business. The IRS used to let companies ask "did we do this right?" but this time instead of saying "yes" or "no" they said "we won't answer questions like this any more and we want to rethink our rules" which is still in progress.

So if the above is roughly accurate it's more like the loophole everybody used is closing and now they're going with a less desirable loophole.

Losers are the web market in general which loses a big independent competitor, internet users which will see products shuttered or neglected, and the upcoming laid off employees. All because greedy shareholders didn't want to pay their damn taxes.

What core assets are those? Yahoo seems like Real Networks: a former big name that continues to exist (and get press) for no reason beyond inertia. It's not clear to me that it actually does anything worth paying for at this point.

Just to list a few of the valuable properties off-hand: Homepage, Mail, Search, Tumblr, Flickr, Finance, News, Sports, Fantasy sports (including daily fantasy). Some of the bigger ones are billion+ dollar properties. Others are hundreds of millions.

> It's not clear to me that it actually does anything worth paying for at this point.

Few users of Google and Facebook actually "pay" for those services, they're primarily all advertising funded companies.

In what sense are they billion dollar properties?

I didn't mean that users would pay for them; I meant that I don't see how one could use them to make money, or at least enough money that it would be worth bothering to acquire them.

Mail is the #1 e-mail provider.

News is massive.

Sports is massive and has one of the top Fantasy operations, a growing market.

Homepage is still the homepage for people who set homepages.

All are monetized through one of the most effective ad selling operations out there.

This is news to me. I suppose it is because I now move into more restricted Internet circles (not so much time to waste as I used to have), but I haven't visited anything Yahoo!-related since 2004? 2005?

Glad to hear they still have a following. I thought GMail and Hotmail were bigger than Yahoo! Mail but what do I know!

"Sadly this probably means 3 things are going to happen in the next 6 months"

(Genuine question, not snark). Why "sadly"? Companies, even technical companies, get obsolescent and die all the time. Maybe it is just Yahoo's time to go.

I can't speak for chollida1, but for me as an "older millennial" (28) Yahoo was how I came to discover the internet.

Between the chats, instant messenger, search before Google, multiplayer games online with strangers (albeit simple ones like chess and poker), and Geocities it was my first taste of the types of things I do online to this day. I think it's okay to mourn a bit for how we remember the company.

As an even older millennial (35), I have very fond memories of Yahoo.

I remember receiving a two-disk copy of Netscape Navigator from a local ISP at a computer show in early 1995 and setting the home-page immediately to Yahoo. At the time I remember seeing hard copies of "The Internet Yellow Pages" at the local Barnes and Noble, but most search was through Yahoo or Alta Vista. Back then AV had several fewer orders of magnitude web pages to crawl and SEO/spam hadn't yet taken off, but even still the AV results weren't always useful. Without page rank or a decent sorting algorithm, I remember often going through pages of results.

Yahoo had it all: games, continuously updated stock quotes (at a time when I would look up share prices in the morning's paper, priced to the nearest eighth of a dollar), weather, news, and hand picked results from around the web. It was all I was previously getting from CompuServe/Prodigy, but at no cost.

But now I haven't visited Yahoo in years. It's like when your favorite teenage band breaks up. You're a little sad, but you've moved on. The fond memories are for life.

Edited to add: we all used a home page back then because tabs hadn't yet been invented, meaning the restore previously opened tabs option that we all use today also didn't exist. One's home page had a much greater importance back then.

I'm a young millennial and even though Google was more or less my first search engine/portal (I used Alta Vista until my 1st grade teacher showed me Google around '99) I also have fond memories of Yahoo!.

I won a Final Four bracket against high school classmates on the site's fantasy sports page and knowing nothing about college basketball. I made $150 from that.

Even though they clearly made strategic mistakes and Mayer's revival may have been too little too late it's still sad when an "old-school" tech firm goes under, especially one that touched so many lives.

1st grade teacher, 1999. God, I'm old.

I remember using AltaVista and finding it really useful. I had a mail account with them. They shut it down.

I miss discovering new search engines (Lycos, Lycos FTP Search, Dogpile, this new one with a stupid named called Google). I didn't use Yahoo! heavily at that time but I did use Geocities pages alot (before they were bought).

Where are the rainbow horizontal rulers now, eh? And marquee tags? They should make a comeback.

Well said.

This is my Nokia heartbreak all over again

I'm 41 -- I have always detested yahoo's clutterly, ugly start page.

I gave up Yahoo mail years ago.

The only thing I ever went to glance at was finance.yahoo.com -- because it seemed to be the literally only page that you could gleen info from yahoo in a split second...

Fwiw, stocks were all priced in 8ths. A few remain that way today. But the newspaper quotes are still a quaint memory regardless.

You can't be a 35 year old millennial, sport. Generation Y for you.

Wikipedia claims Generation Y = Millenials... sport


Hey, it's ok, you can both be wrong :)

1979/80 would both put you in Gen X as a birth year ('61-'81, although Harvard for some reason thinks '64-'84 - either way, bad luck, Coupland novel it is).

Thank god Harvard has taken a stand

> As an even older millennial (35)...


Dude, give up the skinny jeans :)


"Generation X, commonly abbreviated to Gen X, is the generation born after the Western Post–World War II baby boom. Demographers and commentators use birth dates ranging from the early 1960s to the early 1980s."

I have variously seen the upper boundary for Gen X as 1976, 1979, and 1982. Having been born toward the end of 1980 and comparing myself to those born in 1970 and 1990 (squarely in the middle of their respective generations), I find myself having far more in common with the latter. Hence why I consider myself a millennial.

But never will I give up the skinny jeans!

The Strauss & Howe definition, which I find most useful for cultural purposes, puts the line between '81 and '82.

With that said, it's been my observation that people born within a few years of the line in each direction -- as far as '77 to '88 -- tend to share the same values and have characteristics of both Millenials and Xers (born in '84 here, and I'll gladly apply that description to myself). I've also seen people, particularly those in the S&H community, use the term "Generation Y" specifically to refer to this cusp and not to Millennials as a whole.

Gen-X stereotypes tend to be more true for people born '76 and earlier, and Millennial stereotypes tend to be more true for people born '89 and later.

There are probably other things that play into the stereotypes but being born '89 and later maps pretty well to never really knowing a pre-Web and pre-Mobile world. A somewhat primitive version of it in their tween/early teen years to be sure but an online world nonetheless.

There's no hard generational boundaries. For what it's worth:


"Millennials are the demographic cohort following Generation X. There are no precise dates when the generation starts and end; most researchers and commentators use birth years ranging from the early 1980s to the early 2000s."

Someone 35 is on the bubble.

dude give up the pedantry: https://en.m.wikipedia.org/wiki/Millennials

"Millennials (also known as the Millennial Generation[1] or Generation Y) are the demographic cohort following Generation X. There are no precise dates when the generation starts and ends; most researchers and commentators use birth years ranging from the early 1980s to the early 2000s."

Soft clustering does a much better job of classifying people into generations.

Yes, those yahoo chess ladder rooms burned through a ton of dial up hours at my house.

Agree with the others re: our first experiences on the internet.

But even now Yahoo is still hanging on to some valuable things we're likely to lose in this change. I'm still a heavy user of Flickr for example - and though many others have tried, it's still IMO the best photography community out there (sorry 500px).

It's been a perennial money-loser for Yahoo, kept around because what self-respecting tech giant doesn't have a photo hosting service? I fear with this spinoff we're seeing the end days for that product.

I'll agree with flickr having a lot of good photography, but did they actually fix the community?

When I used it, all I remember is that 90% of comments were sparkling banners saying "YOUR PHOTO HAS BEEN AWARTED BEST FLICKR OCEAN SUNSET AWARD MAY 2010! CLICK HERE TO JOIN OUR GROUP! JOIN JOIN JOIN!" to the point where it interfered with anyone trying to have an actual conversation.

Which was a shame because outside of the enormous volume of spam they had a pretty good thing going.

I just tired of most of the community aspect of flickr aside from folks I already knew IRL. I found a lot of groupie-ism and, as you note, group stuff that was at least spam-ish. As with other things about flickr, I guess I'm not really sure what the "right" flickr looks like and how you achieve that at profitable scale. And, to be honest, I've never had a lot of interest in community photo meetings and so forth locally either.

True, I doubt it's possible to have much of a community at the scale that Flickr is aiming for. You can do it with a niche little photography site, but anything operating at mass-market sizes will eventually turn into a lot of people spamming groups and internet jokes at each other because that sort of behavior feeds on itself and gets you more active users to generate money from.

I hadn't checked it out recently, but it looks like they're still doing fine as far as having a ton of great photos posted. As long as the "community" aspects don't bug you, maybe it's a winning strategy?

OTOH I have no idea if they're profitable or not.

>I hadn't checked it out recently, but it looks like they're still doing fine as far as having a ton of great photos posted. As long as the "community" aspects don't bug you, maybe it's a winning strategy?

It's fashionable to bash on flickr because it's "languished" and, one redesign aside, hasn't moved a whole lot in a long time. I've certainly taken casual swipes at them myself.

However, the truth is that--while I can imagine some features I'd like--it works pretty well and has a lot of great photography. At the end of the day, it's entirely possible that I wouldn't like it if they were constantly taking the site in new directions because social or mobile or big data or whatever the current hype is.

Absolutely. There's a huge trend of websites redesigning and shuffling around just for the sake of doing it, and in the rare cases where you can still access older interfaces (I'm thinking of GMail here) it's totally arguable that the old ones are better. If you have a service that works well, staying the same is nothing to be ashamed of.

I haven't been putting any of my photography online for a couple of years now (aside from sharing to friends on Facebook), but the thought had cross my mind recently. It's a tossup between hosting them on my own site or going somewhere else where it can be "social" and more importantly, more broadly visible.

For me, flickr works because I can drag photos that I've processed in Lightroom to the jfriedl publishing service, hit publish, and they go up to flickr where I can share them or people can just stumble across them. I have no doubt the discoverability is better than if I put them on my own site and I do indeed have people contacting me from time to time to use a photo for something or other. (And doubtless, many uses that I don't know about.)

It's not a big thing but the very modest price, the low friction, and contributing to the commons in however small a way work for me.

Left for the same reasons - it was interferring with my photography. Around the same time, other services like Smugmug and Zenfolio got better (I think Smugmug is now a little more up to date than ZF's look, but not originally).

Flickr decided for a long time to not prioritize the best photo display possible and limited photo size and wouldn't offer things like black backgrounds.

And now I may get an infinite less number views, I don't have to deal with the comments, and photography is no longer associated with gamification (when do I post this for the most views to hit explore, etc).

Flickr has a bit of a "look" to what is popular, and while I'm big on good photo processing and the history of the dark room, what makes it today is often too processed, too HDR, and so on, and playing the "game" is not something I'm interested in.

In the early days of Flickr, people DID look more at all the photos in groups they posted to, and that was pretty great.

Getting more people into photography is great though - just shouldn't be about numbers.

Yeah, there was a lot of that, and the bigger groups are still like that to some degree.

But (much like Reddit) the smaller communities were a lot more sane. And (much like Reddit) it was easy to create new communities - groups with memberships in the dozens or hundreds were infinitely better and actually useful for getting feedback and sharing your work with people who gave a damn.

So, the mass groups were pretty shit, but there is a thriving mass of smaller communities there that are quite pleasant and useful. (Again, much like Reddit!) - and competing services largely haven't cloned this or offered an alternative.

500px doesn't do small niche communities - there isn't really a concept of a "community" besides "the whole userbase", and as a result commentary on photos there is exactly like the big Flickr groups - all noise.

Smugmug targets specifically portfolio hosting and presentation, which it does very well, but it has minimal social components.

The only service - oddly enough - that seems to have attracted small photography communities is Google+. Weird.

That's true, but just like when people die—even when it's their time—it can be sad. I haven't used Yahoo in months, but like my sibling comment, it was a large part of introducing me to the web and what was possible.

The past 4 years couldn't have been easy on her.

Isn't that why CEOs are paid the big bucks?

I mean, a Yahoo whose sole purpose is to be a tax-efficient vehicle for holding shares in Alibaba is not the endgame anyone envisioned, and let's be honest, doesn't really need a CEO either... Not that she ever has to work again.

CEOs get the big bucks because they are better than everyone else at taking credit for business success irrespective of how much control they actually had over the factors contributing most to those successes[1]. They've also been the most effective group at raising the baseline replacement cost of their position. This limits the amount that can be saved by booting a CEO for a cheaper option. So there's a feedback loop at play, when the business succeeds, the CEO gets a raise, and when it falters, market forces prevent the CEO from getting a pay cut (and often still seem to necessitate, or at least "justify", a raise in the face of declining business).

[1] I'm not saying that their impact is never high, but CEOs are paid as if it is always high, and that's essentially been demonstrated by economists not to be the case, particularly with large complex organizations.

A single point of failure can demand pretty much whatever it wants.

> 3) If Alibaba buys the holding portion of Yahoo( Alibaba and Yahoo Japan) then look for Alibaba to seek to aquire the rest of Yahoo Japan.

Isn't Yahoo Japan being spun off from the Alibaba portion? Ie. all that remains of the current "Yahoo" company will be its Alibaba stake.

You are correct according to the news reports I read. See 6th paragraph of this Reuters article for example:


> then look for Alibaba to seek to acquire the rest of Yahoo Japan.

Yahoo! Inc doesn't own the majority of Yahoo! Japan (believe it or not), Softbank does. Yahoo! is only a minor shareholder of Yahoo! Japan.

This is not what article says. Previously they wanted to spin off Alibaba stack but because of tax issues now they will spin off other stuff. Either way, results would have been exactly same: Partition of company in to two. There is zero talks of selling of core business. In fact article clearly says that "activists" investors wanted that but didn't got it. Board says they are 100% behind Mayer and Mayer says she is deeply committed to running Yahoo. In fact she is taking only limited leave for maternity. I highly doubt you actually read article or may be you are just jumping to conclusions but without disclosure that this are your interpretation, not the actual content of the article.

Marissa Mayer is basically an ex-CEO walking at this point. As "bad" as it sounds, the only thing that has kept her around recently is her pregnancy. No board would want to step into the mess of letting a woman CEO go during pregnant or immediately following pregnancy and maternity, no matter horrible her performance. You are right, I give it about 6 months before there's an announcement of her departure for whatever reason, probably "spending time with the family".

As it has been put by others, Mayer will hold the title in corporate history as the most expensive CEO for a very long time.

Maybe it's the opposite. I feel like people seemed to like working at Yahoo while she was there...but no great new products...

I do hope they find a good home for Flickr...I will miss it terribly if it is gone.

Chairman and CEO have denied any plan for selling Yahoo. Their plan is to get a tax free separation of its core business from Alibaba. This reverse spin off according to them most likely to get the tax benefit. The other way - forward spin off too would have been tax free but that would have taken multiple years while this would only take 1.

Why is a wind down and/or sale of Yahoo more likely given a spin out of the core business vs a spin out of Alibaba?

Don't you end up with pretty much the same thing in both scenarios? One business that's an internet company and another that is a holding corp for Alibaba stock.

I'm not saying your wrong (a lot of people are saying this). I just don't personally understand the reasoning.

>Most telling is that Yahoo was up after the markets closed on this news.

That spike seems to have been very short lived


good design skills, not so good people skills. sounds like a few successful ceos we all know and adore. a ceo with less than ideal people skills needs a good operator to help balance him/her.

Seems like this is all being spun from investor perspective but is effectively the same result to us mere mortals?

> It's clear she's great at product design and not so good at people skills.

Can you remind me which great products she's designed?


She was in charge of the design of the front page of the search engine, as far as I know. From what I understand, our mental image of the Google brand—bright primary colors on white—came straight from her.

I dont know, seems kind of skimpy for qualifying someone as a CEO.


She went in with a lot of good will. I don't see that she still has that.

Interesting question: could Yahoo have been grown, and if so, how?

Agree with your comment on her good product skills and bad people skills.

> > Yahoo’s shift in strategy comes as Ms. Mayer and her husband, Zachary Bogue, are expecting the birth of twin daughters this month

> I hope she takes a full year off, if not more. The past 4 years couldn't have been easy on her. It will be interesting to see what she does next.

Do you think other CEOs don't have children, or don't have hard jobs? Running a profitable growing company is as hard as failing to save a dying company.

Oh just give this poor old dog the old Yeller treatment already. I don't know what's more sad, the fact that Yahoo has fallen from where it once was, or that it's falling so slowly and that it's new CEO, once thought to be it's saving grace, is letting the bleeding continue for seemingly as long as she possibly can.

I can't imagine the morale issues in the trenches of Yahoo, it's gotta be just horrible in there.

>Oh just give this poor old dog the old Yeller treatment already. I don't know what's more sad, the fact that Yahoo has fallen from where it once was, or that it's falling so slowly and that it's new CEO, once thought to be it's saving grace, is letting the bleeding continue for seemingly as long as she possibly can.

And why not?

In what kind of reasoning, if you could continue to make money and employee thousands of people for 10+ years of slowly declining revenue and relevance, would you refuse it?

A "hot" CEO or employee might want to jump ship ofcourse for greener pastures. But there's absolutely no sense in closing the company and leaving all the money it could make (even if declining) on the table.

If it wasn't profitable, that would be another story. But it is.

[edit] fixed typos.

> if you could continue to make money and employee thousands of people for 10+ years of slowly declining revenue and relevance, would you refuse it?

I sure would. I've seen that happen at a couple of companies where I know people and it's entirely depressing. Slowly declining revenue on the path to planned death means:

* knowing that the next round of layoffs will always be soon

* having a hard time retaining people

* having a very hard time hiring people

* nobody wanting to do deals with you

* having to pay way over market to keep the people you have

* workers much more inclined to negative behaviors

* no sense of promise in the future

I would much rather sell individual pieces to companies that can make use of particular assets, move as many people as possible to other companies, and then gracefully wind down whatever's left.

In my view, profit isn't why we do things, it's just how we measure sustainability of a venture. Maybe there are people out there who would be happy working in a dying company trying to suck every last nickel of profit out. But those aren't the kind of people I'd hire on the way up, so there's no way I'd ask them to spend years being miserable on the way down. I'd also be reluctant to sell my customers to somebody who would be happy doing that; I wouldn't trust them to do right by the users.

I guess it makes sense to get all the jewelry and dresses off the Titanic while the bow is still above water, personally I'd sell the business while it's still worth something and move on to bigger and better things.

Anyway, I'm thinking more from the perspective of the grunt workers than the big execs who will walk away rich no matter what. If I was them I'd be looking for the lifeboats and getting the hell out.

> personally I'd sell the business while it's still worth something and move on to bigger and better things.

They're likely trying to do that and spinning off Japan may make that easier.

I thought I read somewhere that this is a slow bleed, to allow investors more direct access to alibaba, at the expense of the rest of Yahoo!'s businesses?

As a sidebar, I've always kinda felt the name gets in the way.


I feel silly saying it. I feel silly asking someone if they Yahoo!? It feels silly seeing it on stock tickers. Do I want to invest in a silly business? Work for a silly business?

The answers are yes and yes in an objective world, if the company is producing interesting products that are selling. But when it comes to marketing to users, investors and future employees alike, I'm not so sure it isn't a small hurdle in the way of that conversation.

>Yahoo! I feel silly saying it. I feel silly asking someone if they Yahoo!?

Yeah, nothing like the gravitas and seriousness of Google.

It doesn't need gravitas. But the onomatopoeic and just-slightly-this-side-from-awkward feeling of it has always bugged me a little.

"Google it" rolls off the tongue a lot better than "Yahoo it". Plus with Google's minimalist design (at least in the early years) they can get away with the silly name.

All those are after the fact explanations. When Yahoo! ruled the web -- and I was there for those years back in the mid-late nineties when it was as big as Google is now -- the name clearly wasn't a problem.

As opposed to Google, which has a super staid and boring name.

At least Google doesn't have a sound bite of yodelling.

And it works nicely as a verb.

The old ads were great, from the early 00s? Always ended with the dude screaming YaaahooooOOOOOOOOOO!!!!!!


I always hated those ads and also thought the name was silly, even at the time. But hey, they're still here.

The name was from a much more optimistic time in the history of the Internet, when everything was shiny and brand new and less slick and calculated.

Oh please, nothing's changed. Give em a website consisting of nothing but stock photos and solid color squares and a name like Yahooify and they'd blend right in.

Interesting comment, but does sample size of 1 mean times have changed?

I remember reading a tech trade rag back in the late 90's where some consulting company or other was talking about their business. They were getting tons of requests to help provide branding and corporate identity for tech clients.

Apparently "Yahoo" was the gold standard, and everybody and their cousin wanted a name or trademark or other branding component akin to Yahoo.

So I don't understand one simple thing: The stock is up 120% since Mayer took over. Even adjusting for compounding interest over 3.43 years, this is like 25+% yearly growth. So the core business is crapping out? So what? Why is everyone dumping on Mayer? I don't even think I could fix the core Yahoo business. They have to pay a 50% premium for developers just because it's Yahoo and their core audience is the technically illiterate; a group that is fairly difficult to monetize.

> The stock is up 120% since Mayer took over.

All of that is because of $BABA. If you add up the current value of $BABA and Yahoo Japan shares that Yahoo holds, it's more than the market cap of Yahoo; which means, the $4B/year revenue business that is rest of Yahoo is valued negatively by the market. SMH....

They could have literally fired everyone and left it as a shell holding company of the Alibaba stock and it would be worth more than it is now (the current value of Yahoo is less than it's stock holdings of Alibaba).

She didn't appear to add any value to Yahoo at all. I agree that I'm not sure anyone could have, but that doesn't change the fact that she didn't accomplish the job she was hired to do.

Corporate governance is a lot about perceptions. Even if you set aside the fact that most of that growth comes from Yahoo's stake in Alibaba, you still have the question about Yahoo's future and vision. If there is a perception that their future is shaky, that matters more than if things are likely to turn out badly. Should add, IANAL aka, I am no analyst

What's the beta on that stock? Look at it in comparison to other tech stocks. Most of Yahoo's recent rise is explained by the rise in all tech stocks over the last few years.

I would venture that it has something to do with Alibaba and not really a lot to do with Yahoo.

Yes, it's a good financial call, but it puts all of the control in someone else's hands.

The stock is up because overall, Yahoo as an overall business is doing great. The problem is that the best financial parts of Yahoo are its investments. If Yahoo was solely an investment company, it would have a great record. Yahoo, however, has the core business which is what most people interact with on a daily basis that loses money. I joked with my friend at the beginning of 2015 that Yahoo performs betters as a VC than as an internet company.

Paul Graham's What happened to Yahoo[0] is probably just as relevent now as when he wrote it in 2010.

> One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a "media company.

That was a bad decision then, but at the time content and media were newer on the internet and had value. They don't anymore. Yahoo finance and fantasy sports are nice things to provide, but they aren't a google killer for sure.

Yahoo's core business is media not technology. If the NYT and Wall Street Journal are any indication, media is a bad business to be in.


Except the NYT has surprisingly turned things around, considering five years ago they were a dinosaur on it's way out, much as Yahoo was and is.


True, though I think the most accurate statement is that NYT is performing admirably in a horrible, horrible industry.

Wish I could find the article I read this in (googling around has failed me), but I believe around 2010 they also started bringing in execs and business people from Hollywood/MSM and there was a big clash of cultures.

The first Hollywood connection surfaced by my quick googling is the Semel arc, 2001-2007:





The Wired article looks particularly painful. If memory serves, Yahoo first declined to buy proto-Google for one million. Then again in 2002 for 5 billion.

Pretty much everyone with a million dollars laying around declined to spend it on acquiring Google back then, it's not like Yahoo was the only company they approached.

Terry Semel himself was from Hollywood, and he took over in 2001.

Respect, old boy Cringely actually got this one right: http://www.cringely.com/2015/11/30/soylent-green-now-made-wi...

Thanks for posting this. Great analysis about IBM and Google Cloud in this article as well.

Yes, he called it.

To come in as an outsider and try to save an ailing web giant nearly everyone had already written off is no easy feat. Wall St. is valuing things like Tumblr at zero and so now she has to do a 180 and unwind this company, maximally and efficiently, while pregnant with twins. Naturally we're inclined to armchair QB, but I think the hand she took over when she sat down at the table was bad. While she never went "all in" on a moonshot, that would have been a literal gamble, and she played smart. Wall Street can be inefficient. Core Yahoo is worth more than nothing.

>To come in as an outsider

She's a Silicon Valley darling; in what way was she an outsider?

>I think the hand she took over when she sat down at the table was bad.

I agree with this.

>she played smart

But not this. During her tenure the company treaded water for a few years, lost nearly all value, and now might be looking to break itself up. Is this the standard we should be holding high-profile, high-priced executives to?

An outsider to Yahoo, not Silicon Valley. This feeds into point 2. She didn't make Yahoo a media company, it was already one when she got there.

The smart part is meant as not gambling on a Carly Fiorina-type merger to "save" the company. Her deals were smaller and focused, and my contention is she didn't blindly throw capital around (at least in a way that makes headlines) to try to save the company. Value is decided by the capital markets, and I still believe core Yahoo is not worthless, whatever it's problems or other management issues.

(edits for spelling, slight re-phrasing of last point)

What I consider her accomplishments, 1. Firefox deal 2. NFL Live on Yahoo! 3. negotiating out of the search agreement with MSFT is considered as accomplishment by some (not by me)

If Ms.Mayer is able to sell Yahoo! assets to Google in a profitable way for shareholders, that would be a WIN, without it, her regime is a failure not a total failure, but a failure none the less.

They could also try sell to private equity, or someone like John Malone & Liberty Media. I think even a separate capital stock of the core assets would force more value recognition than what shareholders are seeing now, even as a low priced issue. I'm not sure that Google would want anything here that they couldn't build themselves or don't already have the lead on, but if there's any interest, Yahoo should solicit those offers.

Yahoo Search and Yahoo Mail are two assets that GOOG and MSFT would be suitors for. MSFT/MSN looks like a good suitor too, but you never know. From Mayer's side, since she is Google alum, there can be something out there.

What should she have done? That's the million dollar question I don't see any good answer to.

Consolidate Media. More NFL, More Hulu, More Content like Finance. More Messaging, buying Telegraph or something. She was wrong person for the job, but Yahoo could have exploited the TV golden age, by picking some elements there. Yahoo should have double downed on Tech X Media, while improving the Mail. Her #1 job is to sell Yahoo! assets to Google, that is what she should focus on.

I hope she doesn't think she's going to be working from home.

When Yahoo finally dies, my main concern is what happens to the @yahoo.com email address I've had for a couple of decades, and which now lives next to my name in countless address books. Does it perpetually forward to an address I choose? Does Yahoo try to charge for this? Do Russian identity thieves buy the domain and make my life hell?

Yahoo mail probably makes a pretty good penny. Yahoo isn't going to die, IMHO, its just going to be separated off, with the unprofitable bits discarded. It'll probably end up as, Yahoo Mail, Yahoo Sports and Yahoo Finance.

I think Yahoo makes a great case study on how optimizing for revenue per user can kill your brand.

Entirely dependent on who decides to buy Y! Mail. Safe to assume it'll be around for a while though, since straight killing Y! Mail doesn't make much business sense.

If Yahoo could find a way to start charging for legacy Yahoo email addresses without enraging a sufficient portion of the installed base, they could have a pretty lucrative business right there.

I've got a list of maybe 50 accounts including a couple of relatively important ones that still use my Yahoo address. It's been on my todo list for months to get them updated. I guess it's time to bump up the priority on that item.

I've tried moving away from my Yahoo account a couple of times already. Some services simply refuse to change your email address, no matter what.

There's a bunch of smart TV's out there that are tied to Yahoo services (Vizio at least, probably others) for basic things like app installation. I hope they at least transition smoothly...

Probably the last one - look at what happened to Geocities.

Marissa Mayer and Maynard Webb were on CNBC this morning talking about the spin:

Part 1: https://amp.twimg.com/v/76b8a5e2-9a6c-40c3-9c1b-e2c8bcf91159 Part 2: https://amp.twimg.com/v/ce42d263-7b9c-4716-8d06-b320ed243606

Mayer seems completely bored by the whole thing and keeps passing stuff off to Webb as "board level consideration". Doesn't make me excited for Yahoo whatsoever.

OTOH if the CEO is excited about a tax shenanigan i will not be excited by the company.

Yahoo's stake in Alibaba is by far the most valuable part of Yahoo. The "tax shenanigan" itself is worth more than Yahoo's core business! If she can't get excited about the majority of shareholder value she needs to step down ASAP.

because the CEO can do so much more than an accountant?

do you also fire your doctors because they don't pray?

the CEO should be rallying troops and making deals. well, at least that is the excuse for their obscene salaries and bonuses.

> the CEO should be rallying troops and making deals. well, at least that is the excuse for their obscene salaries and bonuses.

She looked like she was asleep. Wasn't rallying anyone or making any deals. Did you watch the interview? She was talking about the most important thing she has ever done as a CEO and couldn't care less. She has checked out.

Yahoo management lacks vision. They had the most popular brand names in social media space, still couldn't innovate.

1. Messenger

2. Mail

3. Flickr

4. Tumblr

5. Groups, which was insanely massive and even after the botched Neo "upgrade" is still the mechanism for the exchange of vast amounts of information.

the funny part is, if you mixed messenger, mail and flickr (let's not forget geocities, delicious and 60% of all online stores before 2006) they could have what facebook is still trying out to be and then some.

True ! This makes the argument event better :)

Yahoo used to have awesome technology. Their developer tools were unmatched and have yet to be matched. Yahoo pipes alone was basically IFFT and AWS Lambda combined way before any of those two existed. They just squandered away all the talent.

I never understood farming out their search engine to Bing in the first place. Google literally prints money with their adwords search business. Seems instead of attempting to innovate they just threw in the towel and gave up? I just find it hard to believe that Google is the only way you can run a successful search engine.

Exactly. Yahoo had the largest Hadoop cluster in 2009. They used it for their search engine. They were the driving force and sponsor of Apache projects like Lucene and Hadoop. Then suddenly they outsourced their search engine business to Microsoft Bing. Last time I checked meta search engines like DuckDuckGo rely on Yahoo's BOSS API to access Bing's search engine.

Outsourcing the software heart of your business to Microsoft is a surefire win. Just look at how well Nokia did when they outsourced their phone OS business to Windows Phone.

(I do wonder if iterations of this pattern panned out better when paired with not-Microsoft)

You seem to imply that because they used Bing they couldn't still make money from ad revenue with searching. The truth is they most certainly could and probably do (they display Google ads on their result pages). Outsourcing to Bing allowed them to, supposedly, focus on more core business related functions. Whether that was a mistake or not (or ultimately didn't matter) I don't know if we have the data to show.

Google's search engine runs at a loss to support their advertising business, and haven't had any serious competition in that sector since they bought Doubleclick (which looks a bit antitrusty in my eyes but what do I know). Yahoo doesn't have much of an ad business so there's not a lot of value in running their own search. They're good at their core business of being a portal, with some parts implemented themselves and some parts external (or semi-external e.g. Flickr) integrations.

That's perhaps the most twisted/obtuse definition of "running at a loss".

Without their search engine, there is no advertising business.

lol, yeah that dude has a serious fundamental misunderstanding of how economics and business works. it's like saying mcdonalds backend operations (food prep, management, real estate leasing, training, purchasing) are operating at a loss in order to support their frontend operations of selling burgers. complete nonsense.

> Without their search engine, there is no advertising business.

They do have significant advertising businesses beyond search (AdSense, gmail, etc.).

Yes there is. A lot of Google's advertising business is selling ads on other people's sites, and they use the information from their search engine to target that; they could run the ad business without it (using data from Google Analytics and elsewhere) - after all it ran as an independent business when Doubleclick owned it.

My understanding is that if search and ads were separate businesses and ads paid search for search result ads at market rates then search would not be profitable (similarly for e.g. Gmail). (In reality if search were an independent company then it might be able to be profitable by selling information to ads in addition to direct advertising revenue - OTOH the legal barriers to selling information to a third party might make that impractical, whereas conveniently they're not an issue while Google remains a single company)

According to their 10K [1] 76% of their advertising revenue and 68% of their total revenue comes from advertising on Google properties. Reducing their revenue by 76% surely wouldn't allow them to "run the ad business without it."

[1] Page 24, https://investor.google.com/pdf/20141231_google_10K.pdf

> 76% of their advertising revenue and 68% of their total revenue comes from advertising on Google properties. Reducing their revenue by 76% surely wouldn't allow them to "run the ad business without it."

While I don't agree with the parent you're implying that search is the ONLY Google property that displays ads but that's not true. A decent percentage of that is coming from gmail. I'm not sure how much however.

Where is this understanding coming from?

By your definition ANY media company runs at a loss. "NBC runs at a loss to support their advertising business", "CNN runs at a loss to support their advertising business", "New York Times runs at a loss to support their advertising business and subscription businesses" etc

A cost center doesn't "run at a loss", it performs something critical to supporting the profit center. Advertising is what customers pay for; search makes that advertising worth the price. No search = no advertising. Google's core is "know everything, to maximize advertising revenue". Yahoo's core is...well, it became famous because it provided a curated index to the then-unsearchable Web, but now that's moot and Yahoo is, um, yeah seems that's the problem.

> Google's search engine runs at a loss to support their advertising business

What? I have never heard that AdWords runs at a loss and find it incredibly dubious.

I think he's saying search itself runs as a loss-leader to get people into their hugely profitable AdWords product. In other words, they spend money in search in order to make money via ads. But yeah. The two go hand in hand, so I'm not sure I'd say search is a loss-leader.

Apologies for taking so long to reply. I've seemingly been banned from replying.

I'll just say that's a convoluted definition of a loss-leader. If a revenue line requires an expense, that expense is not a loss-leader, it's just a cost. That's like saying that having a website is a loss-leader for Amazon, since they really make their money on selling products.

That would make any media company a loss-leader for advertising, basically.

You're misreading what he wrote. It's the ads that bring revenue, and not search. Search is what helps to get people to see relevant ads. Google is not that much in the business of charging people money to provide search services.

I believe their argument is "if you ignore the sources of revenue, it runs at a loss", for what that's worth (which is little).

The search engine runs ads, and is enormously profitable.

The one and only question I need to ask: will flickr stay alive?

The rest had been obsolete for a while anyway.

This can be answered by the question "Is Flickr profitable by itself?" If so, someone will certainly buy it. If not, who knows.

My guess, someone will buy it and it'll languish for a year or two as the product strategy is developed and migration of technology occurs, then the new vision by new owners will be executed.

Yahoo has done a pretty good job with the languishing part all on its own. Though, snark aside, I think part of the issue is that it's not entirely clear what a next-generation photo site with a pro/prosumer slant looks like that's different from today. (And, of course, whatever changes you make are going to be hated by some percentage as was the case when flickr went through a redesign a few years back.)

Guessing we are either going to see major changes in pricing structure, or a shutdown of Flickr. Pretty bummed.

Hard to say. There isn't a lot of direct competition. Smugmug probably comes closest (and I see their current pricing structure again makes it reasonable for non-professionals which it wasn't for a time). It really depends on how many people pay for a premium ("pro") flickr account which Yahoo seems to have been fairly ambivalent about collecting over the past few years.

Personally, I'd find it something of a bummer if flickr were to go away or seriously decay. I could switch but it would be a definite pain. (I also find flickr a great source of CC photos.)

I've been running my own site for displaying images; for backup, I have a dedicated server + synthing.

It's the archives I'd really, really miss, from people who more or less stopped taking photos.

If Flickr was to offer what Smugmug and 500px does for pros ( like direct upload from Lightroom, eyecandy portfolios, etc. ) instead of focusing on an app that uploads every picture it finds by default, I believe they'd see a return of the many and probable could become profitable. But this would need immediate and massive changes, which I don't think will happen at all.

Flickr has direct upload from Lightroom...

Actually, I think that's built in to Lightroom.

Lots of thing have Flickr upload; it was just not build by Flickr itself, supporting the professional photographer culture in the first place.

>It's the archives I'd really, really miss, from people who more or less stopped taking photos.

That's fair. The greatest loss if flickr were to go away at some point would be that a lot of content would be permanently removed from the Web. And flickr's scale is such that I can't really imagine something like the archive team being able to copy flickr content and archive it in a useful searchable way. I may be wrong though.

Given that there are functioning businesses in the flickr vein, I'm reasonably hopeful it will continue on though. Even if that's wishful thinking on my part.

It might be time for Archive Team to start archiving Flickr.

I was really excited when Flikr relaunched and offered a TB of space... but the upload feature ALWAYS failed for me. I could never upload lots of images (I have many thousands) -- so I finally gave up.

Then "Origami" was supposed to launch and solve that - but they shut down before they could even go live!

You can upload directly from Lightroom using something like jfriedl's plug-in. Works great.

I agree that galleries of some sort would be a great addition. I put a lot of photos up on flickr so they're available to myself and others. But I'd like the ability to showcase a more curated collection.

If you look at the landscape of "flickr-like" companies, it looks as if you can make a business out of it (Smugmug, 500px) but it's probably not a huge opportunity business given how many such efforts have been shuttered or allowed to largely languish over the past 15 years or so.

The reality is that most people are just fine with uploading their camera phone pics to Facebook and be done with it. The number who are willing to spend $25-50 per year for a premium site is probably a pretty small percentage--and would be even smaller if you up that to $100+.

Part of this may be related to the lack of direct monetization opportunities from Flickr. If you take the example of Instagram, the enormous number of users they have have created, "Instagram celebrities" out of thin air, with people securing modeling contracts or product endorsement deals simply by being popular on the network. I'm sure some photographers are getting business opportunities by posting their work as well, although that has a lot to do with how good they are at getting themselves exposure.

Even if

What the world really needs is another platform for vapid promotion :-)

Flickr/Yahoo! have taken some steps related to allowing users to monetize their photos over the years. There's been an agreement with Getty and they've done some other things as well. At its heart, though, flickr started out with very much a community orientation and, while they haven't necessarily done the best job of it, they've maintained more of a community than a commercial flavor.

Aside from the young, female, and attractive though, it's pretty hard to commercialize a flickr presence in any significant way. Even microstock sites which are explicitly about selling aren't a great source of income for most.

Flickr has an immense historical value being the first large photo portal. I'd be devastated to see pictures nowhere else can be found going away :(

So they're selling Alibaba, but doing it the other way around.

Honest question: what has been Yahoo's core business for the last 15 years?

Their latest quarterly report summary offers plenty of details: http://biz.yahoo.com/e/151105/yhoo10-q.html

Thanks for the link. Here's the description from their Overview (cleaned up a bit):

"Yahoo! Inc., together with its consolidated subsidiaries is a guide focused on informing, connecting, and entertaining our users. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. For advertisers, the opportunity to be a part of users' digital habits across products and platforms is a powerful tool to engage audiences and build brand loyalty. Advertisers can build their businesses through advertising to targeted audiences on our online properties and services or through a distribution network of third party entities who integrate our advertising offerings into their websites or other offerings. Our revenue is generated principally from search and display advertising."

Reading that was a bit strange to me as it doesn't fit with my image of Yahoo. From that description, it seems they think of themselves as a social network + ad platform. I'm finding it a bit hard to clarify what my image of Yahoo exactly is but its not that.

I would say "portal" which is to connect content creators with content consumers (and charging for space on the portal). Unfortunately for yahoo, this model lost out to social networks. People seem to prefer seeing content from friends over content curated from yahoo. Or they prefer going to sources directly.

I also think that sites like reddit and hackernews have taken a part of the role that a portal once provided. Content that is crowd-sourced seems to be better received than what a single company can push in a curated list.

Their answer is "media" but I'm not sure what that means and apparently they aren't either.

My tech company has a media department. I've been in meetings with them. I still have no idea what they do.

Keeping sticky eyeballs from the first internet generation around.


That wasn't the question. The question was what Yahoo's business has been for the last 15 years, not what it was when the company was founded.

The actual answer is that Yahoo sells ads. That's their business model, just like it's Google's and Facebook's and hundreds of other companies', some very old and some founded yesterday.

That was Yahoo's core business pre-2000. The posted asked about post-2000.


Yahoo purchased viaweb which made YC possible. The startup community owes yahoo a lot.

Throw in Whatsapp too there then ;)

Again I ask, where should I take ~30GB of photos that I have on Flickr? Yes, I have other backups but I need offsite storage. Guess I'll have to budget for it now. Backblaze B2 isn't quite ready yet.

Take a look at Google Photos. It's very good and getting better.

I'd like it to have more advanced options, but it's probably the best choice and well integrated with Google Drive and Google+ (if you use it).

It depends if you want backup or sharing in the flickr vein. If the latter, Smugmug is probably the closest equivalent. It's not free but neither was a flickr pro account.

Google Drive, Microsoft One Drive, Amazon Cloud Drive, etc. They're all very reasonably priced in my opinion (Amazon's says they give you unlimited). But if you want something more sharing oriented like flikr then that's a different beast. You can kinda do that with Google Drive and Google Plus but no one uses that.

Get Amazon Prime ($99/year?), and get unlimited photo storage: https://www.amazon.com/clouddrive/primephotos

And free 2-day shipping (if you're in the US).

As much as I shudder saying it, Google+ has been pretty good at keeping all of my photos. Though I have them backed up from my Android device. Not sure how well it works when actively using it for photo storage.

I am guessing 500px will roll out a "welcome" for old Flickr.com users and give them a heck of a deal to join up to 500px.

Serious answer: digitalocean gives you a 40GB VPS for 20$/m and you can spin up an Owncloud instance in minutes.

A single VPS for backing up photos? No thanks. Redundancy is going to cost you a lot going this route.

He said there are backups already, this is just an addition.

He was looking for an off site backup meaning all of his current backups are at a single location. You need redundancy in your offsite backup (or have multiple) otherwise you may have to use it one day and find the drive has died or who knows what else.

Ouch, that reminds me how much more my VPS is going to cost due to the decline in the Australian dollar. It's not a bad idea, though.

you could put them on mega.co for free up to 50GB, or a 14.00 flash drive or instagram.

I don't think cloud storage or image hosting are unsolved problems.

Ms.Mayer took a very difficult job. There is no sense in feeling for her, she knew what she was getting into and she was paid highly as if she already accomplished a turn around. Every thing said and done, Ms.Mayer will have $400 Million, even if Yahoo as we know is Kaput. It is a demonstration that C-level execs do not have skin in the game any more, they are paid like they already accomplished the task they have set to.

I'm not sure I quite understand.

The article puts Yahoo's Alibaba stake at 31bn. Google finance is reporting Yahoo's market cap as 32.75bn. Does this mean that Yahoo's non-Alibaba value is a rounding error?

You're forgetting Yahoo Japan, a separate company that Yahoo owns a stake in. According to the numbers, Yahoo's core Internet businesses have been worth less than zero.


And don't forget $5B in cash.

"Yahoo's ... share price ... values the whole company at $33 billion. Now, Yahoo has a 15 percent shareholding in the Alibaba Group, worth around $34 billion, a shareholding in Yahoo Japan worth about $8 billion, plus almost $6 billion in cash. In other words, Yahoo has around $48 billion of obvious value, which is $15 billion more than the whole thing is worth." http://www.zdnet.com/article/now-is-the-time-to-break-up-yah...

It may be worth that but as stated in the article it can't be realised without tax bill potentially up to $10bn.

OK. That makes a little more sense. The market might be valuing that at 5bn or so.

If you work out the math, Yahoo could sell those assets, take the tax hit (whether or not the tax is legally owed is irrelevant), then by shutting down the entire company, hand its shareholders several dollars per share more in cash than the market currently values the share.

It's possible that some shareholders would realize significant capital gains on that, and the taxes would offset part or all of the profit. But of course other shareholders would not only make a profit, but would also have a fat capital loss to go with it. It just depends on when they bought the shares and what they paid.

Overall, though, when one factors in all the tax effects, the market is assigning a negative value to Yahoo proper. Why? Because they, quite reasonably, assume that Yahoo proper will chew up the cash that's currently on the books and any that is obtained via asset sales. That is, should the shareholders ever receive a dividend of any kind, it is likely to be the current cash value of the company less some large fraction wasted between now and whenever that might hypothetically happen.

Bluntly, if the company were being valued as a going concern, the market would be pricing it a lot lower even than it is. The only reason for the share's relatively high price is the expectation that some kind of spinoff will happen to allow the shareholders to receive a larger fraction of the value of the company's assets than they would if the company sold those assets itself and used the capital to continue its own operations. In the latter event, one must reasonably assume the ultimate return to shareholders would be very close to zero (an eventual sale of the rotted carcass to private equity) or zero (bankruptcy).

It's almost as if Yahoo doesn't know what their core businesses are anymore. It will be interesting to see if they come out of this with better understanding of their identity.

It seems clear to me. They're an investment business that owns shares in successful companies.

Like Yahoo Maps, Yahoo Green, and Tumblr...?

Tumblr is very culturally significant but not financially successful.

Like that time they told every one of their users that a pending bill in Congress was going to kill Tumblr, set up robocalls that required a single click, and achieved a 0.2% response rate?

That's the joke.

Probably just Yahoo! Japan and Alibaba.

Certainly the end of the beginning. Yahoo!, one of perhaps a handful of companies, was the first "Internet"[1]. Those companies blazed an interesting trail and brought the mainstream population of the US into the "online" world. That they emerged across the chasm that was the dot.com crash, was a testament to the amount of momentum they carried with them.

I have a tremendous amount of respect for them, but even with Marissa at the helm the biggest challenge they have not seemed able to overcome, was to tranform into something more 'web 3.0' ish.

I would not be surprised in the slightest if Microsoft spun out Bing as a subsidiary, and absorbed the assets and IP of Yahoo! into their own search centered business with a portal attached.

By resizing that combined business to be profitable based on the search and ad revenue I expect the case could be made for that as a long lived entity that remains when Google implodes. And having an already separate (or separable) would allow Microsoft to step away to avoid anti-trust concerns while keeping a partial interest to capture the value appreciation.

[1] the 0th Internet was what emerged right after HTTP started propagating, GNN, bookmarks etc.

When/why do you expect Google to implode?

Google has been losing margin (hence profitability) in its search advertising business that powers everything it does fairly rapidly over the last 6 years. They have kept revenue/cash flow going/improving over that same period by putting more and more ads on their properties, dumping things which aren't making money, and trying really hard to push many of the moonshot projects into profitability. During the same 6 years Microsoft has been reporting growing margins on its search advertising business and Bing became profitable for the first time not too long ago.

The issue for Google is that while their search is good, Microsoft has crossed over into the "good enough" space (for the customers, advertisers) and the product (people using the service) are less and less likely to force switch the search engine default to Google. Worse, the back stop efforts that Google has been doing to protect revenue growth have caused many long time users to become dissatisfied with their user experience. Google's portal portfolio (News, Finance, G+, Pictures, and Blogger) and cloud offering (GCE) have not kept up with other offerings in the space they are losing share.

All of that summarizes to "web services are becoming commodities" and while profitable (as Bing has demonstrated) it's not going to continue to be profitable enough for Google to do that and any of the other projects that 90% of the other employees work on.

So first Google will start reporting down quarters because no matter how many ads they cram on a page it doesn't improve their RPM, then start cutting projects internally left and right to cut costs, and then they start cutting more of the benefits, and then they start downsizing groups to stay within the 'profitable' envelope, and like a main sequence star that has run out of hydrogen to burn, the collapse to white dwarf has begun. What Alphabet does at that point will be interesting, but their margins on the G business will only be sufficient to support the G business and not anything else. If they aren't making any money elsewhere then poof.

So when? Can't say, really it depends on them being able to pull out into a sustainable business model on the lower margins of commoditized search. Google seems to understand the threat to the business (given their moves, like Alphabet, changing CFOs Etc.). And they are really smart so if there is a way out they may be able to find it, and they have enough cash to "coast" for a long time (look how long Yahoo has coasted right?) But a lot of these things end up being additive, the shine goes off of working there, a lot of solid people leave and then you can lose the ability to change fast enough to avoid your fate.

Companies that pull it off (re-inventing themselves) are much rarer than companies that auger into the ground.

> Google has been losing margin (hence profitability) in its search advertising business that powers everything it does fairly rapidly over the last 6 years. They have kept revenue/cash flow going/improving over that same period by putting more and more ads on their properties, dumping things which aren't making money, and trying really hard to push many of the moonshot projects into profitability.

Google is trying to pull off a Saudi Arabia: make as much profit as they can and pour said profits into R&D (tourism) so that when the time comes and people are not interested as much as now in AdWords (oil), the "moonshot" investments will have unlocked new sectors where profit can be made.

I don't know about Saudi Arabia's plan but pretty much Google is in a 'find something else or die' mode. We'll see.

MicroSoft made a major bid for Yahoo several years ago, but Yang want more money. MicroSoft hoped there would be synergy between combining MSN and Yahoo.

What's the difference aside from the tax liability? Either way you wind up with two companies. One with the Alibaba shares, and the other with everything else.

There is no difference aside from the potential tax liability but the tax liability is potentially huge. We're talking over $9bn.

Matt Levine wrote a good piece on this a week ago: http://www.bloombergview.com/articles/2015-12-02/yahoo-is-lo...

Totally agree that any shift in the tax liability is significant. But people seem to be discussing many other consequences now:

Does this mean the end of Yahoo?

Is it being acquired?

Are they shutting down Flickr or Tumblr?

Why would this change make any difference to those questions?

> Why would this change make any difference to those questions?

I don't think it does. I think the difference is that Starboard suggested that Yahoo sell its core business - http://www.wsj.com/articles/starboard-urges-yahoo-to-drop-al... - and Verizon's CFO suggested that they might be interested in buying Yahoo Core if it was put up for sale - http://www.bloomberg.com/news/articles/2015-12-07/verizon-wo...

Right, it sounds like you agree with me. But most of the rest of the comments on this article suggest this is a significantly meaningful change.

The symbolism is pretty visceral. People knew intellectually that the AliBaba shares were worth much more than the core yahoo business, but this really pounds it home.

Any reason I shouldn't see this as a complicated tax dodge? Simply more multinational pilfering from public coffers? Why shouldn't the Alibaba capital gains be taxed?

I assume your question was intended as rhetorical, but there's an actual answer to it: because when the owner of the Yahoo stock (or a hypothetical Yahoo holding company for Alibaba stock) sells his shares, he will pay tax on his gain from that holding.

To turn the question on its head: why should some capital gains be taxed twice and others once (or in rare cases, three times or not at all)?

I thought Yahoo's stock price would rise on this news (because it removes the uncertainty that was overshadowing the original Aabaco spin-off plan) but, despite a brief opening spike, the stock is down on yesterday's close.

On the conference call this morning, the management team sounded really downbeat. I expected them to sound positive and optimistic, talking about unlocking shareholder value and focusing on Yahoo Core but they sounded like somebody had died.

As of this moment, the market value of Yahoo's stakes in Alibaba and Yahoo Japan are $32.5bn and $8.67bn respectively, while Yahoo itself has a market cap of $32.37bn.

To quote Matt Levine, "the whole point of Yahoo as a company right now is to not pay taxes on Alibaba. [...] If there was a way to avoid paying taxes on the Alibaba shares that involved burning all of Yahoo's actual businesses to the ground, Yahoo should do that all day long, and then do it again the next day. It would still add shareholder value."

"And the market, right now, is valuing Yahoo as though it will fail in that mission, which is its only mission."

Source: http://www.bloombergview.com/articles/2015-12-02/yahoo-is-lo...

What's this mean for a company like Polyvore, acquired a couple months ago?

I wonder what will happen to their fantasy football product. It's wayyyy better than their competitors

It is odd that Yahoo's stake of the fantasy sports market constantly goes unmentioned while daily fantasy startups like Draft Kings is currently bathing in VC cash and media coverage.

> daily fantasy startups like Draft Kings is currently bathing in VC cash and media coverage.

They're currently bathing in legal battles and will probably be out of business in very short order. It's a liability for Yahoo, not an asset to brag about.

That depends. I thought the same thing would happen to Uber, but they've used their rapid growth and VC money to fund lobbying efforts to change the laws around taxi regulation. As I understand it, these FF startups are attempting to exploit similar loopholes in Internet gambling laws as a short-term fix while they lobby to change the law in their favor.

Uber was never declared illegal gambling by multiple US attorney generals. They fight corrupt local politics, not well tested gambling laws. The only reason the execs aren't in jail already is because they have very well connected investors (which helps Uber as well!).


fantasy football is a game of skill, NOT a game of chance

Yahoo is in the business of running fantasy football: a service which adds up points and tell you whose team wins.

Draft Kings is in the business of running a fantasy-inspired gambling scheme: people pay them money, and some fraction returns to the guy with the most fantasy points.

Market share isn't comparable here; only one of these is an actual profit center. (I have no strong opinions on the viability of DraftKings/FanDuel, but they are plausible moneymakers on their own, Yahoo or ESPN fantasy aren't, other than as a source of ad eyeballs.)

You know, that is strange. Yahoo has a much much larger share of the traditional fantasy market, as well as a daily fantasy product. Not sure how the money aspect of it compares with FanDuel or DraftKings, but you would think they'd be able to leverage that in some way. Maybe a smaller spinoff company would be more likely to do something with that

That's the point I was trying to make. Yahoo has first mover advantage in having their own infrastructure for calculating scores and player statistics, not to mention a large base of users. Surely their fantasy sports products would be of value to companies looking to get a piece of the online sports gambling industry?

Is this a harbinger for darker times to come? Or is it simply Yahoo's time finally? I think there is still value in Yahoo it's just expectations vs market reality to me are at odds. I don't know what I'll set my grandma's homepage to now.

Watching Mayer on CNBC right now. Really sad, she has that 1000 yard stare look in her eyes.

I don't like this expression, but weren't the "optics" of that just terrible? She looked and sounded really really tired. The Chairman is not telegenic AT ALL. And they were sitting about as far apart from each other as possible while being at the same desk.

Yeah, the body language, positioning, phrasing....her constantly referring to what the board was going to do..it was just a bad look.

She probably IS really tired (between the demands of pregnancy and the late-night boardroom fighting).

And she's probably dealing with a lot of anger around not getting to do her turnaround. Whether they were working or not, she was surely emotionally invested in her efforts to rebuild Yahoo as a company and now that is being rejected.

It's devastating when you are pouring your heart and soul into something and then the company just kills it and it's beyond your control. I'm sure a lot of us have been through that (I've been through it twice now, at Palm when HP killed webOS, and at Nokia when they announced they were giving up on phones), and I don't think it's any easier at the top level.

Though those eye-watering golden parachutes can't hurt...

That's how Im reading it. She put up a great fight and did better than I expected her to do. Every aspect of the job would've been a fight. I'd have only done it if I was paid plenty on entry and exit. She's gonna need quite a vacation after this.


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