Marissa Mayer’s Plan for Yahoo Takes Hold
nytimes.com
nytimes.com
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...
[2] http://www.businessinsider.com/marissa-mayer-on-henrique-de-...
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.
You have to read between the lines even when reading between the lines: The investors are really saying that they don't believe she would deliver decent ROI on the BABA cash.
It doens't necessarily mean that Mayer will generate no value, since non-BABA Yahoo had negative value even before Mayer started.
"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."
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.
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).
Yahoo has been profitable to the tune of over a billion dollars a year for a LONG time.
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...
I'm not saying that is what is happening here or that Mayer's strategy shouldn't be questioned, just responding to the "no one said 'because she's a woman' so it can't be sexism"
There's no shortage of sexism out there, but it's dangerous to jump to the conclusion that any criticism of a woman is automatically rooted in sexism. That doesn't do social progress any favors either.
You can see the same thing happening with President Obama. All of the people who criticized him for his race directly have all but disappeared after his first few years in office. Now you get people who criticize him in more indirect ways. It's like natural selection of bigots, you need to figure out where the line of social acceptance is.
Again, not saying anything about Mayer in particular. Just that the parent had said "it can't be sexism because no one mentioned that she's a woman" isn't a rational train of thought. Of course no one would directly mention it.
Maybe. When she first came on board, there was lots of gossip about her having a baby and being a CEO and all that. I personally think that was unfair nonsense.
However, I do have a problem with how she generally treats people and I have a problem with the relentless self-promotion she seems to spend much of her time on.
If it's unfair to talk about her being a CEO with a baby just because she's a woman, why isn't it unfair to talk about the uncountable number of fashion magazine covers and fashion focus she seems to have plenty of time for? (I understand of course that there's a bit of a feedback effect from the media on this, but really, just run the company and ignore the noise).
She's obviously very smart, but I worry that some of her personal interface issues may overwhelm all that. All the best business decisions in the world may still turn into a failure if you alienate your people by reading nursery rhymes to them and treating them idiot children.
Larry Page does fashion magazines too. And don't pretend Fortune isn't a fashion magazine.
I don't know, I'm obviously not the target for that kind of cult-of-personality marketing strategy, but I think it's a huge waste of time and as a stock holder it makes me grit my teeth every time.
I don't really mind the occasional interview, I think that's important for a business leader to do, especially a large publicly traded one, but at the same time, prancing around in high-end boutique clothes is not where I want my corporate leaders to be spending their time.
(and before you complain that I'm trying to dictate what they do in their free-time, I'm not, these magazine covers and interviews are very much part of their corporate work)
For example even when dealing with Washington, star appeal goes a long way to getting people to take you seriously and to listen to you.
As a similar example, take Steve Job's fame and how he was able to use it in order to close deals that an unknown CEO from an equally large company would never be able to do.
I agree. This article is very positive, but in the past, when I've read a lot of her criticism, I have often wondered: is this being said because she's a woman? Would they be saying similar things if she was a man? And the answers, often, are "yes" and "no".
True, but that's not really what this article does. It's mostly supportive.
One reason (among many) she is prominent is the fact she is a successful woman in tech.
In other words, I don't feel the criticism is because she is a woman, but I do think she's more in the spotlight than her predecessors because she is a woman.
It almost seemed like a trick to me, convince the world that things are really dire at Yahoo! then whoever you bring in is going to be a hero unless they are completely incompetent because things weren't that dire. They had both cash and revenue... and an f-ton of traffic and eyeballs. They definitely weren't growing at internet rates though.
I'm not saying they hadn't bought a lot of stuff that they didn't need and they didn't need to kill some products and focus but dire?
I would say the hate stems from her pushing a policy of ending working from home. A lot of companies followed and it really pissed off a lot of devs and ops people.
It will be interesting to see if her strategy pays off or not. It is certainly bold.
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.
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
Edit: maxerickson pointed out my wrongness. YHOO will be much more expensive, but the 10x number was in error.
The market cap doesn't necessarily capture the takeover price, but I doubt it is wrong by 10 times.
Let's not pretend like Yahoo is a $45B company. It is consistently valued between +/- $5B.
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.
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.
Buying Yahoo today for anything less than $65B would be cheaper than the previous offer.
I was agreeing with you, and my point was that Yahoo is today still an extremely cheap buyout target. Any argument that MM has increased the market value of the US operations (which is the part she actually runs) appears unfounded.
That said, I hadn't realized MSFT offered so much before. I thought their last offer was when YHOO was still at 17, so I was incorrect.
I think a buyout price will be somewhere in the range of 80-100bln.
"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?
Still would like to know what products saw this growth...