The investors are hoping for a second-coming of Steve Jobs but they are delusional. But they also have a profitable business. Instead of cutting all these verticals, I think they should build on them, as long as they are accretive to earnings. Yahoo has significant name brand recognition, especially amongst the 40-something and older.
Why not just build an entire lifestyle company around this? Yahoo Internet TV, Yahoo Banking, Yahoo Insurance, Yahoo Real Estate, etc. It might not make Wall Street happy because they're not growing 20% YoY but they would become a one-stop shop for everything a person would need on the Internet, and they can capture a lot of stickiness that way. They tried that to a certain degree but never to the amount of commitment that would make it stick. I think they should double-down and get things like banking and insurance in there, as well, so that people who need to pay bills, etc, will all use the same site.
And keep throwing shit on the wall and see what sticks, maybe they do come up with something that revitalizes them like an iPhone.
But their brand is the most valuable thing about them now, why not just expand horizontally into slower-growth but ultimately profitable businesses?
I think this is what Ross Levinsohn wanted to do, but they chose Mayer, partly based on advice from Andreesen that product innovation was the way to go.
He wanted it to stop competing with technology businesses like Google and Microsoft and focus entirely on competing with media and content businesses like Disney, Time Warner, and News Corporation. As part of this transition, Levinsohn wanted to spin off, sell, or shut down several Yahoo business units. He said doing so would reduce Yahoo’s head count by as many as 10,000 employees, and increase its earnings before taxes and interest by as much as 50 percent.
The full article is fascinating as to how they made this critical decision.
The problem with being the Internet Portal for Old People is that old people have a bad habit of dying. So unless you're also the Internet Portal for Middle-Aged People and the Internet Portal for Young People, when the current crop of old people bites the dust, they get replaced by a new cohort who bring along whatever habits they developed while you were ignoring them.
Yahoo is a public company and they are already facing heavy pressure from activist investors (i.e. quick-buck artists who want their profit locked in now). Yahoo had some leeway to try new things when Mayer was hired, maybe even things with a longer term payoff as you're suggesting, but, well, buying a revenue basket case like Tumblr was the main thing they got around to doing.
They are capable of making world class products still that drive revenue. Their fantasy football UI is the best IMO, and they managed to use that platform to drive their daily fantasy gambling that they have tied to it. Hopefully they could repeat it for Yahoo Banking etc.
If they continue chugging along, they're most likely going to get eaten alive by single-purpose companies who have the capability to offer a more refined product, and iterate at a quicker pace. It would be more valuable to investors if Yahoo split into product-specific components, a la HP. The sum of Yahoo's components will be more valuable than the whole, anyways.
Yahoo's been throwing shit on the wall for a long time, and nothing's been sticking. It's no wonder investors are starting to lose their patience.
Older people care about convenience, rather than the "best" product (I know this as an old person). If Yahoo had a decent breadth of product offerings, and if they marketed it correctly, they could keep most of their customers in their ecosystem. It won't work with kids that are used to 5 different chat clients at the same time, but for the people that don't care as much about flashiness and care more about integratedness and convenience, they could definitely win the way against single apps.
Yahoo was somewhat bound to this state when it decided to brand as a advertising company instead of a tech giant.
They had yahoo answers before Quora got popular, they had tumblr, yahoo sports, etc., all of which were market leaders at some point in time but in the end all the potential got wasted due to the direction the company took.
Marissa Mayer's been at the top for 2012, and really is responsible for the direction that Yahoo has taken in the past four years. I have to wonder -- will Yahoo's sale (and inevitable downsizing) play out worse for her, or the people who were merely following her direction?
It would have been really really hard to save Yahoo, but it could have been done. Obviously it will play poorly for everyone short term as many will lose their jobs.
However, just like the fail fast & learn, I dont think she will, nor should, pay a permanent price for this as she is actually a much smarter executive from that experience.
The problem with yahoo has always been well understood, no one knows what the fuck it is. It provides some value to a lot of different groups of people. It came out of Mayer's tenure looking the same way, a big company with a lot of pretty good things centralized in a disjointed way which was a missed opportunity.
Yahoo finance should have been broken into a stand alone site and become an investing portal selling side services to people and market data to others.
Yahoo should have restructured as a news organization and retooled the UI to look like bloomberg.
Fantasy sports should have been split out into a business and either sold to, or transformed into draft kings, etc.
Search engine actually quite valuable if it isnt someone elses results rebranded.
Diverse interests shouldn't be a problem. The media world is dominated by big conglomerates that handle complicated portfolios without stressing over it - because portfolios don't have to fit together to make a pretty picture. It's fine if all the properties are profitable individually.
So IMO Yahoo's problem isn't that no one knows what the fuck it is, but that it's really a Big Media conglomerate that happens to specialise in the Internet, rather than an Internet search company that happens to do media but isn't really sure why.
Mayer half understood this, but her Google experience didn't give her the background, the experience, or the insight to make it work. She seems to have tackled it as a top-down engineering (mobile!) and people management problem, instead of leaving the various divisions to invent their own best profitability strategies.
I don't know - maybe the board would have done better with a former Viacom exec, or someone with a similar background.
True in a sense. I would frame it that the media world is the internet and there are many channels on it.
Larger organizations have fared quite poorly in this environment, especially in a non specialized space reaching consumers.
Bloomberg is a data & tech company with a fairly specialized clientele for their media. Without viewing there financials I would assume cap iq and the terminal data feed dwarf the media arm.
So my poiny above was that adapting Yahoo finance to serve as a consumerized version of Bloomberg, and cross sell data to finance companies viaban APO would have been helpful.
The sports media and application ecosystem looks like fanduel & sbnatition.
The mail service not sure what to do with maybe keep it in the yahoo ecosystem on main.
Correct. This is just a job. If she gave it her best and more and they fail, then that is just outside her hands.
Edit. no one knows what the fuck it is
Correct again. Apple:iPhone/Mobile. Google:Search. Microsoft:Windows/Software/PC. Facebook: Connection/Address Book. Wikipedia:Encyclopedia. Yahoo and Twitter, while very useful to millions, suffer the same problem.
I don't agree with this sentiment. Rather, I'd say that she tried and failed, and that that failure was as much her fault as it was anyone else's. Saying it was "outside her hands" implies she did the best that was possible, not just the best that was possible for her.
1. She was worth less than they thought when they brought her in. They paid for someone they thought could solve their problems, and she could not.
2. She's worth more now than she was when they hired her, because she does have more experience (this point I agree on).
This means, to me that she's worth somewhere between "what she was really worth when they hired her" and "that amount plus the value she gained by learning".
Given the decisions I saw her make (no remote work, basically firing anyone that wanted to continue their remote work), I'd say she was worth a lot less than they thought she was when she started... and worth a lot less now, even with new experiences.
I actually thought/think a merger of twitter and yahoo would make sense, and I also said a while back they should have merged(square & twitter) but that is off topic.
The thing about twitter is that it has 1/2 of the problems of yahoo, it is pretty well defined as a communication channel and more specifically it is a one to many broadcast channel. It doesn't know how to financially capture value.
Twitter is pretty interesting in that the arbitrary SMS length of 140ish char is pretty interesting from a data standpoint as it ends up playing sort of like XML. Pretty much the way to use data online is that we use 1960s IBM doc authoring language, it got a few tags and some sugar in the late 80s/90s but in reality we add meta tags to meta tags and then read this data. Twitter, due to the char limit actually provides dynamic labels to realtime information flows in a way that is comprehensible programatically.
e.g. <p>Some info</p> is not particularly helpful as the entire <article> and accompanying data needs to be parsed and looked at, and always varies from site to site.
However: In #election2016, I voted for #Trump. Data labels can mirror trends in human readable form and computer processed form. So in the above example, from @example you could state:
Public Opinion of Trump +1
@example is a complete moron.
So it actually ends up playing like a paradigm shift from sql to nosql data in terms of data streams.
What was her net worth prior to moving to Yahoo? I assume she is wealthy from her time at Google, and the move to Yahoo was just because she wanted to work and was frustrated by what her position at Google had evolved to.
Even though Alibaba is Chinese owned, and based in a country whose attitude toward free speech is not something I'd like to spread, somehow I'm more comfortable with them as a suitor for Yahoo than I am with Comcast or Verizon (shudder).
I don't have time to find the source right now but there was speculation that a structure could be found that achieves this. While I may not capture the exact method, it was essentially something like:
* Yahoo would sell the core "Yahoo" piece or businesses components leaving the new Yahoo as just a shell company with just BABA holdings. Essentially, they decouple it entirely.
* Yahoo's components would be sold and then BABA would almost certainly purchase all of the Yahoo stock, which would just be, in reality, a stock buy back from their standpoint.
* The actual Yahoo components would go to whoever bought them, but likely not to BABA.
Not sure how this plays, but it doesn't seem like anyone smart realizes Yahoo core is valuable, or at least has not been publicly announced as a suitor. It does not seem feasible to recap the company in reverse, selling BABA and betting on itself, although I think that is the move personally.
The result currently appears that BABA does a stock rebuy and Yahoo disappears entirely. The employees acquihired slowly look for better jobs over the next year as they work with the acquirer to destroy yahoo by integrateding it into whatever piece of shit idea some executive has.
The issues with all of that Merger/Acquisition stuff are basically tax problems. Anything that locks in the share price of their stake in BABA means they need to pay taxes. The spinoff company didn't get IRS approval, so their only option to avoid as much as they can of that is to peel off the non-BABA parts of the company and then there might be some kind of share deal that could get approval.
Basically, cash for any of the BABA shares means they take a big tax hit. Share deals could maybe avoid this (which is what the "activist" investors are pushing for) but would need regulatory approval and likely to sell or close down the rest of the company.
Greed - there's no reason why Yahoo! cannot operate as a smaller but profitable business - it's never going to be the industry leader it once was but the fact it's still around after all these years is impressive in its own right - a new CEO needs to come onboard and give the company the respect it deserves by cutting a lot of staff, products and services and focus on a smaller set of services that drive a smaller profit.
Yahoo today is a private equity fund first and an operating business second. By that I mean, the vast majority of Yahoo's value derives from investments like Alibaba and Yahoo Japan. The core business is relatively small. You might have to do a deal like this in order to get the core business spun out cleanly from the rest.
Regarding the core business, we're in an era where markets are becoming more winner-take-all meaning scale is your network effect and there are huge gaps between 2nd or 3rd place and the rest. This is especially true in ad tech and ad supported businesses (Facebook, Google, and the rest). From this perspective, Yahoo core is probably hugely more valuable to Verizon or another massive company who can credibly challenge Facebook and Google, than it would be by itself.
In fact if you add all the numbers for the Alibaba and Yahoo Japan, it ads up to less than what it should be, i.e. on its own the core business has a negative value, which is kind of interesting.
No, Core Yahoo is a profitable multi-billion-dollar company in a slowly declining market.
The reason the market values Core Yahoo negative, is because it thinks the current management will destroy capital by spending it on useless acquisitions and costly R&D to become a growth company again.
But accepting that it is a stable company that's going to bring in billions in revenue for years, and just milking it dry is actually not a bad strategy. It's a very boring strategy though.
IPs are still visible. And when you can tie IPs to individual households, addresses, and credit card information there's a lot of information to be gained.
Investors don't think like that, and their opinion is what decides the future of the company. Shares are only worth something if you can sell them at a profit or if they pay a dividend.
A Yahoo with a declining profit margin and market share is worth less in terms of any likely future dividend. So the share price drops accordingly. Normally, this would make it more likely for an outsider to purchase the company as those that bought at the higher price would be willing to see either a small loss or a small profit (depending on when they bought) and close out their position. The purchaser could then sell the pieces or merge with another company or do something to get more revenue later on.
What complicates all this is the shares that Yahoo has in BABA and Yahoo Japan, which set a hard floor on the stock price (and lowers the potential upside for any acquisition, making it hard to find buyers for the whole company). However, they can't just sell out of those positions and pay off some existing investors and/or buy shares, as they would have to pay a hefty tax fee and probably tank the stock price as it tried to find a new floor.
One potential way out of this would be to find a way to kickstart the company growth so it would be valuable enough that investors would hang onto it. That hasn't worked. Another way is to try and just spin off the BABA shares into another company, give those to some investors so they can close out their positions with a profit, and the remaining investors can focus on the business. That got nixxed by the IRS.
So they're basically stuck doing the same chop shop deal that a "corporate raider" might pull, only while taking a huge PR hit and a hit to morale because they're supposed to be the "good guys". Not some "outsider" pulling a hostile takeover.
And why can't the new buyer do that? What makes it greedy to sell the business and let someone else hire that CEO? It's not like they're shutting it down and selling the assets individually.
They could do that, but the problem is that the stock price is too high to encourage someone to buy it wholesale because of the stakes in other companies, but the future earnings potential is keeping it too low to allow investors who currently have Yahoo stock to sell out of their positions without taking a huge loss.
I wonder if outcome would've been different if she didn't bring any new outsiders, but instead worked with the team that was already in place. Perhaps skip a level or two, to tap closer into lower level managers and give them more autonomy.
Yahoo has plenty of smart people itching to do the right thing.
Not really. Marissa came in and spent spent spent to try and make Yahoo! into Google, something it would never be.
She was not a destroyer who came in to trim down to the appropriate level, she was the creator expected to raise them to new heights with all kinds of new ventures and projects.
I kind of feel sad for this company. They had very strong model. Build something that scales to millions of users and offer it for free along with ads. As long as the cost of scaling is less than ad revenue you run a profit.
Clearly marketing and engineering both were strengths here but I strongly feel they lost the control of engineering side. They probably did not invest in tech leadership that was required. This is a sinking ship and can not be turned around.
> Companies such as Verizon Communications Inc., Comcast Corp. and AT&T Inc. are among interested parties, as well as buyout firms including Bain Capital Partners, KKR & Co. and TPG, the people said, asking not to be identified as the situation isn’t public.
So if it's not public, why are they making it public by talking to the press? What do people get in exchange for leaking information like this? I've always wondered.
Sometimes, help later. For example, an ex-Yahoo leaked information to Business Insider in exchange for positive coverage of the startup she was moving to. [1]
In an ideal world, Berkshire Hathaway would have been a suitor, but Warren Buffett doesn't care about Internet companies. Think about the companies Mr. Buffett has owned privately - See's Candies, Brook's, DQ - they make a known amount of money every year and aren't under pressure to make more as long as they preserve their maket position and revenue numbers.
Can Yahoo get its money back from its current CEO? Or did they really pay someone to run this ship aground?
At the time when they were looking, I wrote Jerry an open letter about what I thought could be done. Sure I'm a nobody, but none of the ideas were even, through the chances of good business, implemented. Instead there was a fancy rebranding, and a targeting of women's lifestyle channels. And now this.
I'm glad we have a competitive economy, or else I could imagine Yahoo becoming the service that sucked, but that everyone still used.
The ship has been grounded for a lot longer than the last 3 CEOs have been around. they should have scuttled it and sold it off for parts a very long time ago.
Why not just build an entire lifestyle company around this? Yahoo Internet TV, Yahoo Banking, Yahoo Insurance, Yahoo Real Estate, etc. It might not make Wall Street happy because they're not growing 20% YoY but they would become a one-stop shop for everything a person would need on the Internet, and they can capture a lot of stickiness that way. They tried that to a certain degree but never to the amount of commitment that would make it stick. I think they should double-down and get things like banking and insurance in there, as well, so that people who need to pay bills, etc, will all use the same site.
And keep throwing shit on the wall and see what sticks, maybe they do come up with something that revitalizes them like an iPhone.
But their brand is the most valuable thing about them now, why not just expand horizontally into slower-growth but ultimately profitable businesses?