How much more time does Marissa Mayer have for Yahoo! recovery?

Stuart Lauchlan Profile picture for user slauchlan July 26, 2015
Summary:
Marissa Mayer is running out of time as profits collapse as Yahoo!'s Alibaba cushion nears its end.

Marissa Mayer
Marissa Mayer

So how’s that famous turnaround going at Yahoo!?

Pretty good, according to CEO Marissa Mayer as she points to turning a $270 million profit a year ago into a healthy loss of $22 million. That's  on total revenues up 15% to $1.24 billion, which seems healthy until you realise that the  revenue number drops to $1.04 billion after deducting payments to content partners, leaving year-on-year revenues essentially flat.

Then there’s the elephant in the room - the value of Yahoo!’s stake in e-commerce giant Alibaba. Strip that out of the equation and Yahoo!’s basically worth nothing.

Yahoo! has officially filed with the Securities and Exchange Commission (SEC) to spin off its 15% stake in Alibaba as a standalone company, Aabaco Holdings. By doing this, Mayer and her team hope to avoid paying billions of dollars in tax that would be result of selling off the shares and having to pay back cash to Yahoo! investors.

This leaves two problems for Mayer. Firstly, that tax break is far from guaranteed. Secondly, if the spin-off occurs, the she loses a massive financial cushion. in other words, she’s rapidly running out of time to show that she can balance the decline in desktop display ad revenues with new revenues from mobile and video.

To that end, Mayer’s latest gambit has been to appoint a Chief Revenue Officer in the shape of Lisa Utzschneider, best known for revolutionising advertising strategy at Amazon. She’s been at Yahoo! since last year in the role of senior vice president of sales for the America’s region. Her new role will see her lead Yahoo’s sales organization globally.

For her part, Mayer insists that Yahoo! is innovating on new ad formats that will deliver return:

With native video ads, Yahoo! combines two of the most engaging digital formats, so brand content can be as compelling as a video and as seamlessly integrated into Yahoo!'s properties as our Gemini native ads. A recent study showed that viewing video native ads on Yahoo! increased brand favorability up to 50%, and purchase intent up to 28%. With video app-install ads, app marketers and developers can show how their app works with a video and then urge users to install. This enables them to promote their apps across Yahoo! in thousands of other applications through Yahoo! Gemini. Our research shows that consumers who download an app after watching a video use the app 40% more often and 20% longer for each session compared with other install ads.

She also points to a tie-up with the NFL as an example of the sort of innovation that Yahoo! is looking to in content delivery with Yahoo! as the first live stream platform for a game:

Through this partnership, the NFL leverages our global audience of over 1 billion users, our diverse portfolio of digital advertising capabilities, and our delivery platforms across all devices to ensure that fans can watch the game wherever they are. On October 25, the Buffalo Bills and Jacksonville Jaguars will face off in the NFL International Series in London and it will be streamed live and for free exclusively on Yahoo!. We're confident that our partnership provides the ultimate football experience.

The fandom of the NFL is just immense, and so we've been working very closely with them to understand how the experience should be presented, how we should make it available to our different users, where on our site we should make it available. I expect it will be reasonably immersive across Yahoo!, and, overall, I think that it's about delivering a beautiful product that it rivals many of the other ways that the NFL delivers their content, a really seamless experience. And we'd also like to do some things that are innovative, in particular, around our potential ad partnerships to support the game.

My take

Mayer insists:

Yahoo’s transformation is well underway and overall I am very pleased with our progress.

Well, someone has to be, so it might as well be her.

Once the IRS rules on the Alibaba stake and the spin-off, Mayer and her team will be fully exposed to shareholder unrest. They’ll be considerably less willing to put up with quarter after quarter of upbeat predictions and claims. Laid bare against the soaring growth at Facebook and Google, Yahoo! remains languishing in the slow lane, picking up the crumbs left behind by the other two.

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