Once upon a time, Yahoo! was worth $125 billion. Today, its core assets were sold off for a paltry $4.83 billion. (To put that in context, back in 2008, it turned down a $44 billion offer from Microsoft.)
The winning bidder is Verizon, which will combine Yahoo!’s content and advertising assets with those of AOL, which it purchased for $4.4 billion last year.
The deal is the completion of a kind of destiny. Two years ago AOL CEO Tim Armstrong proposed a merger-of-survival with Yahoo!, but the idea was rejected by the firm’s CEO Marissa Mayer, then still working through one of an ever-changing series of strategic turnaround plans.
Mayer, who was openly reluctant to encourage a takeover of Yahoo!, today calls the Verizon deal "poetic" and says she intends to hang on at Yahoo!, telling employees:
I’m planning to stay. I love Yahoo, and I believe in all of you.
Rather more telling perhaps is that Marni Walden, who is head of product innovation and new business at Verizon, will head up Yahoo! inside Verizon and report direct to Armstrong. She told reporters that the new management team shape is not yet determined.
The smart money has to be on Mayer walking away, complete with $57 million compensation for her troubles, upon completion of the deal, but caretaking the company until that process is finished. Yahoo! will be retained as a brand by Verizon, but the operating company itself will exist as the owner of a 35.5% stake in Yahoo! Japan and a 15% interest in Chinese e-commerce giant Alibaba.
Verizon’s move will double its digital advertising and marketing clout, but still leave it trailing behind Facebook and Google. Yahoo!’s share of the digital ad market is currently around 1.5%. According to data from e-marketer in March, Yahoo’s worldwide net digital ad revenues will fall nearly 14% this year to $2.83 billion, from $3.28 billion in 2015. In contrast, Google will see a 9% increase while Facebook will be up by nearly a third year-on-year (31%).
It’s ironic that so much of the damage done to Yahoo! will be attributed to the rise of Facebook and Google, both companies that were, at one point, offered up on a plate to Yahoo! as potential acquisitions in the days when they could have been afforded - Google was on offer for $1 million in 1997 while Facebook was up for grabs for $1 billion in 2006!
Mayer’s time at the top of Yahoo! has been the cherry on the cake in terms of bad decisions, but her predecessors showed equal aptitude for doing the wrong thing. You can fault Yahoo!’s leaders for incompetence, but by heavens, not for consistency!
Prior to Mayer, there were plenty of those leaders. Since 2008, there were two CEOs and two interim bosses before Mayer was brought on board four years ago in July 2012. She would, it was proclaimed far and wide, turn the company around.
I’ve noted before that while many of Mayer’s decisions have been hugely questionable, I don’t actually think that anyone could have rescued the firm. The damage was done way back in the mid-noughties and it was too long a road to travel back.
But there’s no shortage of dubious strategic moves to choose from during that four-year tenure. The big mistake to dominate the latest earnings call last week was the latest write-down on the $1.1 billion purchase of the essentially un-monetizable Tumblr, but that was only one of 53 companies that Mayer bought during her time as Yahoo! CEO.
She also shut down 41 of those.
As with any terminally-ill patient, there’s a mixed emotion of relief that the suffering is over, tinged with a sense of regret that it came to this. For those who didn’t live through the original dot com boom, it may be difficult to reconcile the idea that Yahoo! was the future once. Like AOL, it was dealt a fatal body blow with the dot com crash, while upstarts like Google and Facebook ate its lunch.
Marissa Mayer will go down as the person who finally drove the firm into the ground, but that’s only part of the story. She made some horrific unforced errors, both in terms of the business, but also as a Silicon Valley leader. This was a woman CEO who banned Yahoo! staff from working from home, while simultaneously installing a personal creche in her office so that she could bring her own child to work. Then there were the Marie Antoinette-like photo opps on a throne-like chair at the vastly-extravagant company Christmas party last year (see above) while yet more employees were waiting for dismissal notices.
While she will leave Yahoo! under a cloud, having failed in the essentially impossible task of saving the company, there are nonetheless those who view Mayer highly. It’s difficult to remember now, but her appointment back in 2012 was greeted by many commentators as Yahoo!’s saving grace. Salesforce CEO Marc Benioff, a man whose judgment I respect, rates Mayer as a talent and said that he’d hire her in a second, an option that may now be about to open up!
For Verizon, the challenge now is how to monetize its new assets. For all its problems, Yahoo! still has a massive user base and generates vast amounts of traffic as the third largest internet property in the US. Mayer’s focus on the MAVENs businesses of mobile, video, native and social definitely provides a base from which to build, even though in negative growth now, while some of its innovations in programmatic advertising might well be exploited profitably in more capable hands. But Tim Armstrong has a massive job on his hands and the odds are stacked more against him than in favor.