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Yahoo: When CEOs Make Mistakes

CEOs aren't always right, Yahoo's history certainly proves it

8Dec

On July 21 2014, Eric Jackson uploaded an article on Forbes about Yahoo, a company he has had an on-and-off stake in since 2006. Jackson is a harsh critic of Yahoo's CEO, Marissa Mayer, who he believes has done little to help the company's floundering position. In 2014, he claimed that the valuation of Yahoo's core business had fallen from $7.3 billion to $500 million, that she had failed to tackle the company's overstaffing issues, and that her decision to sell her own shares in the company - she sold roughly $11.6 million worth of shares in Yahoo in 2014 - had given off all the wrong vibes.

Yahoo's decision to invest in Chinese e-commerce giant, Alibaba, has been its saving grace. The company's 27.63 billion valuation masks the fact that Yahoo's core business has fallen even further recently, with many analysts claiming that it's worth less than nothing - or negative $3.5 billion. When Alibaba went public, Yahoo got a much needed cash-injection. Mayer hired McKinsey & Co to help shake up the company's strategy, but the advice given was not what she had expected. Basically, they told her to sell up, something Jackson had said in 2014. And that wouldn't necessarily be a bad idea. If Yahoo's core business is worthless and showing no sign of picking up, it could be an interesting target for one of the tech industry's major companies.

It would be unfair to blame Mayer for everything. Yahoo's problems date back to long before her arrival. As they looked to expand their portfolio, new technologies were handing greater power to startups. Yahoo had many irons in the fire, but had lost its core focus. As Nicholas Carlson states: 'Yahoo was losing out to eBay in auctions, Google in search and Craigslist in classifieds. Then Facebook came along, replacing Yahoo as the home page for millions of people.' It's been a shambles since. Yahoo's last CEO, Scott Thompson, lasted just five months, resigning under a cloud of suspicion after his qualifications were questioned by a major shareholder. Thompson was the company's forth CEO in five years. The problem has been the same for all of them; Yahoo's advertising is no longer a force.

In July, Mayer celebrated three years as Yahoo's CEO, making now as good a time as any to take stock of the former Google prodigy's time at the company. Since her arrival, Yahoo's social media strategy remains focused on Tumblr - a site it acquired back in 2013 - which has limited its scope for customer communication. According to Forbes, the mobile app hasn't been a disaster, but still reaches just 10% of internet users.

Mayer's approach to the company's workforce has been ruthless, but justified. In fact, she was criticized by Jackson for not getting rid of enough people. She has slimmed the company down by 29% by using stringent performance based metrics to separate weaker employees, while also removing parts of the business which had shown no promise of adding value.

More than anything, Mayer will be judged for her ability to drive revenue and profitability. And recent reports would indicate that she's done neither. SunTrust analyst, Robert Peck, states: 'At first glance, it appears that Ms. Mayer has almost tripled the stock price in her three year tenure,” concludes Peck. “However, our analysis suggests the value of the core business has actually declined, by as much as 50% (or $1.5 billion), to the extent that the core business is now almost free.' The taste in the shareholders mouthes is likely to taste even more bitter considering that Yahoo has spent around $6 billion under Mayer.

An impossible job? Maybe. But Mayer has still made her fair share of strategic mistakes throughout her tenure. 

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