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Mayer’s ‘Shopping Spree’ Brightens Yahoo!’s Long-Term Outlook

Sunday - 6/16/2013, 1:25pm  ET

Marissa Mayer has been in the thick of Wall Street debates since her appointment as Yahoo!  CEO last year. A section of analysts have fully thrown their weight behind her acquisition and human resource restructure strategies while some have clogged the media with all sorts of negative commentary on the same. Despite the evident divide among analysts on Mayer’s strategies, investors are, for the most part, bullish.

Since July 16, 2012, to date, Yahoo!’s share price has grown around 74%. There is some real daylight between Mayer’s turnaround performance and that of her predecessors. And even as Yahoo! follows through with more acquisitions, the rewards of this strategy are slowly but surely gathering on the horizon.

It’s all about timing

At present, I wouldn’t say that things at Yahoo! are all that rosy. E-marketer contends that Yahoo!’s stake in total global ad revenue dipped to 3.1% from 3.4% in 2012. This came even as Google increased its share of the pie from 31% in 2012 to 33%. Similarly, social media giant Facebook increased its share to 5.1% from 4.1%.

Unlike her predecessors, Mayer isn’t pressing her staff to hastily advance innovative products that can level the playing field and gnaw into competitors’ ad revenue in the near-term. Instead, she is focusing on setting a solid platform that will stage future market share battles. In my assessment, this approach is wisdom at its best. It makes no sense to wage a direct battle against a giant like Google at this time.

Google can easily leverage its position in mobile to seal Yahoo!’s entry points into the mobile front. As it is, YouTube, Google’s video-sharing service, has tripled its ad sales on mobile devices over the past six months alone. And considering Android’s growing user base, there is no denying that Google’s momentum in mobile hasn’t fully played out.

Facebook mobile, on the other hand, despite receiving criticism at the outset, is finally securing a footing. E-marketer projects that Facebook will earn $2.4 billion in mobile advertising this year, this will signal a more than 400% increase compared with 2012.

Yahoo!, despite having an inherent ability, should maintain the temporary tepid disposition that Mayer has established. If it goes on the offensive, both Facebook and Google will seal the entry points into the mobile sector. Considering that mobile has now become the primary point of contact with consumers, Yahoo! would greatly lose out if its entry was thwarted. This would not only set things out of order, but it would suppress turnaround prospects as well.

Before Mayer takes an all out aggressive stance on mobile content and subsequent ad deals, she will have to make sure that she has the arsenal and strategic advantage. It’s all about timing.

Beefing up the arsenal

The reason why investors are unmoved by suspect reports and recurrent negative outlook on Yahoo! is that they know what’s brewing under the acquisitions and human resource restructures. And more importantly, they know it will be instrumental in securing the market in the long run

If you take a more definitive look at all the 12 companies that Mayer has acquired since her tenure begun at Yahoo!, you will realize that there is very little overlap in the markets that these companies previously addressed. This means that Yahoo! is building raw numbers; numbers that it intends to transform into active users later on.

For instance, her late 2012 acquisition of OnTheAir, a mobile app that allowed users to host online talk shows, allowed her to rope in users with interests in discussions on industry trends. This suggests a working demographic. In another case, Mayer oversaw the acquisition of Astrid task-management app, which again addressed professionals with daunting schedules.

In the most prolific acquisition, Mayer signed off to the $1.1 billion Tumblr acquisition. With 117 million unique global visitors each month, Tumblr again presented a totally different demographic. Tumblr nests a younger demographic relative to Yahoo!. In addition, it mainly has content revolving around arts, food, music, and travel. Yahoo!, on the other hand, primarily concentrates on finance, news, and sports.

This rich mix of unique content at Yahoo!’s disposal, coupled with all the talented engineers and entrepreneurs that it has added to the company, will allow it to tailor its content moving forward. I believe that it will be able to accurately personalize content for all its users in the near future. This will transform the raw numbers at its disposal into active users. What’s more is the fact that Mayer has worked on overhauling the work culture at Yahoo!. She has also stamped out the fear of layoffs during the turnaround and in the process motivated Yahoo! workers toward achieving organizational goals.

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