28 thoughts on “Yahoo — rotten to core? I think so”

  1. Om, I think you’ve got it dead right. There are two fundamental problems at Yahoo.. 1) they’ve lost the engineering / product culture they once had, and 2) the org structure is effed up bigtime. I think Marissa is a great fit for problem #1, but the foundation is too shaky. This is a 10 year old problem there.

    1. Thanks for sharing your thoughts Salim. I think the company is too far down the road to mediocrity. I am just surprised that people (read Wall Street) doesn’t see it or rather doesn’t want to see it.

      1. Yahoo looks good to Wall Street because of margins, revenue, and eye balls. Mediocrity on product is a-ok. for wall street Just look at Wal-mart and every other big box retail store that sells to the “center 40 states.” They sell the lower end of companies’ product lines and they are making some on wall street happy. Look at 1 yr and 5 yr numbers there. I think this is a bit of upper class tech snobbery that comes through and not enough thought of the majority of people.

      2. I’m surprised that your surprised. Wall Street excels at valuing mediocrity — it’s a product of their reliance on the Gaussian bell curve.

  2. That’s it, one anecdote? I’ve heard some ideas being thrown around by junior writers at tech blogs that provide more insight than this, I was expecting more. I actually felt exactly the same way before thought the same before Marissa showed up, but I now believe she has a chance to make something out of this– and has no obligation to explain to the tech media or “community” what her plans are at this time.

    1. I think the problem is much more deep seated and Marissa can’t fix them all. It is crazy to expect her to pull a miracle. You should read my previous posts about Yahoo. I think they are fighting the battle of attention – where they have a lot of competition. We shall see soon how this plays out.

      1. I agree. I believe they are little more than a glorified AOL. And they have an ex-Googler leading that effort too.

  3. I don’t get all of the criticism. Yeah, Yahoo never grew out of its roots as a portal. They didn’t branch into social networking, but the world doesn’t need a whole lot of those. However, with less page views than Facebook, they still generate more revenue than them. Which means Yahoo is a more desirable place to run ads than Facebook. Or twitter.

    People still use Yahoo for mail (despite complaints from the under-30 crowd, email is not going away). They use it for news and stock quotes and financial information (where I just got the revenue #’s for the two companies). They use it for web hosting. Is it rotten because it couldn’t sustain its meteoric growth of its first few years of existence? They even proved to be a good investor, with their return on Alibaba, which the geniuses at Facebook will not match with their much larger investment in Instagram.

    I don’t understand why people expect a stream of hits from companies that have a successful product – there is no formula for creating great web companies, so why hold Yahoo to those expectations?

    As far as being rotten to the core, there is no doubt waste at yahoo, but show me any publicly traded company with $5 Billion in revenue that doesn’t have unneeded employees, or makes bad choices. They don’t exist. There is no formula for great companies.

      1. Ankush, I think you missed the point. I take issue with using one anonymous person’s quote second handed. What value is this? I can’t reflect on the persons disposition, circumstances, whether he was jaded, or what. Did the anonymous person come from a mediocre company of questionable value to yahoo and was venting at the slight, or should I take some anonymous persons view seriously and write a column on him, implying that this anonymous persons views are worth considering because Mr anonymous is supposedly a very reliable source? Not clear on what value is of assigning a label of “rot” to the many people that work there, and attempting to backup the assertion with one anonymous second hand source’s one time experience of what some yahoo representative did or did not do.

  4. The issue with Yahoo is that it is a public company and has to live by a 90 day mandate everyday. The right thing to do is to make it clear to the markets that the next 3 to 4 quarters would stink, and get their act together.

  5. Om – You MAY be right, however; I think you are jumping the gun quite a bit to claim that a turnaround is impossible. Many, many companies in far worse shape have been turned around by a leader determined to make the tough business decisions and reinvigorate the culture. Yahoo is still profitable, touches many millions of users everyday and still has an incredibly recognized brand in the internet space.

    Is it tarnished? Yes. Do they need to make major organizational and product-oriented moves? Yes. That being said, there is nothing impossible about it. Mayer needs to make bold and calculated moves, and the board needs to support her every step of the way.

    I am not making a prediction for or against here, but Yahoo is clearly not a lost cause or someone of Mayers caliber would not have taken on the challenge. A lot can change quickly in the technology space. Hot startups (see Viber, Whatsapp and many more) quickly can generate huge numbers of users. Likewise, many of the heavyweights are spreading themselves quite broadly and may lack focus in key areas (see Google and MSFT). By rebuilding a strong culture, acquisitions (both talent and products) and the right focus on organic products, Yahoo can certainly turn things around. Unlike a startup, the DO have mechanisms to monetize users and traffic.

  6. I don’t fully understand what business Yahoo is in. Google offers search; Facebook connects people; Amazon is a retailer; Apple provides integrated computer hardware. What is it exactly that Yahoo does?

    1. Well Robert,
      Yahoo is a media portal offering news, dating, ckassifieds, stock quotes, email and various other web services to its end users. I.stead of being highly conce.trated in one category it has spread itself thin, and even partnered with others instead of developing its own products.

  7. Warren Buffet Quote: When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

    With that said I’m rooting for Marissa.

  8. For Wall Street there is an underlying value to Yahoo based on the sum of it’s parts — the cash they just received from and their remaining stake in their Asian assets (although Chinese internet stocks probably aren’t considered worth what they were a few months back), their existing cash, the value of the various parts of Yahoo if sold off, etc. Probably around $17 per share. The stock’s at $15.61 today so there is not a lot of perceived downside.

    They are hoping for a turnaround of course but Wall Street is impatient and Mayer hasn’t articulated a convincing enough strategy yet for them.

    At least they seem to be investing in Flickr. 🙂

  9. Yahoo seems frozen in the pre Web 2.0 era. They are not even part of the conversation around Mobile, Social Networks and Big Data. They mostly seems to have “legacy users” who created email accounts there long time ago. Engineering talent can’t be the problem, its the lack of vision. Its a company choose to maintain its legacy systems rather than reinvent it. Marissa Mayer may perhaps inject a new DNA but it will take years, after all Yahoo is not Apple and Marissa is not Steve Jobs.

  10. i think Yahoo can make the serious comeback and the real problem is not deep rooted, it is with cooperate and financial heads. first they are really messed up with money making and ongoing company loses and not thinking out of boxes. second thing, that they are not able to differentiate in between the good products and bad products, i think they are the person who make their decision on the basis of Alexa rankings. If you see with Google and Facebook, they have enjoyed success simply because of parallel branding i.e. you dont call youtube and blogger googletube or googlelogger and you dont call facebook tagtile and instagram, facetile and facegram. they simply remain what they are before acquisition. but with yahoo, they seem to brand everything with yahoo. And that’s make the people feel rotten.

  11. Om, you may be right that Yahoo is unlikely to return to its former status. However, I think you misunderstand Wall Street’s attitude and expectations. If Marissa Meyer can revive the company even a little bit and create even a temporary bump in the stock price, there is profit to be made there. That is what they are interested in. I don’t think anyone on Wall Street expects that Yahoo is going to knock off Google or Facebook and become the “heavyweight champ” of the Internet again.

  12. Here’s an inside view from this recently departed Yahoo: Upper management is completely divorced from Yahoo’s end users, with little idea of what people want and expect from Yahoo. Meanwhile, the long-suffering troops who actually produce, edit and curate the content that 700 million users enjoy every month know exactly what users want, but are ignored, cut to the bone and immensely frustrated by a lack of product and technological support.

    Until Mayer or the next CEO realizes that technology for the sake of technology is not what drives Yahoo’s traffic, Yahoo will continue to endlessly struggle. Om is right when he says the problem is deep, extensive and cultural and that acquisitions won’t cure the disease. But divine intervention won’t be needed if the C-level would just adopt the basics of any mass market business: Taking care of your customers.

    1. @dave60… I think getting C-level to actually get down to the basics is the equivalent of “divine intervention” and I am not being sarcastic. I think higher up the totem people are, less they think with “common sense.”

      1. You just tell it like it is dont you Om! Lol. Love it… When I was younger I was so intimitdated by C-Levels… As I grew older and wiser I realized they are usually not that sharp and sometimes border on stupidity. With the education and experience some of these people have, it simply boggles my mind at the decisions that they make…

  13. I think you have to start with defining what will constitute a successful turnaround. If your measure is that Yahoo again become a market leader, overtake Google or FB in search or social traffic, then you are correct, that would take a miracle and is highly unlikely – we don’t see “old” tech companies come up with groundbreaking new technologies (OK, except Apple, but Apple’s comeback was a miracle). If your measure is can the stock price double over some reasonable span of time and some real value be created (more typically the expectation for a turnaround), then this looks plausible – PE and EBITDA/EV multiples are low, there is lots of leverage in the business model, getting some growth and expansion in the multiples looks like it’s worth betting on from a Wall St. perspective. The old Yahoo we all loved for its novelty and fun is dead and gone; this is a mature but undervalued business that needs a turnaround in the traditional sense.

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