In the past year, several tech companies that once seem inviolable have fractured badly—Research in Motion and Nokia most notably. Yahoo, which yesterday announced a surprising and energetic choice of Marissa Mayer as its new CEO, is not in such dire straits, but only just. Its revenues have been on a multiyear secular decline, occasionally flowing, mostly ebbing; it lost the battle with Google as a search engine; and its content, while stellar, may be unable to support its current structure and identity. Mayer is a bold hire, and visions of another turnaround, that of Apple in the late 1990s, must surely be a dream. The question will be whether that dream has any chance of becoming real.
It was only 16 years ago that a new company called Yahoo founded by a couple of grads barely out of college went public, in April 1996, just as the Internet bubble was inflating. Yahoo soared, and in early 2000 it was worth a stratospheric (and yes, somewhat absurd) $130 billion, which it has never matched.
Yesterday, the once-central Internet company announced its new CEO after a troubled four years that saw one CEO fired for failing to revive the company’s fortunes and another canned for fudging his academic credentials. It also has seen board turmoil, with activist investor Daniel Loeb demanding new directors and finally moving beyond the no-longer-constructive voice of founder Jerry Yang, who will forever be lauded and praised for founding the company with David Filo and forever be criticized for turning down a $44 billion takeover bid from Microsoft in 2008.
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The new hire, the sparkling Silicon Valley Google executive Marissa Mayer, who was employee No. 20 at Google and at the ripe old Internet-era age of 37 is tasked by Yahoo’s board with restoring the vitality of a franchise and a brand that are on the precipice of irrelevancy and viability.
The company has much going for it: it has brand recognition, hundreds of millions of regular users who follow any number of its multiple content verticals from finance to sports, and more than a billion dollars in annual earnings, mostly from advertising. Yet in a world where content has and continues to proliferate, what edge does Yahoo have?
One answer has been that it is, at best, a media company par excellence. That was certainly the expansive vision of former CEO Terry Semel. But few non-diversified media companies have been in a happy place for the past five years, depending as they do on advertising dollars that are pickier about targeting consumers. Overall ad spending online is growing, but in a competitive landscape that makes 20th-century newspaper, magazines, and television look positively tiny and provincial. Yahoo competes against thousands of outlets for mind share and eye share, and sheer size isn’t enough.
Other once-giants are struggling to meet these challenges as well, AOL most notably. It may be that user loyalty, just enough ad dollars, and constantly creative and bountiful content will be sufficient to maintain the franchise, and that all Mayer needs to do is align costs with a more modest expectation of future revenue and the company will at least survive, if not thrive.
The problem is that the ecosystem in which Yahoo exists is the opposite of static: it is frenetic. The new becomes old with startling alacrity. The social-media gurus of today, be it behemoth Facebook or the thousands of apps and sites that proliferate like algae, see Yahoo the way Yahoo saw the Des Moines Register and VHS machines. The next wave has passions and interests elsewhere, and with that comes next generations, new demographics, and new consumer habits. It is difficult just to maintain in a world dedicated almost too zealously to the principle of creative destruction.
Yahoo is not in a death spiral like BlackBerry, and after severe erosion between 2000 and 2010, its share losses have slowed and occasionally reversed. And of course, it is still profitable. That provides ample space for reinvention; yet the absence of acute crisis can be its own impediment to radical and necessary change. Apple truly was almost finished when Steve Jobs returned, messiah-like, in 1997, and the situation was so bad that he could credibly argue for his strategy or bust.
Yahoo may soon be in that situation, but not yet. Mayer does have the advantage of a revamped and energized board with experienced media and Internet executives, as well as financial acumen, that chose her with an eye to a viable, dynamic future. Now it will be up to her to devise and execute a strategy, persuade nervous institutional investors to stay the course, and energize a workforce that has had its confidence and self-image sorely dented in the past four years.
It would be heartening to see Yahoo and Mayer succeed; she is a young star and a rare woman in a largely male world, and Yahoo remains a compelling and diverse platform. But in the unsentimental world of revenue, stock prices, and extremely changeable consumers, it is easier to forecast hard times for the company. For every Apple that pulled back for a death spiral, there are dozens, hundreds, that crashed, burned, and went unlamented save by the few who cared deeply.
Yahoo, the quirky child of two quirky twentysomethings in a heady decade that redefined how people communicate, learn, and know, is now middle-aged, developing a paunch and rife with ailments that may signify something seriously wrong. In hiring Marissa Mayer, the board is looking for an elixir of its lost youth and its future vitality. She is likely the single best choice they could have made. Whether that is enough, we will know before she turns 40.
