When you think about technology companies these days, it’s unlikely that Yahoo! springs to mind. Apple, Google, Facebook, Microsoft, even Amazon, are certainly more obvious choices.

Mention Apple, and you think of iPhone, iPad, MacBook, Apple Watch, iTunes—each product line a multi-billion dollar business in its own right.

Google? Search and online advertising giant. Purveyor of YouTube, Android and ChromeBooks. Shaper of the future!

Facebook? The king of social media.

Microsoft? The 800-pound gorilla of PC operating systems and productivity software!

Amazon? The 800-pound gorilla of online retail!

But Yahoo!? What is it and what the heck has it done lately? What has Yahoo! done in years?

Fair questions, but it’s worth remembering that Yahoo! has a market cap of $31 billion, and annual revenues of $4.6 billion. So the company must be doing something right. Right?

Yahoo through the years

Yahoo was founded in 1994 by two engineers—Jerry Yang and David Filo—at Stanford University. It began as a website dubbed Jerry and David’s Guide to the World Wide Web, which was a hierarchical index of other websites. In 1995, its founders changed the name to Yahoo!, and eventually the site became a popular web portal, where users could find news, weather, stock prices, and more.Yang_Filo

Yahoo! went public in 1996, and during the dot com bubble, its stock price was as high as $118. The company acquired other companies, which enabled it to add e-mail, games, web hosting, special interest group sites, and chat.

The company eventually added search, music, and photo services, and, leveraging its millions of users, was able to turn a dollar through paid advertising services for online commercial sites.

After the dot com bubble burst, Yahoo! struggled and, famously, in 2008, turned down a lucrative buyout offer from Microsoft.

The company transitioned through multiple CEOs, its stock price foundered, it laid off thousands of employees, and Yahoo! seemed to become increasingly irrelevant, as users and paying customers moved to other online services.

Enter Marissa Mayer

In July 2012, an up and coming executive at Google, Marissa Mayer, was brought into Yahoo! as president and CEO. At the time, a Yahoo! press release sang the praises of Mayer as a “visionary leader” with “an unparalleled track record.”

Marissa_Mayer_May_2014_(cropped)Of course, with any new CEO appointment comes unbridled optimism. Given the company’s struggles leading up to the hire, the pressure on Mayer to succeed where multiple other chief executives had failed must have been enormous.

Since her debut, Mayer’s track record has been mixed. She has done things to light fires under her employees to get them to be more productive, creative, and team-oriented. She has focused on improving Yahoo’s mobile apps. She has attempted to expand the company’s media presence, hiring Katie Couric as “global anchor,” and bringing aboard other well-known talents, such as David Pogue as chief technology columnist. She has overseen the redesign of both the Yahoo! logo and the company’s website.

Mayer’s team revamped the popular Flickr website and apps for storing photos, and purchased the microblogging site, Tumblr, for $1.1 billion.

Mayer’s made bold moves, but have they moved the needle? Browse the web, and you can find positive commentary on Mayer’s achievements in her three-year tenure at Yahoo (see here, here, and here, for example).

You can also find plenty of negative commentary. Last December, the New York Times published an in-depth article, and it was not particularly hopeful for Mayer or her vision. Quoting from the article:

Mayer’s plan to restore Yahoo to the ranks of the tech giants had been premised on producing apps that hundreds of millions of people wanted to use. But as the Alibaba I.P.O. approached this fall, Yahoo’s new and updated apps weren’t getting enough traction. The digital-magazine strategy had not taken off, either; few of the strategic acquisitions seemed poised to break out; and Yahoo’s search business, which Mayer hoped to grow to a 20 percent market share, had dropped to around 10 percent. Mayer’s plan to sell a new kind of advertising in apps had been undermined by her trouble building relationships with clients, like Sorrell and Roth. Despite her efforts, Yahoo was still not growing. On July 15, the company reported dismal second-quarter revenues.

Alibaba magic

Alibaba-logoOne thing that Yahoo did right—and which Mayer can’t take full credit for—was buying a stake in Alibaba, the Chinese equivalent to Amazon.

Yahoo bought the stake before Alibaba went public. Today, Alibaba is valued at $200 billion, and Yahoo’s portion is worth $30 billion, give or take a few shekels.

That’s an interesting number, because Yahoo’s market cap is just around $31 billion. Some analysts have surmised that Yahoo, without its Alibaba stake, is worth $0. That’s a sad commentary, given all the efforts that Mayer, and her predecessors, have put into the company.

That, as you might expect, has also brought activist investors out of the woodwork, declaring that Yahoo should divest of all of its holdings, except Alibaba. This would turn Yahoo into essentially a holding company, producing no goods or services. This might benefit the stock holders, but then what?

Would you miss me when I’m gone?

Consider, if you will, a fictitious, but analogous, scenario. Let’s say Apple decided to take the company private, shut down its factories and stores, stop producing iPhones, iPads, and the like, and simply go forth investing its $200 billion cash hoard.

yahoo-disappearI think it’s fair to say that this scenario would be a shot heard round the world. Apple’s loyal customers would cry out in agony, and its 100,000 employees would mostly be out of a job.

The technology world would be the worse for it, and even the global culture would suffer.

I’m not proposing that Yahoo! cuts the same swath as Apple across the global zeitgeist, but in similar ways, a lot of bad things would happen. Yahoo has millions of users, and reportedly sees over 700 million hits to its site each month. It has 20,000 employees. Apps such as Flickr and Tumblr are used by millions.

Likely, however, we are probably witnessing the boundaries to which Yahoo can grow financially and as a cultural icon. It’s best days may very well be behind it.

As the aforementioned New York Times article concludes:

Yahoo grew into a colossus by solving a problem that no longer exists. And while Yahoo’s products have undeniably improved, and its culture has become more innovative, it’s unlikely that Mayer can reverse an inevitability unless she creates the next iPod. All breakthrough companies, after all, will eventually plateau and then decline…For Yahoo, embracing its maturity means settling for a business that earns close to $1 billion in profit every year. It has outlasted other formerly iconic Internet portals, from AltaVista to Excite, and even dwarfs more recent web sensations like Myspace and Ask.com. For a company that started out as “Jerry and David’s Guide to the World Wide Web,” that’s not a bad way to grow old.

That may very well be the right way to look at it. But then again, who knows? Maybe Yahoo will invent the next new thing that will capture the imagination of a new generation. Hiring the next Katie Couric probably won’t help with that, but hiring the next Steve Jobs or Elon Musk just might.

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