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Lessons to be learnt from Yahoo’s geek tragedy

business Updated: Oct 25, 2015 12:06 IST
N Madhavan
N Madhavan
Hindustan Times

Yahoo’s quarterly profit tumbled to $76 million from $6.8 billion a year ago, when it had a one-time gain linked to sale of shares in China's Alibaba.(AFP Photo)

Last week Yahoo, the original Internet portal, announced a search advertising deal with Google’s new parent, Alphabet Inc, building on an existing search partnership with Microsoft. It reported a fourth quarter revenue well below analyst estimates, raising questions on the performance of Marissa Mayer, who was poached from Google as a savior. The previous CEO, Carol Bartz, was unceremoniously fired by a phone call in 2011.

All I could say was: What a sustained fall!

Two decades ago, Yahoo was in a position to buy the fledgling Google as a pioneering Internet giant, leading media content and search. After declining over the next decade, in 2008, Yahoo famously turned down a buyout offer from Microsoft for an attractive $45 billion. Yahoo’s current market value is $29.3 billion. The value was higher two years ago, mainly on account of Yahoo’s 15% stake in China’s Alibaba Group.

A hard analysis shows that the current market value comes not from its core businesses – which seems have no value at all. Its cash chest is at $5.5 billion, its Alibaba stake is estimated at $22.6 billion and separately listed Yahoo Japan accounts for $2.3 billion. They add up to more than the current market capitalization!

Yahoo is mostly in the news for the personality of its struggling CEO, or for innovations that sound like tinkering – such as an announcement that it has launched a password-free method of logging into its mail and other services.

To think that this company lost the search revolution, the e-mail phenomenon (more or less) and then the social media leap! Yahoo could have been Google, Facebook and Twitter put together had it got its act right. The big lesson: “Tweaking does not solve big problems. Big ideas do!”

Mayer is still trying to work some magic with mobile, video and other emerging businesses where some growth is happening but Yahoo said last week that its foray into original video content has not really worked out. Consider the fact that Amazon, officially an online retailer of products, now has a Studios division that makes TV shows and movies!

Yahoo is still the third largest Web platform in the US after Google and Facebook but it badly needs some magic. My view is that Mayer still thinks technology and not audience, for which perhaps you need a media DNA. Memories of Ms. Bartz in her role may just help her decide faster.