[adventureful]

This will play out much like Armstrong at AOL. Lots of flailing around, another attempt at altering Yahoo's trajectory, and ultimately a further devalued company (not specifically because of anything Mayer will do, but because there's nothing that can stop Yahoo's erosion).

At some point the conclusion needs to be reached that the core of Yahoo is the problem. The products that generate the bulk of their sales are at best stagnant with no growth left, and at worst are slowly collapsing. Once that's properly digested, the company then needs to be blown apart and liquidated to the highest bidders.

Maybe there's a smaller core that could be focused on as a source of innovation and growth, but it's definitely not what makes up the bulk of Yahoo's $20 billion market value. If the goal is to generate shareholder value, Mayer should focus on getting her hands around an engine of growth that she can really add value to; a smaller Yahoo where she can drive a few growth products (assuming those can be found first). So much of what Yahoo does is maintaining a flat-lined late 1990s group of products.

[j_baker]

I think the problem at Yahoo has traditionally been too much of a focus on superstar CEOs, and Mayer isn't much different. What Mayer really needs to do is remove some of the focus from her and put it onto the people on the front lines doing the work.

[joelandren]

Armstrong is a sales guy. Marissa is a product person. Yahoo has the budget and bandwidth to incubate great products. I wouldn't count her out based on a sales guy trying to turn around an ad sales business.

[adventureful]

I didn't compare Armstrong to Mayer. I said the end result would be similar.

[codex]

I wonder what advice Michael Dell has for Yahoo.

[erohead]

Success is non-linear! click

[adventureful]

Depends on if you think Mayer has some Steve Jobs magic in her.

[ddt]

Yahoo! and AOL are a classic examples of The Innovator's Dilemma. They can't separate themselves from the immediate needs of their customers to look at the patterns of what's next. They'll never take the leap of faith to do something completely new because they're not in a place where their culture and SOP allow it. The products that made them initially successful can't possibly carry them into the future. http://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

[product50]

Good advice. So according to you nothing can be changed at Yahoo! no matter who comes in. Apple was in a similar situation not long ago and I am sure there were people like you commenting similarly. I am not saying Marissa is similar to Steve Jobs but at least she has the credibility and qualification to make things work. Why comment when you have nothing to add?

[drumdance]

Steve Jobs executed the single greatest turnaround in corporate history, at the company he founded, from which he had been fired ten years before. Betting on a similar result (or even something 10-20% as good) is really no different than expecting to draw an inside straight at the poker table. Sure, it can happen, but it's very unlikely.

Best of luck to Mayer and Yahoo, though.

[wpietri]

Note that Jobs didn't turn around Apple alone. He had built an entire separate company with a strong team and a strong technology. That was vital to the turnaround. In some ways, Apple didn't acquire Next; Next ate Apple from within. Aided, of course, by Jobs knowing the company and its markets inside and out.

And that wasn't enough; 3 years later they got their new OS out, but they were still a small player in their markets.

It was something like 4 years from takeover until they released the iPod, and circa 7 years before the stock really started to take off.

Even Yahoo can survive long enough for Mayer to find some new multi-billion idea, I'm not sure whether key shareholders or the board will give her enough rope to make significant changes.

[adventureful]

Apple is a once in a century example, good luck with that.

And besides, I didn't suggest nothing can be changed at Yahoo. I didn't say that at all.

I said it should be blown apart, and the stagnant 1990s products should go. Mayer should put her talents to work on a smaller core where growth can be achieved with new products.

Yahoo Finance? Yahoo Sports? Search? Yahoo Mail? 1998 era portals? There's no growth there. She might be able to revitalize energy into Flickr and adjust it to a smart phone world, that'd be one existing major product worth giving some attention to (for example).

Unless Mayer has something equivalent to the game changing PageRank approach to search, there's absolutely nothing she can do to improve Yahoo's search product. So what can she do with the existing product core exactly? Not much, stagnation is inherent to most of the product segments in question.

The real simple angle is: ok, what's the gorilla / whirlwind product that's going to revitalize Yahoo? Search? Not a chance. The content niche products like sports or finance? Nope. Web mail? Comeon. Classifieds & jobs? Nope, small potatoes. So what is it? To really grow a $20 billion company, you need to find billions in new profit. Mayer will only find that with new products. Unless you think she can take 1/4 of the search market back from Google or take a huge chunk of the rest of the web email market.

Yahoo needs a blue ocean change.

All the stagnant parts should be sold off for a huge amount of cash. And she should more or less start over and attack something new where Yahoo can own its segment and build a gorilla product with huge growth potential (instead of being 2nd or 3rd (etc) place in everything).

[wonderyak]

They've only stayed somewhat relevant the past decade due to partnerships and these legacy sorts of services. I agree 100% with this. But what are they to do? They aren't Amazon. Try and buy Netflix and battle it out with all the other digital entertainment services?

[adventureful]

They're going to have to literally reinvent themselves. Not in the B.S. wishy-washy way they've proclaimed numerous times. But in the balls out risky reinvention where if you fail, the company potentially gets sold for peanuts. They're not going to get anywhere playing it safe at this point.

The smart phone market is still relatively wide open for new, not-yet-thought-of services. Yahoo could throw their focus strongly that direction and try to matter there, betting on the future.

Buying Netflix wouldn't be a terrible idea, they're cheap these days relatively speaking. They could bring a lot of cash to bear behind Netflix, which could be put to use beefing up their streaming selection.

There are a few potential acquisitions they could do to get pointed in the right direction in terms of products relevant to the future. Yelp and Foursquare for example. They need to be able to properly handle services they acquire however, and perhaps Mayer can do a better job of that than their previous leadership. They'd need to do something more like what Google did with YouTube.

Short of making a dramatic change, it's merely a game of milking old assets for cash and slowly fading away.

[wonderyak]

There was a time, not that long ago, where Yahoo! was in a bad situation. Their search engine was terrible, portals were dying and they were losing mindshare like you read about. The thing is, at the same time they were doing REALLY interesting R&D work (Yahoo! Pipes, YUI, etc).

The impression I get is that in the last few years between the cuts, layoffs and good people just leaving they have virtually no talent left to resussitate the company.

Am I wrong in thinking this? Where is all of this awesome new stuff going to come from?

[cpeterso]

In a day when Instagram can be acquired for $1B, how much would Yahoo have to pay for Netflix? NFLX market cap is about $4.6B with $3B in assets.

[wonderyak]

Well that would certainly cover the 'risk everything to turn it around' idea posited above. I don't think anyone thinks FB didn't overpay for Instagram, it seemed like a desperate move, but then again they were flush with cash and it might be a great value compared to building their own.

[gcb]

i'd disagree with the 'no matter who comes in'... but in real life, who comes in is decided by who is already in.

[wilfra]

Apple derives more than 80% of their revenue (and probably 90%+ of their market cap) from product categories that didn't even exist in 1999.

Yahoo needs to reinvent itself. They have a $19 billion market cap, billions in revenue, a brand with household name recognition all over the World and tens of thousands of employees to do it. It can certainly be done. I don't know that Mayer will do it or that it will ever be done with Yahoo - but to look at their current sources of income and define that as their future is shortsighted. Unfortunately, thats exactly how their investors look at it and it's a big part of the reason why they are in this mess in the first place.