Tag: Yahoo

As Mayer Brings the Pizzazz, Yahoo Waits for the Magic

Posted on July 17, 2012

Yahoo’s hiring of Marissa Mayer — a high-profile executive and innovator ensnared from rival Google — as its new CEO has all the trappings of a coup. But Wharton experts say Mayer will have to move quickly to win the search engine new users and advertisers, and to jump-start product innovation.

“Will Mayer be the one to finally work some magic at Yahoo and restore its glamour in the industry?” asks Wharton management professor Lawrence Hrebiniak, adding that he his happy with the choice. “She brings experience with, and knowledge of, consumer websites gained at Google, a good place to work and learn.”

Mayer’s last post in her 13-year Google career was vice president of the search giant’s local, maps and location services, overseeing product management, engineering, design and strategy. Yahoo credits Mayer — who made Glamour magazine’s 2009 list of “Women of the Year” — with heading up some of Google’s most successful innovations and launching more than a hundred features and products, including Gmail, Google News, and the “look and feel” of the Google experience.

“Marissa Mayer is a great win for Yahoo,” says Wharton operations and information management professor Kartik Hosanagar. “She’s from a relevant domain and is a star exec. She will provide good, positive PR and will help in recruiting some good folks back to Yahoo.”

Prior to Mayer’s hiring, Hosanagar told Knowledge@Wharton Today that Yahoo needed a leader with an “entrepreneurial spark” as CEO. “Marissa is close, but not quite that,” he says now. “She joined Google very early … but she’s been at Google too long and it’s not clear to me she’s the person who comes up with new product ideas and gets them done. I’d have preferred someone who has started and grown a company. Even Jack Ma [founder of Chinese business-to-business trading platform Alibaba.com] would have been a great choice. That said, I think Marissa is overall not a bad choice.”

Mayer will have to hit the ground running at Yahoo, which has struggled to maintain stable leadership at the top and seen a steady decline in revenue over the past few years. “Her focus will be on Yahoo’s core advertising business,” says Hrebiniak. Adds Hosanagar: “The one thing Marissa needs to do is to focus on developing a new winning product at Yahoo instead of financial reengineering, restructuring the organization and the like. Some of the latter is needed, but what will get Yahoo out of this mess will be a new product, much like [the introduction of the] iPod for Apple. Given her background, I think her focus will indeed be on products.”

Hrebiniak suggests that the work done by Mayer’s predecessor, interim CEO Ross Levinsohn, including settling disputes with Google and Alibaba, will allow her to focus on the advertising business.

Closing the Revolving Door?

But Mayer could face other distractions, as well as formidable hurdles to overcome, Hrebiniak points out. “Levinsohn’s being passed over may generate resentment among key managers and employees, which could [lead to] defections and other problems,” he says. “Google and Facebook, which have steadily been stealing Yahoo’s users and advertising revenues, aren’t going away. A frontal attack by Mayer is certainly anticipated and the two formidable foes will assuredly be prepared for Yahoo’s new assaults.”

Mayer is Yahoo’s fifth CEO in as many years, and “a revolving door itself creates uncertainty and possible confusion,” Hrebiniak notes. “Levinsohn, for example, was reportedly in the process of formulating and executing his version of a new strategy. Mayer may upset the apple cart with something new and different, creating confusion and a feeling of ‘here we go again.’”

Wall Street seemed to cheer the choice of Mayer, notes Hrebiniak, but adds that “only time will tell if the trust in her capabilities in a competitive marketplace is warranted.” Mayer has a lot going for her — including a baby boy due Oct. 7 — and has been named in four consecutive years starting in 2008 to Fortune‘s list of the “50 Most Powerful Women in Business.” As one of only 20 female CEOs of Fortune 500 companies, and Google’s 20th-ever employee, “maybe 20 is the magic number,” for Yahoo, says Hrebiniak.

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How Yahoo Can Search for its Growth Engine

Posted on July 13, 2012

Yahoo’s board is on borrowed time to fix its woes — a situation that was no doubt aggravated by the board’s decision not to name a new CEO at its annual meeting on Thursday. Wharton professors Kartik Hosanagar, Eric T. Bradlow and Waheed Hussain have advice for the board on how to ensure stable leadership and reposition the struggling company for growth.

Hosanagar, Wharton professor of operations and information management, states that time is running out for the company’s board. “They need to elect someone … who can bring back some of the entrepreneurial spark in Yahoo,” he says. “Traditional, seasoned management veterans are not the right candidates for Yahoo given all that it’s going through.”

Many expected Yahoo’s board to name interim CEO Ross Levinsohn to the top job, but now speculation is growing that the board is considering other candidates, too. Levinsohn, 48, took over as interim CEO in May from Scott Thompson, who quit after being accused of making false claims on his CV. Since then, Levinsohn has scored several victories, including making peace with Facebook last week by settling patent disputes. Also, Yahoo and Facebook agreed to form advertising and content-sharing partnerships. Finally, Levinsohn in May guided Yahoo’s decision to sell half its 40% stake in Chinese e-commerce firm Alibaba for $7.1 billion, ending tensions over how much value Yahoo can extract from that investment.

What should guide the Yahoo board as it picks the firm’s next CEO? “The last two Yahoo CEOs were outsiders, and it seems that Levinsohn is also essentially an outsider, having been at Yahoo for only two years,” says Hussain, Wharton professor of legal studies and business ethics, whose research areas include corporate governance issues. “You never know an outsider the way that you know one of your own executives, and you naturally have to take much more on trust.”

Hussain’s advice for corporate boards in general, including Yahoo, is to build better structures and processes for grooming leaders from within the corporation. “There is no hard and fast law that says internal leaders have less viable and transformational ideas than outsiders,” he says. “And in general, the devil you know is better than the devil you don’t know.”

Wharton marketing professor Bradlow says the new CEO must develop “a core niche strategy” to restore Yahoo’s fortunes. “[That person] should rebuild from the ground up by owning a segment of customers and branching [out] big from there.”

Bradlow has a specific to-do list: “Be willing to experiment,” he says, such as offering value-added services like web page layouts. His other suggestions: “Track much more than visits/sales to understand performance. Make sure you understand repeat visitation behavior, page depth and [other] things at the individual customer level.” Any company, including Yahoo, that tracks only aggregate behavior will miss out on important diagnostics showing whether a strategy is or is not working, he adds.

Hussain cautions against placing too much emphasis on just the CEO’s actions. “In the long run, the choice of a CEO is only one moderate factor among many that figure into making a company successful,” he says. “These decisions get an enormous amount of attention in the media, so boards tend to feel enormous pressure to do something dramatic. But it’s important to be realistic. You can only do so much to move an ocean liner in a short amount of time. Where it ends up depends a great deal on the seas and the winds.”

Shaky at the Top

Yahoo has had more than its share of instability at the top. Thompson, who quit after less than six months as CEO, had replaced Tim Morse, who had been at the helm for four months. Morse was named interim CEO last September after Yahoo’s chairman fired then-CEO Carol Bartz for what was widely seen as a failure in her efforts to boost the company’s fortunes.

Bartz, who had been CEO since 2009, had a little more than a year left on her contract when she was fired. Bartz had replaced Yahoo’s co-founder Jerry Yang, who had taken on the CEO role in July 2007. Yang had replaced then-CEO Terry Semel, a six-year veteran at the company, amid worries that Yahoo’s ad revenues were shrinking as business opportunities on the Internet were expanding.

Concerns over revenues persist to this day. Yahoo’s revenue has fallen steadily from $6.46 billion in 2009 to about $5 billion by 2011, although net income has grown in that period from about $600 million to a little more than $1 billion. “The major issue is that [its] growth is lagging the industry, especially [that of] Google, Facebook, etc.,” Hosanagar had noted in a Knowledge@Wharton Today report after Bartz’s exit.

Meanwhile, Yahoo’s shareholders seem to be losing patience. “You are behind the ball and you have been behind the ball, regardless of which CEO has shown up,” a shareholder told Levinsohn and other Yahoo executives at a Q&A session on Thursday, according to The Associated Press. “You don’t execute…. As a consumer, I have given up on this company.” Many still rue Yahoo’s decision not to sell itself to Microsoft four years ago for $47.5 billion. Back then, Yahoo’s share price was $33; On Thursday, it closed at $15.69.

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Yahoo: Let’s Make a Deal

Posted on October 24, 2011

As Google, Microsoft and other potential suitors continue to explore the idea of buying Yahoo, the question remains: Who would benefit most from such a purchase, and why? 

According to Wharton marketing professor Eric T. Bradlow, co-director of the Wharton Customer Analytics Initiative (WCAI), Google, with its prior acquisition of DoubleClick, “would have a unique opportunity to utilize its in-house technology to monetize Yahoo’s installed base. Revenue on the Internet is still driven by traffic, which is a function of having unique and important content.” DoubleClick, purchased in March 2008, provides ad management and related services for buyers and sellers of digital media advertising.

Google could also bring its recently launched social networking Google+ to Yahoo’s audience of nearly 700 million unique visitors, according to a report in the Wall Street Journal. In addition, Google would benefit from Yahoo’s relationships with content publishers like ABC News.

Kevin Werbach, Wharton professor of legal studies and business ethics, states that while Yahoo’s massive user base makes it valuable as a whole to acquirers, “the user benefits really come from the individual Yahoo offerings that are differentiated or have well-developed communities.”

Google is in talks with private equity investors to buy Yahoo’s core business, while Microsoft plans to invest “several billions of dollars” in loans to potential bid partners and preferred equity in Yahoo, the Journal report says. Yahoo and Microsoft already have a 10-year search partnership signed in 2009, a year after U.S. antitrust regulators frowned on a proposed Google-Yahoo partnership for web search advertising. Chinese Internet firm Alibaba Group Holdings, in which Yahoo has a 40% equity stake, has also shown interest in buying Yahoo, but has not yet made a formal offer.

If Microsoft’s strategy is successful, it may also push to integrate Skype, the Internet communications service it recently bought, into Yahoo, says a New York Times report. Already, Microsoft’s Bing search engine allows Yahoo to sell ads against responses to user queries.

The “basic question,” says Werbach, is whether Yahoo today is more valuable as a whole or in parts. “Any new owner of Yahoo must choose whether to extract as much revenue as it can from the existing platform, or to re-energize Yahoo as a distinct competitor. The second option would be better for Yahoo’s users, but it’s riskier for potential investors.”

Bradlow notes that while Yahoo has struggled in some ways, it has continued to provide content that attracts millions of unique visitors on a daily basis, especially “a very monetizable set of customers.” Yahoo’s visitors “tend to be heavier-than-average buyers of products and services, and provide a valuable audience for targeted advertiser content,” he adds. Yahoo’s news arm reported 81.2 million unique visitors in August, making it the biggest online news site, the Times report said.

Yahoo reportedly sought out potential investors after firing its chief executive, Carol Bartz, in September. Bartz made way for Yahoo CFO Tim Morse to become interim CEO after a study of Yahoo’s assets and performance by independent directors concluded that the company was not performing as well as it could. Yahoo is “still basically playing out the Internet portal model that it pioneered in the 1990s,” Werbach told Knowledge@Wharton Today at the time, adding then that “Morse, or whoever takes over as the permanent CEO, needs to make a major strategic decision: Sell the company or bet big on a big idea.”

Price could be a major sticking point as Yahoo’s suitors cobble together a deal, according to the Times. “Private equity firms have indicated they are unwilling to pay much more than Yahoo’s current market value of $20 billion, arguing that the stock price already includes the expectation of a sale,” the article says.

Putting the right price tag on Yahoo may be a tough call, but the space it operates in offers advertisers a value they cannot ignore. “What social media has allowed companies to do is listen to customers in real time,” said Bradlow in a recent Knowledge@Wharton interview. “You think about the biggest problem companies have: What is it? It’s customer defection and churn. You know why? Because you spend a huge amount of money on acquisition costs, [but] many customers don’t stay around long enough” to justify that expense.

 

 

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The ‘Morse Code’ at Yahoo: Bet Big, or Die

Posted on September 7, 2011

Tim Morse, Yahoo’s new interim CEO, needs to sharpen his focus on two things to right his embattled company, according to Kevin Werbach, Wharton professor of legal studies and business ethics. The company must “become relevant again in the Internet market and have a viable, differentiated long-term business model,” says Werbach, who studies digital convergence and innovation, among other subjects. Morse, 42, stepped up from his previous role as chief financial officer on Tuesday after Yahoo’s chairman fired CEO Carol Bartz over the phone.

Bartz, 62, had little more than a year left on her contract since taking over as CEO in 2009. Sunnyvale, Calif.-based Yahoo had hired her on the strength of her successful runs at Sun Microsystems and software maker Autodesk. But a recent study of Yahoo’s assets and performance conducted by independent directors “concluded the company wasn’t performing as well as it could,” according to a Wall Street Journal report. Visitors spent 33% fewer minutes per month on Yahoo’s U.S. website since Bartz became CEO, the report said, citing comScore data.

“The company is still basically playing out the Internet portal model that it pioneered in the 1990s,” says Werbach. “Morse, or whoever takes over as the permanent CEO, needs to make a major strategic decision: Sell the company or bet big on a big idea. Just managing effectively on the current trajectory is a path toward a death spiral.” Yahoo has, over time, been courted by potential acquirers, but no deal has come close to completion.

Kartik Hosanagar, Wharton professor of operations and information management, doesn’t believe Yahoo is reaching its end. He points out that the company reported more than $6 billion in revenues and more than $1 billion in profits last year. Yet, the company “is not going anywhere,” he says. “The major issue is that [its] growth is lagging the industry, especially [that of] Google, Facebook, etc.”

Hosanagar suggests that Yahoo should go back to its roots in media products. “It needs to come out with a new compelling product that is not an effort to catch up with Google or Facebook or anyone else, but instead is revolutionary. It should think about how to create that culture of innovation within and find that spark that resulted in Yahoo being formed in the first place.” Efforts to catch up or beat Google at search or email, or to compete with Facebook in social marketing, “will be misguided,” he notes.

One of Morse’s top challenges will be to decide whether or not to sell Yahoo’s 40% equity stake in Chinese e-commerce company Alibaba Group. Bartz had resisted Alibaba’s efforts to buy back that stake, for which Yahoo paid $1 billion six years ago. Investment analysts suggest that Morse should retain Yahoo’s Alibaba stake, especially because of the potential upside from a possible listing of Alibaba’s popular online shopping site, Taobao, according to a Bloomberg News report. Bartz courted controversy in May when Alibaba sold control of its online payment company to a group controlled by Alibaba’s CEO. “The Alibaba debacle made investors insecure about whether or not the crown jewel (Alibaba) will stay with Yahoo or not,” Hosanagar says.

Hosanagar notes that Bartz seemed focused on financial and organizational re-engineering. That “was fine to an extent … but she never successfully positioned herself as an innovative CEO who is seeking to bring new products and services to consumers.”

Bartz clearly didn’t have many friends on Wall Street. Yahoo’s shares rose more than 6% to $13.70 in after-hours trading on news of her exit. To be fair, the Journal story says Bartz got some credit inside the company for overhauling the organizational structure and challenging practices she thought were slowing things down. But she apparently made some wrong calls on the company’s U.S. ad sales campaign and in facing up to competition, the Journal adds.

Morse has sufficient momentum to build on, says Werbach, pointing to Yahoo’s “valuable assets, lots of users and some very talented people.” Yahoo needs to find a strong future strategy if it wants to remain an independent company, he adds. “The very few large tech companies that have successfully turned around [such as IBM and Apple] had long-term visions that played to their unique strengths.”

Some of that sounds familiar: Yahoo needs focus, according to Wharton experts who offered advice to Bartz in a January 2009 Knowledge@Wharton article. “Yahoo is this odd company that is part search, part technology and part media,” Kendall Whitehouse, Wharton’s director of new media, told K@W. The company “needs to pick one or two of those parts.”

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