This may be Marissa Mayer’s last shot. Yesterday, the Yahoo CEO announced a turnaround plan to streamline the company and zero in on its strengths to drive growth and revenue. But will it work?
Mayer (pictured above) is focused on seven goals: improving product quality for consumers and advertisers and growing daily active users; driving revenue growth through mobile, video, native and social content to $1.8 billion in 2016; improving profitability to hit $1 billion by the second half of 2016; limit GAAP revenue impact to about $100 million; explore sell offs that could generate at least $1 billion in cash; and increase value to all stakeholders.
Although Mayer has managed to become Yahoo's longest tenured CEO in recent history -- before she took the reins the company had had six chiefs in as many years -- the clamor has been growing in recent months for her to be replaced. Shareholders are not happy because Mayer has not produced the mass turnaround they had expected.
However, Yahoo's CEO is convinced this new strategic plan will pave the way for faster transformation at Yahoo. She acknowledged the plan calls for bold shifts in both products and resources and signaled that the company would bet heavily on its billion-plus dollar business in mobile, video, native and social, also known as Mavens.
"Our strategic bets in Mavens have enabled us [to] build an entirely new, forward-leaning business of tremendous scale and growth in just three years,” Mayer said. “The plan announced today builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers, and partners."
Quieting Sale Rumors?
With more than 1 billion active users to build on, Yahoo will make growing user engagement a high priority in 2016. The strategy is to put energy into the products that set the company apart in the market and drive most of its revenue. That sets the stage for faster innovation and quicker growth in key metrics like pageviews, according to Yahoo.
Specifically, Yahoo said it will focus most heavily on search, mail, Tumblr, and news -- sports, finance and lifestyle verticals -- in key markets. On the advertising side, Yahoo will hone in on two products: Brightroll (which offers programmatic buying and selling tools) and Gemini (which combines native ads and search). Yahoo cited mobile search as its largest opportunity and said it would move most of its resources toward forward-leaning investments that differentiate its product in that space.
We asked Greg Sterling, vice president of strategy and insight at the Local Search Association, what his initial reaction was to the in-depth plan. He told us it’s coherent and logical but he is not willing to wager on whether or not it will work.
“I think investors will wait and see evidence of more user engagement and revenue growth,” Sterling said. “But perhaps this plan will quiet the company sale rumors for the time being.”
Driving Ads, Cutting Costs
A key part of the revenue strategy is increasing the advertiser spend in the Mavens areas. In a statement, Yahoo noted the big picture, in which mobile industry ad spend is set to nearly double by 2018 with programmatic technology gaining a large share of that. In response, Yahoo said it is shifting toward performance and programmatic ads.
Yahoo also said that it is planning job cuts. The company will reduce its workforce by about 15 percent and close offices in Milan, Madrid, Buenos Aries, Dubai and Mexico City. By the end of 2016, the company plans to have about 9,000 employees and fewer than 1,000 contractors. That 42 percent decrease over 2012 will enable Yahoo to cut costs by $400 million a year. The end goal is to return to modest and accelerating growth in 2017 and 2018.
“The board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders,” said Maynard Webb, Yahoo's Chairman of the Board. “Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we've discussed previously, we will engage on qualified strategic proposals."