Internet pioneer Yahoo is at a crossroads and is examining “strategic alternatives” after reporting another quarter of poor growth caused by products that refuse to fire.
After reporting a loss of $4.4bn, the company said it has to reduce its workforce by 15pc.
Yahoo, which was a forerunner of internet content and set a standard for others to follow in the 1990s and early 2000s, is struggling in an online display market dominated by players like Alphabet’s Google and Facebook.
Earlier this week, Google, a company forged when Yahoo was in its heyday, saw its parent company Alphabet become the world’s most valuable company by market cap ahead of Apple when it reported Q4 revenues of more than $21bn.
Yahoo, on the other hand, reported a loss of $4.43bn in Q4 compared with a profit of $166.3m a year ago.
After deducting fees paid to partner websites, Yahoo’s revenues fell to $1bn from $1.1bn a year ago.
Yahoo is at a crossroads, and so is CEO Marissa Mayer
It is now make or break for Yahoo’s CEO Marissa Mayer, who has to deliver a new strategic plan for growth that involves prioritising user engagement among its 1bn active monthly users.
The strategic plan on first perusal shows a clarity and urgency that should have been embarked upon years ago.
This will involve simplifying its product portfolio. As a result, Yahoo will consist of three global platforms, including Search, Mail and Tumblr.
‘This is a strong plan calling for bold shifts in products and in resources’
– MARISSA MAYER, YAHOO CEO
Yahoo will divide itself into four verticals: News, Sports, Finance and Lifestyle.
For advertisers, Yahoo will be defined by two core offerings, a native ads platform called Gemini and a programmatic advertising platform called BrightRoll.
Mayer said that, for Yahoo’s search business, mobile search is the biggest opportunity and the company will shift most of its resources towards this.
Yahoo Mail will get new features that will grow daily active users and make it easier to share and connect.
For the Tumblr platform and Yahoo’s digital content strongholds of News, Sports, Finance, and Lifestyle, investment will be focused on growing user engagement, especially on mobile. According to reports, Tumblr, which Yahoo bought in 2013 for $1.1bn, is now worth less than a quarter of that price after Yahoo instigated a $4.5bn write-down of the value of various business units.
“This is a strong plan calling for bold shifts in products and in resources,” Mayer said.
“We are extremely proud of the billion-dollar-plus business we have built in mobile, video, native, and social. 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.
“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.”
Yahoo chairman Maynard Webb said that the board is committed to supporting Mayer’s turnaround plan.
The clarity and sense of urgency of the plan is overdue and is precisely the kind of strategy Mayer should have adopted when she became CEO in 2012; playing to Yahoo’s strengths and focusing on the user.
One thing is for sure, this is make or break, not only for Yahoo but for Mayer herself.
Yahoo image via Shutterstock