10 Ways Marissa Mayer Is Reinventing Yahoo

by Don Reisinger

The joint announcement between Microsoft and Yahoo could be a major victory for the online company. For one thing, it doesn’t change the revenue-sharing agreement, which means a large portion of Yahoo’s revenue—31 percent in 2013, alone—will still be generated from Microsoft’s ad services. In addition, it forces Microsoft to start selling its own ads, which reduces Yahoo’s costs. It’s a win-win.

If anything can be said about Marissa Mayer, it’s that she sees value in acquiring other companies. In the last couple of years, Mayer has acquired a host of companies across a wide range of markets. Chief among them is the Tumblr microblogging service, acquired in 2013 for $1.1 billion. Tumblr is central to Yahoo’s efforts to build a bigger, more loyal user base.

Mayer has said that her company has not done enough to focus on mobile. At one point, the company had just 100 engineers working on all its mobile efforts. Last year, Mayer made several public statements saying that mobile would be a driving force in Yahoo’s resurgence and she has made good on that promise with heavy investments in mobile applications development. Whether it’s too late, however, remains to be seen.

Research firm eMarketer said Yahoo’s search ad revenue declined over the past several years and predicted the company’s digital ad revenue will continue to slip. Part of the issue is Yahoo’s difficulty attracting corporate advertisers that have the budgets (and desire) to go to its network of sites and services. Yahoo needs to change its strategy in that space to improve relations with corporate advertisers and attract more spending dollars for digital ads if the company is going to get back on track for sustainable growth.

Yahoo was a minority owner of Alibaba, the Chinese e-commerce company. Yahoo reaped billions of dollars following Alibaba’s initial public offering in September 2014. Yahoo can use those billions to acquire other companies or try out new ideas. But Mayer has said that she believes the company’s ample cash should be used to invest in high-quality employees and develop products internally that will appeal to a larger segment of the population. It’s a smart move.

One of the core components in the new pact with Microsoft is that Yahoo will have the right to enhance the search experience across for users of desktop and mobile devices. That’s a good thing for Yahoo. The company’s search is still popular internationally, but is facing increased pressure from Google and Baidu. Having more control over Web search development means Yahoo can more readily adapt to the changing times in search.

One of the more surprising moves Yahoo’s Mayer has made over the last few years has been to invest in well-known media celebrities to build out her company’s content business. Chief among those hires was Katie Couric, who Mayer tapped as the company’s global news anchor. Yahoo has also brought on several other major personalities, including the former “American Idol” judge Simon Cowell, to improve its content offerings. The idea? Drive more advertising revenue through content that’s exclusive to Yahoo.

Yahoo is a global company, but its presence in several key markets, like China, is troubling. Yahoo needs to work hard at building out its operations in Asia and Europe and be a bigger player in those markets. Once upon a time, Yahoo was the dominant force in search worldwide, but now Google and local competitors are far ahead. Yahoo needs to address that sooner rather than later.

Yahoo has made a series of rather interesting acquisitions in the analytics business with the purchase of such companies as Flurry, Lexity, Ztelic and others. Analytics plays a major role, not only in building out an advertising business, but it can also help Yahoo gauge where user interest and activity is going. Yahoo can then respond with services of its own that appeal to user demands. Don’t underestimate the importance of analytics in the Yahoo product portfolio.

All this talk of Yahoo going into new markets and investing in other firms ignores one important factor: The company still has several important platforms, like Yahoo Mail, Messenger, Finance, News and others, that need to be cared for and built out. Yahoo has a core business in those services that can keep the company churning, but it can’t allow companies like Google to steal its users away. Focusing on the time-tested, old favorites at Yahoo isn’t such a bad idea.