How Yahoo Keeps Trying to Reinvent Itself

Yahoo is under more pressure than ever to increase returns for investors. Here’s a look at steps CEO Marissa Mayer has taken to reinvent Yahoo.

There’s an issue at Yahoo that the company doesn’t quite know how to handle. But it’s a problem a lot of companies wish they had. Yahoo owns about $30 billion worth of China-based giant Alibaba. Last year, Yahoo thought it could spin off the stake into its own company, allowing it tax-free access to the assets. But after shareholders revolted, the board has since decided that it needs to keep Alibaba in-house and not spin it off. Still, Yahoo wants to find some way to cash in from its Alibaba stake.

When Yahoo acquired Tumblr in 2013 for $1.1 billion, it was clear that the company wanted to become a hub for content. However, over the last several years, Tumblr has lost some of its allure among users. That forced Yahoo in the fourth quarter to write down Tumblr’s value by $230 million, calling into question whether Mayer’s belief that the Tumblr social networking site would be a big success for Yahoo.

Over the last few years, Yahoo has made several strategic advertising acquisitions. The company acquired BrightRoll in 2014 for $640 million, as well as Media Group One for an undisclosed amount a month later. Those acquisitions came after Yahoo acquired ad-security company ClarityRay and ad firm Luminate for undisclosed sums. Yahoo is counting on Internet advertising growth to drive its business in the coming years and it’s spending serious cash to prove it.

Yahoo is a complicated company. On one hand, it’s a search service, an email platform and a resource for financial gurus. On the other, it’s a content company trying to drive more interaction with Internet users. All the while, Yahoo wants to be an advertising giant. It’s a problem. Although Mayer has said she’s trying to simplify Yahoo, so far, shareholders argue it still has too many moving parts.

Job cuts have become a frequent occurrence as Yahoo keeps restructuring. In February, Yahoo announced that it was laying off approximately 15 percent of its workforce to about 9,000 people as well as nearly 1,000 contractors. The company also said it would be closing five offices internationally as part of its cost-savings efforts. Yahoo won’t stop cutting until it finds the right size for profit growth.

Yahoo was once a top destination for online video. But with Google’s YouTube continuing to deliver user content and Facebook offering a social video platform that no other company can top, Yahoo has been left in the dust. To address that, the company has acquired expensive (but exclusive) streaming rights to NFL games and other content. It’s also believed to be in the running to exclusively air more than a dozen NFL games next year. Yahoo apparently believes that it can recapture viewers by focusing on highly attractive video content.

Although Yahoo wants to play a leading role in delivering high-quality video content to users, the company in January announced it was shuttering its YouTube alternative Yahoo Screen. While some observers viewed the move as a decision to get out of video, it actually signaled something entirely different. It was part of an effort to shutter underperforming business to reduce expenses and develop more successful ventures. Since then, Yahoo has shuttered its Games business and seven digital magazines, as well as Yahoo Livetext and Yahoo BOSS.

In February, Mayer made her pitch to shareholders for how she plans to fix Yahoo. She contends Yahoo’s growth prospects can be improved with help from what she calls Mavens (mobile, video, native and social). The Mavens program is essentially a catch-all that Mayer has developed to focus the company on coupling mobile apps, high-quality video content and social media with ads. She believes that the combination of those components, which she’s been working on for years, will hit their low point in 2016 and “return to growth” starting sometime later this year or in 2017. In fact, Mayer has staked her career on the idea that Mavens can reverse Yahoo’s fortunes.

In addition to Mavens, Mayer announced in February that Yahoo must stop trying to provide its services to too many markets. She says that Yahoo will shutter operations in some markets and reduce its offerings in others. Yahoo will instead spend its upcoming years delivering its services to North American countries, the United Kingdom and other developed nations that could prove more profitable.

No roundup of how Yahoo is trying to reinvent itself can be complete without acknowledging that many of the company’s moves are aimed at making it a more attractive acquisition target. Yahoo’s board has said that it would consider offers, and the more attractive the company can make its advertising seem, the better. Exactly how much Yahoo (not including its Alibaba and Yahoo Japan stakes) could fetch is unknown. But most analysts say the bids likely won’t come close to $10 billion. Yes, a once-dominant Internet company is now worth a fraction of some of its newer and admittedly more innovative competitors.