When in July 2012 “rock star” Silicon valley — a former top Manager of Google Marissa Mayer was CEO of Yahoo, the expectation that it will be able to breathe life into a once one of the largest Internet companies were so high that the staff has done with her image posters, repeating the famous election posters of Barack Obama with the inscription “Hope” (Hope). However, on 19 February it became known that the Board of Directors of Yahoo has hired investment banks to find a buyer for the core business of the company — its online assets. Meanwhile, investors are increasingly demanding the dismissal of the Mayer. Why once the darling of the press and the founder of Google Larry page has fallen out of favour with investors and journalists and was unable to stop the sunset of the Internet giant?
Portal Of The Millennium
The first day of trading of 2000 trades in securities of the Internet company Yahoo closed at $118,75 per share, and the company’s market capitalization reached a record $128 billion (it went on the exchange in 1996). So expensive Yahoo will no longer be cost never. A week later, she reported on the results of 1999: a profit of $47,8 million on revenue of $591,8 million In that year the company first became profitable.
Despite the fact that Yahoo many know primarily as a search service, initially it was not a search engine in the current sense of the word. In 1994, when the students of Stanford University Jerry Yang and David Filo began working on a project, the Internet was a little-known environment. They decided to make it something like a guide: “Guide Jerry through the world network (World Wide Web, or WWW)” was originally just a catalog of known Yang and Filo sites. The directory began to be popular with the friends of the programmers, and then other Internet users.
In January 1995, Filo and Yang registered the domain yahoo.com. Then among programmers, it was fashionable to name the projects Yet Another Something Something (“And something else about something”). The Abbreviation Yahoo! meant for Yet Another Hierarchical, Officious Oracle “yet Another hierarchical, but informal authority”. The exclamation point at the end was just a marketing ploy. By the end of January 1995, the Yahoo directory was about 10 thousand sites and more than 100 thousand unique users per day.
In 1997, Yahoo has made the postal service. Yang and Filo began to convert the site into a portal, making the main page, services, news, links, and banners. They believed that the user should obtain as much information as possible on the first page. By 1998 yahoo.com was the most popular portal to the Internet.
Loss of focus
The first big blow for the company was the dot-com bubble: if in January 2000, the price of Yahoo shares reached $118, by September 2001, it dropped to its lowest level $8,11 per share.
The company needed new blood in 2001 the place of Timothy Kukla engineer, the first CEO of Yahoo, took Terry Semel. Semel was a man from Hollywood he worked for more than 20 years at Warner Bros. The purpose of Semele surprised the market — he was a man without technological background, it was said that at the time of joining Yahoo he did not even know how to use e-mail. Therefore Semel has shifted the emphasis on media and not on the technological component. He even opened an office in Los Angeles, which hired mostly people from the entertainment industry.
Although Yahoo, to a lesser extent engaged in the development of its own technologies, Semel knew that he had to develop search. In 2002, Semel was thinking about buying Google: when Yahoo in revenue reached $837 million in the year, Google revenue — $240 million a year. Semel Larry page and Sergey Brin are $3 billion for their rapidly growing company, although the advisers of the head of Yahoo kept telling him that Google is worth $5 billion, page and Brin proudly refused.
Then Semel went the other way: in 2002, it bought Inktomi search technology, and in 2003 — Overture, a company engaged in contextual advertising (Yahoo at the time was earning on banners, i.e. media advertising). By combining two technologies, Terry Semel tried to create a Google competitor, but few have succeeded. In August 2004 the stock price of Google overtook Yahoo, and by the end of the year the company page and Brin went around competitor and advertising revenue. By the beginning of 2005, Google’s revenue had already exceeded $1 billion.
All 2000-e years the management of Yahoo and are unable to decide whether they are doing tech company or media. Yahoo, on the one hand, has signed deals to buy content from movie studios and news organizations like ABC News or si-EN-EN and tried to buy numerous, but small technology start-UPS. In 2005 the company bought Flickr, the most famous at that time, the service for editing and sharing photos. But the leadership of Yahoo did not want to give a lot of money on the development of Flickr, because the site did not produce much income in the end Flickr is almost not engaged in innovation. And when Facebook and Instagram, he quickly lost his position.
Who owns Yahoo
Yahoo held a public offering of its shares on the new York stock exchange NASDAQ in 1996. On the first day on the stock exchange the securities of the company rose by 270% from the offering price. Business media then with surprise wrote: who would have thought that less than a year ago, the search engine may have a market cap of $848 million from Founders David Filo and Jerry Yang at the time of the IPO owned the bags of 5 million shares each (aggregate market value of which at that time was about $165 million), once the IPO to sell shares.
After 20 years Philo is the largest owner of the Yahoo — to it, according to the latest report of the company on major shareholders published in June 2015, holds approximately 71 million shares (7.5% of the total share capital of the company, or slightly more than $2 billion). Two large owner’s funds BlackRock and Vanguard Group, which in June was owned by 6 and 5% respectively. Yahoo management, including current CEO Marissa Mayer, at that time belonged to 8.1 per cent stake in the company.
Buying small startups and local sites, Yahoo did not buy breakthrough services, determined the development of online. Terry Semel has missed two major transactions. In 2006, he refused to buy Facebook — Semel and Zuckerberg have practically agreed on a price of $1 billion, when at the last moment, the head of Yahoo has decided to bring down the price by $200 million and the deal fell through. At the same time Semel was negotiating the purchase of video hosting YouTube, but have not agreed on a single paragraph in the contract. In the end, the video service acquired the main competitor of Google Yahoo. From buying MySpace Semel was just brushed off as a minor project.
The inability to determine in which direction should evolve Yahoo, has led to the fact that by the beginning of 2010, the company reached an impasse. In finding she was hopelessly lost in Google’s 2012 search share, the Internet giant exceeded 66% in the US, whereas the share of Yahoo fell below 15%. In social networks leadership has been in Facebook. In media began to gain momentum with new projects such as the Huffington Post and Buzzfeed. How to get out, no one knew: from 2007 to 2012, Yahoo has had seven General managers who were unable to find a focus for the company.
The Princess of Google
In 2012, Yahoo led by Marissa Mayer. 37-year-old former Vice-President of Google, one of the most influential women executives in Silicon valley, investors had high hopes.
At Google Mayer came in 24 years right after graduating from Stanford University when he was still an unknown startup. Mayer was in it’s 20th employee and first female programmer. At Google she worked for 13 years, grew to the post of Vice-President and member of the operating Board of the company, in which it was included together with the founders — Larry page and Sergey Brin. For a long time she ran the most profitable area in the company — search, among her achievements the interface to the mail service Gmail, news aggregator Google News and image search Google Images. At Google, she earned a fortune of $300 million.
Mayer told investors that Yahoo wants to return the “big four” American technology companies — Apple, Google, Facebook and Amazon, but in the early days realized the extent of the backlog of the company from its competitors. From the first meeting with staff, she learned that on the creation of mobile products at Yahoo are “about 60 engineers”. In Facebook at that time in the mobile development team worked for more than a thousand employees. The main product Yahoo — mail, through which at the time went over 30 billion messages a day and which still remains one of the most popular email services in the US, at the time of joining Mayer didn’t even have a mobile version.
Meyer also set a goal to update the Yahoo search, which is slowly but surely continued to lose its market share. “I don’t see no reason why our share in the search is below 15%, moreover, I don’t understand why we can’t take more than 20% [of the search market in the U.S.] that we had before,” she wrote to employees.
In July 2013, Yahoo managed to regain first place among Internet companies, the size of the audience for the first time since may 2011. According to ComScore, the audience of all portals of the company then amounted to $ 196,5 million unique visitors, while Google — 192,5 million during her first year in the post of CEO of Yahoo market capitalization has increased almost twice: from $18.9 billion in July 2012 to $31.6 billion in July 2013.
In search of “breakthrough”
In April 2014 at the meeting of the Board of Directors of Meyer stated that she was not yet able to understand what product the company can become a “breakthrough”, but reminded those present that Steve jobs took five years to create the iPod, when he took over Apple the second time.
As part of a strategy to update employees and talents to Yahoo, Mayer has begun active buying up of startups, having spent three years a total of nearly $3 billion in about 50 companies. The most expensive acquisition Mayer has become the blogging platform Tumblr, which Yahoo in may 2013 posted $1.1 billion At the time of purchase of Tumblr was 300 million users per month, and Mayer is trying to attract this younger audience to all other services and products of Yahoo.
Meyer also did a great (and very expensive) bet on the development of the media business, to win over the audience at Google, Facebook and Twitter. She has spent several million dollars to restart the thematic online magazines Yahoo sports, cars, technology and cooking. And the money was mostly spent on star writers and editors, for example the creative Director of Elle and journalists from The New York Times.
Under Mayer Yahoo also actively promoted videonablyudeniye. For example, she decided to make the video-Yahoo! Screen competitor to the giants of the movie business — Netflix and Hulu. Yahoo! Screen began to purchase the rights to show expensive television shows, such as archived episodes of Saturday Night Live and Comedy series “Community” (Community), which Yahoo spent $42 million in the Summer of 2015 Yahoo was the first online company that has managed to sign an exclusive contract to broadcast the matches of National football League live online. According to sources, Bloomberg, Yahoo pay-per-view match $17 million, suggesting more than Twitter, Google and Amazon.
As the main interviewer and news stars video services Meyer invited former leading evening news show on CBS Katie Couric. According to media reports, the contract value and the presenter was estimated at $10 million a year, with the content to which it was related, Yahoo earned $3 million
According to The New York Times, the discontent of the investors wastefulness Mayer grew in proportion to the losses of the company. For example, they calculated that on free food for Yahoo employees spends $108 million a year. Smartphones and fitness bracelets that Mayer gave them to the staff upon joining the company in total, it spent about $12 million For the sponsorship of the world economic forum in Davos, Yahoo paid $2 million, and pompous Christmas party for employees in the style of “the Great Gatsby” in December 2015, costing the company $7 million (according to data from The New York Times, in the company of each digit of the challenge).
Despite all the calculations of Mayer, Tumblr, bought by Yahoo, was not as good as Instagram, which Facebook paid in 2012, the same $1 billion In Yahoo predicted that in 2015 Tumblr was to bring the company $100 million, but at year-end Yahoo said that the target platform is not reached and it will be a goal for 2016. Facebook, which started monetizing Instagram only in the summer of 2015, at the end of the year estimated income from this business at $110 million, and in 2016 the income of the application should grow to $300 million if analysts And Instagram wall street estimate of $34-37 billion, Tumblr, in their opinion, now not worth a dime — app platform even fell from the top 100 of the app store AppStore, the newspaper notes the International Business Times. The Yahoo had in 2015, the year to write off the cost of an asset of $230 million.
Despite being updated under the leadership of Mayer mobile services and applications that brought the company in 2015 about 20% of annual income (about $1.1 billion, 43% more than in 2014), the company missed the chance to become a leader in mobile devices. According to comScore, eight of the ten most popular apps in the USA belong to Facebook and Google. Yahoo is in the top 15, and then only thanks to a partnership with Apple is an application that displays stock quotes of the companies that come installed on the iPhone and made on the basis of Yahoo! Finance.
Not better things and with the financial results Yahoo. The company not only increases slightly by revenue (its revenue in 2015 by only 8% exceeded the figure for 2014 at $4.9 billion), but turned negative (net loss in 2015 of $4.4 billion). The reason for such a catastrophic loss — a massive write-down of assets, in addition to Tumblr Yahoo has devalued its business in the U.S. and Canada for $3.7 billion, $530 million in Europe and $8 million in Latin America.
In early February of 2016 Yahoo announced the closure of half of its printed editions and Yahoo! Screen as part of a mass reduction of expenses of the company. Reductions were made and the state — of Yahoo were sacked 1.7 million people. By the end of 2016, the company must remain approximately 9 thousand people — its staff will be reduced by 42% compared with 2012. Program to reduce costs should increase the value of Yahoo assets of $1 billion from the current $3 billion, Yahoo also announced the closure of its overseas offices in Dubai, Mexico city, Buenos Aires, Madrid and Milan.
Mayer continues to remain optimistic: reduction of expenses she prefers to call “simplification” of the business. “Yahoo can’t win the hearts and minds of users with a diversified portfolio of assets and services,” she said to the investors, voicing results 2015. Now, according to Mayer, the company holds three main services (she calls it a “chair with three legs”) — search, mail and platform Tumblr. All other assets should be “simplified” to four main areas — news, sport, Finance and lifestyle.
But had Yahoo and a successful acquisition, however, they were made even before current CEO Marissa Mayer. In 2005, Yahoo began a partnership with Chinese Internet holding Alibaba, buying a 40% stake in Alibaba Group and instead of giving partner the Chinese version of Yahoo and $1 billion As it turned out seven years later, the leadership of Yahoo then made her very sound investment — in 2012 the Chinese Internet giant bought back half the 40 percent stake from Yahoo for $7.1 billion
The calculations are unhappy with the way Meyer manages the company’s business, investors, the online assets of Yahoo has literally reached a negative value, wrote the NYT. In early 2014, when the capitalization of Yahoo was $33 billion, the cost of the package in Alibaba was valued at $37 billion if Yahoo sold all of the shares of the Chinese Internet holding company, its business would be worth minus $4 billion.
Now Yahoo has in Alibaba, the proportion remained at 15%, is estimated at $26 billion, is the main financial asset of the company, all of which are worth little more than $28 billion.
Professor at new York School of business Leonard stern Aswath Damodaran not believe that the blame for the collapse lies with the Yahoo Mayer: the company grew into a colossus by solving problems that no longer exist. And despite the fact that the quality of many products at Yahoo, Mayer has inevitably improved and the company has managed to become more innovative, it is doubtful that it will change the course of the company, except that she’s really not going to invent the next iPod, says he. For a company at this age and stage of development, like Yahoo, a good result would be stabilization of the business, so every year he would bring profits of $1 billion, says the Professor in the comments for the NYT.
When investors finally “selling” the Board of Directors of the company to start selling online assets (email, portal, search engine, thematic vertical, the blogging platform Tumblr and the business related to mobile Analytics, Flurry), the main question for them is how much a potential buyer would be willing to pay for the unprofitable and non-developing, but still one of the most popular online resource in USA. Estimates vary from $2 billion to $8 billion, wrote in January this year in an article in Vanity Fair entitled “Why I want to change Marissa Mayer”, one of the company’s investor Eric Jackson, managing Director of hedge Fund SpringOwl Asset Management. “According to our estimates, if we draw should work to reduce costs, the company’s core business can generate $2 billion in profits.” On wall street the asset (subject to the availability of intelligent management) can be estimated at $16 billion and even higher. The Guardian with reference to analysts yesterday wrote that the company may be interested in AT&T, Comcast, and private investment funds. In early February of this year, interest in business Yahoo showed the American telecommunication company Verizon Communications, which in June last year bought another legendary Internet company in distress, is AOL.