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Yahoo's comeback focuses on technology

Oct 21 2012 05:33 Reuters

Yahoo CEO Marissa Mayer (AFP)

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San Francisco - Marissa Mayer, who earned a reputation for decisive action and intensity during her 13-year stint at Google, has spent her first months as Yahoo CEO quietly moving the internet pioneer back to its roots in technology.

Long torn between whether it should focus on media content or on tools and technologies, Yahoo under Mayer is being positioned firmly in the latter camp, according to sources inside and outside the company.

Her hires, acquisition musings, and other early moves hint at an ambitious, technology-driven comeback plan designed to revitalise aging but well-trafficked properties such as Yahoo Mail, Yahoo Finance and Yahoo Sports.

Yahoo has been criticised for allowing these sites to stagnate - they look very much like they did five years ago, and do not have many bells and whistles to encourage users to spend more time on them.

Mayer, 37, wants to make Yahoo's properties much more interactive, on PCs and on mobile devices, using social media tools to personalise the user experience and new technology to boost advertising sales. Her well-known focus on user design is expected to result in a simpler, less-cluttered email and home page, one source said.

Yahoo declined to comment for this article. Mayer, who gave birth to her first child weeks ago, will unveil details of her comeback plan when Yahoo reports quarterly results on Monday.

Mayer's focus on technology in many ways reverses a course set by her predecessors, who had concentrated on media content deals, such as those that gave prime billing to Walt Disney's ABC News or CNBC, or to bring an original programme starring actor Tom Hanks to its website.

The new strategy is not without risks: it positions Yahoo squarely against Facebook and Google. It also risks alienating a large, media-focused contingent that is already weakened by the departure of Ross Levinsohn, who had championed a media-centric approach when he was interim CEO before Mayer's arrival in July.

Mayer has been meeting with internet gurus including AOL CEO Tim Armstrong, another ex-Googler; Silicon Valley lawyer Larry Sonsini; and Wall Street investment bankers, according to people familiar with the matter.

Bankers have pitched Mayer and her team on a slew of potential acquisitions, and they appeared to show interest in restaurant reservation site OpenTable  and advertising technology companies PubMatic, Turn and Millennial Media, one of the people said.

Caterva, a small start-up whose technology analyses social media activity, has also been in low-level talks with Yahoo, said another source familiar with the situation.

OpenTable and PubMatic declined comment. Millennial Media and Caterva did not respond to requests for comment.

With more than $2bn in cash and short-term securities, Yahoo has the money to acquire engineering talent or bolt-on services.

Two types of deals are under consideration: companies that will increase user engagement, including on mobile, and those that will boost advertising returns, source said.

"What they've signaled so far is that the deals will be more niche in nature, smaller deals that maybe have a lot of promise," said Ken Allen, a director at Blackstone Advisory Partners.

Talent hunt

Many industry insiders believe Mayer is Yahoo's final hope for reversing a years-long decline from the pinnacle it once attained as the leading gateway to the internet. Four of her predecessors have tried in vain to right the ship - Yahoo's market value of $19bn, is less than half its $44bn value in 2005.

Mayer, who earned a masters degree in computer science from Stanford University specializing in artificial intelligence, has moved quickly on the personnel front, shelling out rich pay packages to attract ex-colleagues from Google and elsewhere.

She brought in ad technology systems guru Henrique de Castro as chief operating officer; a new finance chief in Ken Goldman, who also has tech chops, to replace Tim Morse; and Jacqueline Reese to assume the dual role of hiring and acquisitions, suggesting the start of a train of "acqui-hires" or buying small companies for their engineering talent.

"She's spending almost all her time with the product folks. She's spending it on technology. She's talking about engineering hires," a person close to Yahoo said about Mayer's early days.

Yahoo's advertising technology products, headed for the auction block before Mayer's arrival, are back in favor. De Castro, her highest-profile hire, is known for a deep-understanding of the complex advertising landscape, where dozens of businesses and technology providers are interlinked.

Mayer has also shown an interest in the company's ad tech platform, including Right Media, an automated exchange that allows marketers to blast ads across a network of websites.

The group has been a long-standing source of division among Yahoo's management, including with Levinsohn, who was keen on divesting the unit, according to two sources close to the matter. But shortly after Mayer's arrival, Yahoo told AdAge that it had no intention of selling Right Media.

Yahoo's advertising salesforce, responsible for signing splashy home-page ad deals and premium marketing campaigns, has received scant attention from the new CEO, say people close to the company. Michael Barrett, Yahoo's chief revenue officer hired by Levinsohn shortly before Mayer's arrival, recently announced his resignation, according to a source familiar with the matter.

Focus on mobile

Roughly 700 million users visit a Yahoo website every month - putting it in the top ranks globally. But the amount of activity people engage in on many sites is steadily declining, and its smartphone offerings are deemed lackluster.

"The largest change is to be deadly serious about mobile," said a former Yahoo manager who remains in touch with people at the company.

Yahoo faces tough competition from Facebook and Google, two companies that have taken consumers' time, engineering talent and market value from Yahoo. They are also trying to make the transition to mobile, but it has been difficult.

Some say the direction signaled by Mayer is not so different than strategies espoused by previous CEOs that Yahoo has consistently struggled to implement. A fragmented culture in which short-term finances usually trump product plans is to blame, according to those who know the company.

The recent departure of CFO Tim Morse could signal a change in approach, said several former Yahoo employees.

Morse was considered the force behind Chinese e-commerce company Alibaba Group and Yahoo's $7.6bn deal over the summer, which saw Yahoo sell about half of its 40% stake in Alibaba after years of wrangling over terms.

But now Yahoo's Asian partners, including Yahoo Japan, are not on the front burner for Mayer, one source familiar with the situation said.

Whether Wall Street has the patience for yet another Yahoo revival plan remains to be seen.

"Every CEO needs time to have their full vision articulated and understood," said Dan Rosensweig, a former Yahoo chief operating officer, who now serves as CEO of online textbook rental company Chegg.com. "To count Yahoo out would be an enormous mistake, because the users have not counted Yahoo out," he said. "It's not like MySpace, where all the users went away."

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