With the announcement that after months at the negotiating table Verizon will be purchasing Yahoo! for $4.8 Billion dollars, the Marissa Mayer Era at Yahoo! for all intents and purposes would appear to have come to an end. After nearly two decades as an independent, publicly-traded company, Yahoo! was in steep decline and it put itself for sale to the highest bidder following a 4-year run with Mayer at CEO. While many critics believe she will go down in tech history as one its most inept leaders ever, several key decisions prior to her hiring started the downfall, and ultimate demise of the former search engine giant.
“I love Yahoo and I certainly want to see it into the next chapter,” Mayer told CNBC yesterday. “(AOL CEO) Tim (Armstrong) and I are old friends and colleagues and I very much look forward to working with him again.”
The collecting of the remaining Yahoo! assets comes on the heels of the $4.4 Billion acquisition of AOL’s Properties, putting Verizon in play in a big way the the media and content world. They are full steam ahead in their ultimate quest of 2 Billion active users, a number that Armstrong considers ” the number that all huge media companies want to be at” (Lunden, TechCrunch, 7/25/16).
In 2005 then CEO and co-founder Jerry Yang orchestrated a deal for Yahoo! to acquire 40% stake in Alibaba. The return on that investment was quickly seen as an albatross to Yahoo!’s investors as explained here ( Forbes, Solomon, 7/25/16) :
"If Yahoo were to sell its shares in Alibaba on the open market to reap the windfall Yang achieved, it could incur a tax of 38% on the transaction, or more than $10 billion.That fact led to an odd truth: the value of finding a way to divest of the Alibaba stake (and smaller Yahoo Japan stake, in a similar position) in a tax-free way became worth more than Yahoo’s core business itself."
The Alibaba deal was one that seemed to directly lead Microsoft CEO Steve Ballmer to try to aggressively acquire Yahoo! back in 2008, a move that few understood at the time. Yang would reject Ballmer’s attempt and Alibaba would go on to announce the largest tech IPO in 2014. Eric Jackson, Managing Director for SpringOwl Asset Management, has been monitoring the Yahoo! situation for over a decade and shared some interesting insight on the Microsoft situation on his Twitter feed.
How much different would things have been for Yahoo! if they had merged with Microsoft? Many have speculated the focus of that relationship was centered around online advertising, which would have supported the growth of Yahoo!’s publications and surely driven more users. Factor that with the assumption Microsoft would have been able to help Yahoo!’s tax issues associated with Alibaba deal and you have to figure the story today would be very different. And while many will point to Mayer’s leadership as the key component in the demise of Yahoo!’s independence, a key decision a decade prior and the unwillingness to merge with Microsoft more than set the table for yesterday.
It’s true that Mayer didn’t do herself any favors over the years since coming on board as a rising star from Google in 2012. The decision to bet big on Katie Couric, the Tumblr fiasco, and overall mismanagement will supplant her legacy in Yahoo!’s ultimate failure, but it was here lack of foresight that was her ultimate undoing.
Few will have empathy for her when you factor in what she was paid, in the same way some hot-shot assistant coach was over paid to fail for a major sports franchise or university. Mayer did oversee the NFL stream beta-test that many saw as a success, including Twitter who decided to go forward more aggressively as Yahoo! went the auction route. Mayer did tell CNBC’s Jim Cramer that the Verizon deal opens the door for licensed content deals, implying that AOL will be a player in the streaming race which Twitter has been actively trying to corner.
“Because of the fact that we were in an auction process we haven’t designed any of the integrations, but (an NFL stream) is certainly some of the opportunities that we find incredibly exciting. In terms of the overall scale and reach that we bring to the business, I think it would be possible to go after more and more valuable content and licensing rights and opportunities.”
It remains to be seen what role Mayer will play when the transaction is complete in Q1 of 2017, but it seems clear it will be a more focused role on internal integrations and overseas assets, including Alibaba, which she unsuccessfully tried to spin off last year.