More than 18 months into her tenure, the Marissa Mayer-Yahoo connection is sputtering. Advertising, the lifeblood of company revenue, isn't growing – leading to the ouster this month of Yahoo's No. 2 executive.
This was highlighted today by desultory annual display-ad sales of $1.95 billion, down 9% from the previous year. The news sent Yahoo shares down 5% in after-hours trading.
The decline dovetails with a dip in Yahoo's share of the U.S. digital ad market: Its take in 2013 was 5.8%, compared with 6.8% in 2012, according to eMarketer.
IDC's Karsten Weide and other analysts point out it is hard for advertisers to reach Yahoo users who are fragmented among the company's thicket of properties including Tumblr, sports, Flickr and email.Yahoo was also late to mobile.
"(Yahoo's) investments and acquisitions have not translated substantially into ad revenue," says Clark Fredricksen, an analyst at eMarketer. "This was expected."
And yet, Yahoo's stock is soaring – it rose 7% in regular trading Tuesday to $39.12, up about 150% since Mayer arrived as CEO in July 2012 – while its desktop traffic in December bested Google, Microsoft and Facebook. Mayer, meanwhile, has injected charisma, star power, energy and smarts into a company badly in need of all of them.
Mayer's detractors quickly – and legitimately – point to Yahoo's 23% stake in Alibaba as a safety net. The Chinese Internet firm is expected to go public within two years. Yahoo sold 40% of its Alibaba holdings for $7.6 billion in 2012 and has been on an acquisition spree since.
Alibaba can't mask ad revenue woes, however. Yahoo's comeback journey took a stumble this month, when Chief Operating Officer Henrique de Castro, a Mayer hire, departed. And today's quarterly report gave investors pause.
But Mayer inherited a turnaround project akin to a house whose foundation was rotting. It's a journey that requires work and time, Mayer told me last mont! h. Realistically, it will take four to five years.
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