The Strategist

Yahoo Is Captured by a Moral Crisis

11/25/2015 - 14:17

Yahoo’s CEO Marissa Mayer has repeatedly stated that improving the Internet company’s results can take years. However, many Yahoo employees lost their patience. They believe that Mayer has no clear idea how to further develop the company, and misleads investors about its progress. The company sunk into moral crisis - dozens of top managers fled Yahoo in the last few months.

Adam Tinworth via flickr
Adam Tinworth via flickr
To stop the mass exodus of employees, Mayer arranged a large meeting where asked senior managers to sign an agreement. According to the document, those, who put their names, must work in the company for at least three years. Some participants openly refused to sign such a document.

Yahoo led by Mayer has invested hundreds of millions of dollars in mobile software, online video and search. Nevertheless, this did not led to a significant increase in the portal’s audience, neither it boosted incomes. A month ago, Mayer announced a new strategy that will "reset" the company, but did not disclose any details. In addition, she recently hired consultants from McKinsey & Co. to find possible ways to reduce costs, say sources familiar with the situation.

Mayer tries to keep bad news in secret, revealing positive information first. For example, she uses an accounting metric called "Mavens" to demonstrate the company's financial results. The grouping shows only growing parts of Yahoo’s business. These are mobile and video advertising and ads on social networks. Yet, it does not include, for example, income from ads on the traditional web, which are constantly shrinking.

Yahoo announced acquisition of the microblogging service Tumblr for $ 1.1 billion in May 2013. Then Mayer said that Yahoo’s total audience topped 1 billion due to 300 million Tumblr’s users. Last year, Mayer made the company revise the methodology for calculating audience on mobile devices and personal computers. At meetings on this issue, she has always insisted that Yahoo showed the largest number, said one of the company's employees.

Mayer has repeatedly said that Yahoo will be able to compete with Netflix's video and Google search. Yet, she was unable to make significant progress in this direction. Over the past two years, the company has spent more than $ 100 million for production of original content, said several sources familiar with the company's expenditures. Now, the number of YahooScreen’s unique visitors ( the service publishes movies, sitcoms and shows) stands at 25 million per month according to comScore (excluding mobile users). The index has not changed since the beginning of 2014. In the III quarter of this year, Yahoo has written off $ 42 million spent on the production of Internet TV series.