Marissa Mayer's Plan to Save Yahoo

David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Yahoo! (NASDAQ: YHOO) seems to be one of those companies that people take for granted. Even though it offers a lot of good info, as Gertrude Stein said about Oakland, California, there's just no "there" there.

Yahoo's been slipping behind its rival Google (NASDAQ: GOOG) for a long time. When was the last time you "Yahooed" anything?

The income statements tell the story. Google raked in $37.9 billion in sales last year, ending up with a profit of $9.7 billion. (Don't spend it all in one place, Google!) Yahoo! only managed to take in $4.98 billion, with a profit of $1.04 billion. A lot of smaller companies would kill for that kind of revenue, but compared it its major rival in the search business, Yahoo! doesn't look good. There really is Google and everything else.

Its old rivals are still hanging in there. AOL (NYSE: AOL) is not only still around but thriving, reinventing itself as a portal, acquiring major online properties like The Huffington Post and TechCrunch. The company posted a $45.8 million profit last year, up from a loss of $982 million last year.

Microsoft (NASDAQ: MSFT) has also entered the search space with Bing. It's hardly a competitor, though. Yahoo! uses Bing as its back-end search engine. It also posted a $16.9 billion profit last year.

With the future of the company on the line, it's not surprising that the company would change its management. New CEO Marissa Meyer also happens to be a Google alumnus. It's inevitable that she would want to turn things around.

She recently announced a plan to Yahoo! employees. She's aiming to personalize the company. Like Google, the company makes money pushing ads to its users, or at least the ones who haven't figured out how to install ad-blocking software on their computers. She also said the company was attracting top talent (including landing former Fortinet CFO Ken Goldman) and increasing ad sales, as well as users.

Anyone with half a brain can see that the tech market is moving toward mobile, and Mayer is shifting the company toward that. She plans for the company to become strong in mobile by 2015.

This is something that Facebook (NASDAQ: FB) has been struggling with. The company has around 543 million mobile users around the world, but raked in $1.2 billion in sales last quarter, much of which was eaten up by R&D costs, leaving the company with a loss of $157 million.

Mayer plans to get stronger into mobile by buying smaller companies that are successful in this area and incorporating them into Yahoo!, a process known as "acqui-hiring."

Given that the whole point of getting into mobile is to save the company, why would she bring in outside talent? Since Yahoo! is so well-established, an in-house team creating these apps wouldn't necessarily know how to do it properly. Since mobile is still a wide-open frontier, the best thing to do would be to watch the startups experimenting in this field, and pick from the best.

This seems to happen a lot these days. The big tech companies treat startups like the minor leagues, recruiting and acquiring startups. On the other hand, you couldn't blame Mayer for wanting some real talent. Developing an app is one thing, but being able to sell it to an audience takes dedication.

So will these moves save Yahoo? They lost the search war on the desktop, but if they manage to work themselves into mobile, Mayer has a chance. If Yahoo! is going to compete with Google, it takes an ex-Googler to do it.


Fool blogger David Delony has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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