The Yahoo CEO was viewed as a saviour back in 2012. But insiders say that she now leads a company without a vision or a viable turnaround plan. As top executives flee in droves, it's plausible that Mayer might soon join them
The late October offsite meeting for more than 120 of Yahoo’s top executives at the Park Central Hotel in San Francisco started well enough. The first day jumped from strategy sessions to upcoming product discussions. But on day two, when the topic shifted to employee engagement, and with CEO Marissa Mayer in and out of the room, things went downhill fast. When Bryan Power, Yahoo’s head of HR, glossed over results from a recent employee survey that showed dramatic double-digit drops in metrics like morale and trust in the company’s executive leadership, various vice presidents began venting to one another. Those murmurs of discontent erupted into outright heckling when another session—billed as an opportunity to improve communication—turned into a lecture from Yahoo’s top brass that many found patronising. Vice presidents started calling out their superiors for “not listening”, “not understanding” and “not being interested in changing.” Some cursed.
“It was the most stressful and acrimonious professional meeting I’ve ever attended,” says one participant.
Such is the state of affairs at Yahoo these days. More than three years after Mayer was brought in to turn things around, the original internet media giant is still failing at its core business and getting whipped by Google and Facebook and newer entrants such as Instagram, Snapchat and even the beleaguered Twitter. In the most recent quarter, its net revenue declined by 8 percent and search revenue, a priority of Mayer’s, declined by 13 percent. Overall traffic has continued to inch downward, and none of its new mobile apps has yielded new users or revenue on the scale Yahoo needs to offset the declines. The stock market has rendered its assessment: Yahoo, which has a market value of $31 billion, owns a $30 billion stake in Alibaba and a $8 billion stake in Yahoo Japan and has $5.5 billion in cash net of debt. While investors often apply discounts to the company’s Asian assets due to taxes and risks related to their eventual spinoff, in many models, Yahoo’s core busi- ness—with $4 billion in revenue and 10,700 employees—has an implied valuation of less than zero.
Mayer inherited a tough situation. The very idea of an internet portal—a Yahoo or an AOL—is a relic of a web era 15 years ago when advertisers were willing to pay dearly for a massive home page audience that could direct millions onto a plethora of services like mail, news, sports, finance, autos and search. That model doesn’t compute in the mobile era, where apps and social networks dominate.
But Mayer, a star at Google, was supposed to be smart enough to figure a way out. The knives are now unsheathed. Forbes spoke with more than a dozen current and former executives who requested anonymity to discuss confidential matters, and most say a confused strategy and mismanagement, specifically from Mayer, has undermined any attempts at a turnaround. Yes, she originally brought hope, a badly needed focus on products and a keen understanding of technology. But as pressure to deliver results has mounted, there’s widespread belief, as reflected in that employee survey, that she’s no longer up to the task. The past few months have seen a mass exodus, as Mayer lost her chief accounting officer, chief marketing officer, chief development officer, a string of senior vice presidents and an alarming number of vice presidents from across the company in product, engineering, sales and human resources, with more defections to come. Some former executives Forbes spoke with jumped to gigs they saw as more promising, but several said they left out of exasperation with Mayer. “I am so frustrated and upset that so many people’s hard work is just getting destroyed,” says one recent defector.
Mayer, through a spokesperson, refused to speak for this story. Yahoo declined to comment. At a business conference in San Francisco this month, she admitted that there was “more to do” as part of her turnaround but said, “One of the things I’m really proud of is that we have built a future” for Yahoo. Two weeks earlier, she told Wall Street analysts during an earnings call that Yahoo has “the right talent, the right strategy and the right assets to deliver long-term sustainable growth for our investors.” Addressing the defections, she said: “The design and changes in Yahoo’s leadership team are the result of careful planning to achieve the necessary skills, passion and ability to execute growth in our business. Our leadership team today is unequivocally the strongest during my tenure.”
The executives Forbes spoke with dispute that the resignations had much at all to do with “careful planning”. And some increasingly wonder how long it will be before Mayer joins the ranks of ex-Yahoos.
(This story appears in the 08 January, 2016 issue of Forbes India. To visit our Archives, click here.)