When Marissa Mayer took over as CEO of Yahoo!, it was a catalyst for change. Having lost their way long ago, the former champions of search were in desperate need of transformation. With Meyers at the helm, the Yahoo! ship is now changing direction, but to what end? If all their recent moves (and rumored acquisitions) are any indication, Yahoo! may not want to be Yahoo! for much longer.
Where Yahoo! went wrong
Yahoo! was founded in 1994 by college friends Jerry Yang and David Filo. The goal was to give the internet a little structure, and focus, by organizing search results. In a time of Ask Jeeves, Lycos, and Netscape, Yahoo! was a refreshingly straightforward approach. It was easier on the eyes, gave better results, and later lumped in services like email to make it the first one-stop internet portal for many of us.
Over time, the sizable number of acquisitions by Yahoo! clouded the focus it began with. A company that started with such a simple concept soon found itself bloated, broke, and bartering for survival. Spending money to make money is not new thinking, but Yahoo! only got half of that right. Acquisitions that were later shelved or shuttered left Yahoo! with no return on investment, and the added bulk only served to weigh them down when they could least afford it.
The advent of Google, with their incredible search algorithm, left Yahoo! in another bind. Like any search engine ir web portal, Yahoo! relies on selling advertising space for much of their revenue. Even with a 3 year jump on Google, Yahoo! was caught off guard by Larry and Sergey. The two companies were on a different arc, with Google breaking ground on an empire, and Yahoo! digging through the rubble of theirs.
Mayer has the distinction of being employee number 20 at Google, as well as its first female engineer. Mayer was instrumental in many key services like GMail and Search, famously keeping the Google landing page subtle. She seemed to be everything a company could hope for: beautiful, bright, and bold. There was, however, a point in which she reached waters at Google she couldn’t navigate successfully.
Schmidt, Page, and the management shakeup
While Larry Page and Sergey Brin were finding their way within Google, Eric Schmidt was the defacto “adult supervision”. A tried and true CEO, Schmidt had a very vanilla way of organizing the company. The structure suited Mayer, and left her with a very clear and concise trajectory to follow in her quest for greatness.
As Schmidt moved away from the helm, and Page regained control, the Google universe shifted. The new CEO, a founder along with Brin, had a very clear idea on what Google should be. As with many management shifts, the structure changed. Schmidt, for instance, had an oversight committee, which Page almost immediately disbanded. That committee, which Mayer sat on, had a direct hand in the direction of perhaps the largest tech company ever. As Page disbanded the committee, a chain of events began, throwing Mayer’s future at Google into uncertainty.
Mayer the climber
Marissa Mayer is an ambitious woman. For someone with a drive like hers, simply being a cog in the wheel isn’t good enough. With the oversight committee being dissolved, and her being passed up for one of several open Senior Vice President spots after the Page regime began, Mayer’s direction fell prey to the fog of corporate war. She went from a beloved figure to embattled talent in very little time.
She was well suited for any SVP position in the company, having held so many key roles and been instrumental in so much of Google’s early success. Mayer was now increasingly unavailable and unseen, whereas she was once the darling of Google. While the real reasons are not known, her role was increasingly diminishing at Google. No promotion, no committee, and no public face time. She was being relegated to simply being employee number 20, and that clearly didn’t suit her. She said all the right things about her role at Google, but the fire was still burning. She wanted, and maybe needed, more.
Mayer goes Yahoo!
While many would be exceedingly happy with the position she held at Google, Mayer was ready for change. As Yahoo! floundered, and removed their CEO from power, Mayer became the perfect choice to lead them. Some were taken by surprise with the move, but they shouldn’t have been. Well known, well liked, and well versed in the industry, Mayer has all the proper tools to lead.
As Yahoo! wants for direction, Mayer is poised to offer it. If one thing can be said of Mayer as CEO of Yahoo!, it’s that she learned a thing or two from Google. While decisions like the one to no longer allow employees to work from home have been met with heavy criticism, the reasoning for such a shift tells us more. The hiring process at Yahoo! has also changed, becoming more rigorous. The focus at Yahoo! is clearly shifting toward mobile, where they have a huge opportunity.
Those changes are similar to Google’s own structure. The environment at Google is collegial, and welcoming. The focus on mobile is clear, and the hiring practises thorough. The question is whether Mayer is trying to beat Google at being, well, Google.
Mayer spent a lot of time at the Google dojo, seeing first hand that smart acquisitions pay off. Even with a $1.1 billion price tag for the blogging site Tumblr, that move is a smart one. The demographic is young, and it’s a brand new stream for ad revenue. Tumblr is many things to many people, but also highly social. As Mayer was privy to the genesis (and genius) of the Google+ social layer, and the perils of doing it wrong (Orkut), she undoubtedly sees the upside for Tumblr as it relates to Yahoo!’s bottom line and overall scheme.
News that Yahoo may be interested in Acquiring Hulu also lines them up against Google, this time with the YouTube juggernaut. While Hulu has a trump card with their programmed content, YouTube is a big target that is not easily hit. With so much user generated content being uploaded daily, YouTube simply can’t be toppled. They can, however, be edged out of certain areas they’ve not explored.
As the television industry changes, Hulu is in a good position to capitalize on a new type of subscription model. Having already been established as a pay-for-content service, the brand can withstand such a transformation to a channel subscription model. YouTube may not be so lucky, even though they’re currently dabbling in that realm. Pricing and positioning will ultimately win, and Hulu is currently in a much better position.
Mayer made one very slight snafu in obtaining Tumblr: she promised a positive gain, almost immediately. Promising investors that Tumblr will contribute positively to the bottom line right away is bold, and perhaps misguided. Yahoo! should be focussing their energy on making Tumblr a destination, not expecting it to reap dividends for them straight away. It also sets a precedent that a Hulu acquisition would need to mimic, and that’s a tall order.
One thing Mayer hasn’t picked up on is Page’s willingness to lose. Google acquisitions have a very visceral tinge to them, and almost all are done so with the understanding that what they do will be cobbled into a Google service. That growth model almost never shows immediate gain, and Page is okay to lose for a little while in the interim. The greater overall health of Google Is much more important than turning an immediate profit.
Winners without losers
A thread of desperation still runs deep at Yahoo!. While Tumblr is a good buy, it’s nowhere near as through or well received as Facebook or Google+. What Yahoo! really bought was users, and the roots they’ve put down at Tumblr. The revamped Flickr, and staggering terabyte of free storage space, will attract many to the site. Hulu would be similarly attractive: loyal users, and a new audience for ads.
Modelling Yahoo! after Google is wise. Mayer is taking what she learned from an exceedingly successful startup, and applying it to a company that needs to act like one. Whether or not Yahoo! employees subscribe to her “no working from home” policy, it means culture. The new-look Tumblr is really nice, and translates well to mobile. These are topics Mayer is comfortable and well versed in, and she learned from the best.
The issue may end up Mayer herself. She’s a climber, dead set on winning. Her attitude and drive got her where she is, but tempering it would be wise. Yahoo! can’t out-Google Google, no matter how much they may want to. So long as Mayer understands that she isn’t bigger than Google this time around, things will be just fine.