PROBLEMS ‘ PILING ON’ FOR YAHOO, MARISSA MAYER
CEO’s legacy diminishes as email breach compromises Verizon deal
Marissa Mayer vowed to have an impact when she took over Yahoo in mid- 2012.
Four years later, it’s clear she did — but not always good, particularly in light of revelations that came to light after she announced a deal to sell the Internet icon to Verizon.
The latest contretemps: Verizon’s general counsel said the massive breach disclosed by Yahoo last month, in which the personal data of 500million users were stolen in 2014, could have an impact on Verizon’s proposed $ 4.83 billion deal.
Questions about the status of the Verizon deal, coupled with its murky role in a government surveillance program, shouldmake for a strained backdrop when Yahoo announces its third- quarter financial results late Tuesday. But don’t expect many answers: Yahoo is not hosting a conference call, citing the pending Verizon deal.
Themost recent revelations ( of spying) “are just kind of piling on,” says RitaMcGrath, professor of management at Columbia Business School, who, like other management experts, concedes Mayer’s failure to turn around Yahoo will shadow her. “I don’t think it’s like she was a goddess and now these revelations have destroyed her. It’s almost along the lines of, ‘ We almost expected that.’ ”
A report this month said Yahoo scanned all customers’ incoming emails on behalf of U. S. intelligence agencies, the first time a U. S. Internet company is thought to have done an email sweep of that scope, and the kind that rivals including Google and Facebook said they would have fought. A law enforcement source told USA TODAY the scan looked for a digital signature associated with a known terror organization.
Yahoo called itself a “law- abiding company”
in a statement. Nearly 50 members of Congress on Friday asked the Obama administration for more information “as soon as possible” on Yahoo’s cooperation with the government.
The blockbuster news made another crack in Yahoo’s already- crumbling image as it navigates a highly- publicized sale to Verizon, which has now placed the burden on Yahoo to prove the breach of 500 million customer accounts does not affect the price of the sale. Yahoo says it’s confident in its value in the deal.
What happens next is integral to whether Mayer can leave on a high note.
“She’ll be remembered as the CEO who sold Yahoo to Verizon,” says Greg Sterling, a contributing editor at Search Engine Land, who gives Mayer a “B” for her stint at Yahoo. “Her legacy will be judged, in part, on what Verizon does with Yahoo.”
Mayer has taken the brunt of the criticism for the email breach, and later, news of cooperation with U. S. spy agencies. To some extent, that’s typical for a CEO, especially a highly paid one. But Jeffrey Sonnenfeld, a professor at the Yale School of Management, says those events obscure what’s been a so- far successful navigation of the Verizon deal. “Put away your pitchforks,” he wrote in Fortune. “( The email scanning story) is the latest corporate witch- hunt, and it arrives just in time for Halloween fun.”
When Mayer agreed to leave Google and lead Yahoo, she embarked on a suicide mission, Sterling and others agree. It’s doubtful anyone could have righted what was a sinking ship, they say.
Yahoo was in the throes of receding users and revenue growth because of withering competition from Google and Facebook, a plunging stock price ( less than $ 16) and amuddled strategy caused by five previous CEOs in five years, including two interim CEOs.
Mayer, who succeeded interim CEO Ross Levinsohn, at the time vowed to make online advertising Yahoo’s main revenue source. Yet she inherited a company that abandoned search through a partnership with Microsoft in 2009.
Despite boasting one of the most- visited websites in the world, Yahoo’s quarterly sales were flat, at $ 1.1 billion, and profits were down 4%, to $ 226.6 million.
Four years later, Mayer has helped Yahoo grow its mobile revenue, but revenue and profit is in decline, with the company reporting a net loss its past three quarters.
During her tenure at Yahoo, Mayer opened the company’s pocketbook to spend billions on acquisitions including blogging platform Tumblr, photo- sharing site Flickr, mobile analytics firm Flurry and style site Polyvore.
While some such as Flurry were successful, not all were, most notably Tumblr, which Yahoo paid $ 1.1 billion for three years ago and has since has written down twice with charges of nearly half of its worth.
Mayer also signednetworkTVanchor Katie Couric to a $ 6million annual contract in 2013 that reportedly rose to $ 10 million annually. Mayer is in line to pick up a $ 44 million severance package.
While some may have stemmed the decline, it wasn’t the hoped- for turnaround.
Revenue is expected to decline 14% in the third quarter to $ 861 million, according to analysts polled by S& P Global Intelligence. Estimated net income is expected to drop 44% to $ 42.5 million.
Competition from Google and Facebook also marginalized Yahoo, one of the original Web portals. In 2015, Yahoo’s U. S. digital ad revenue fell 1.3% to $ 2.51 billion, according to eMarketer. Its share of the U. S. digital ad market declined to 4.2% in 2015, down from 5.8% in 2014.
“She was hindered by structural impediments,” Sterling says. “Google invested heavily in search with superior resources and technology. The rise of Facebook builtmomentum and appeal.”