Shopping spree leaves Verizon holding the bag
When Marissa Mayer took over Yahoo five years ago, one of the key parts of her strategy was buying smaller companies more for their talented engineers than for their products.
Silicon Valley veterans talk about companies having their own DNA, a corporate genetic code stitched together from the experiences and skills of the people who work there. For Mayer, the goal was to refresh Yahoo’s gene pool.
A headline-making deal that epitomized the notion of injecting Yahoo with fresh thinking was the 2013 acquisition of Summly, a news-summarizing app savvily marketed by Nick D’Aloisio, a charmingly cheeky 17-year-old. Yahoo soon spiffed it up and rebranded it Yahoo News Digest, and it won a design
award from Apple.
That app will shut down June 30, the company announced shortly after Verizon purchased Yahoo’s Internet properties for $4.5 billion. Including disclosed or reported deal prices, Mayer spent roughly half that amount — more than $2 billion — to buy over 50 companies.
Analysts say the app’s shutdown is just one more sign that Mayer’s startup shopping spree didn’t pan out.
“It’s hard to find many in that list that thrived or seemed to be really fantastic decisions by Mayer,” said Jan Dawson, chief analyst with Jackdaw Research. Most “faded into obscurity.”
It didn’t matter for Mayer that people hadn’t heard of OnTheAir, Jybe or Hitpost. She already had a widely known brand: Yahoo. Mayer had a different strategy.
She wanted to attract talented software engineers and designers, who would build great products; those products would attract users; those users would attract advertisers; and those advertisers would produce revenue.
The strategy did help bring in more employees, far faster than Yahoo could do by hiring them, at a time when Yahoo’s reputation as a place to work had faltered. (Many companies use the strategy, known as “talent acquisitions,” to bolster their ranks.) The problem was that none of the products ended up as a breakthrough success on the scale of Yahoo’s early products like Mail, Finance, News and Sports. And many of the entrepreneurs brought in through the deals fled.
Summly was seen as promising, a natural fit with Yahoo’s large audience of news readers. The app highlighted key stories for the day. But its founder, D’Aloisio, left in 2015. He did not respond to a request for comment. (The News Digest app will redirect to a new one, Newsroom, which allows users to post their own links to stories.)
Mayer’s biggest acquisition was Tumblr, a blogging app. Yahoo paid $1.1 billion for it in 2013. Under Yahoo, Tumblr missed a goal of reaching $100 million a year in advertising sales by 2015. Yahoo ended up writing down a large chunk of the purchase. Dawson said it was Mayer’s biggest flop.
“It definitely feels like they acquired it right at its peak, and it’s gone downhill since then,” Dawson said. “The timing was terrible.”
Mayer announced her resignation from Yahoo after the Verizon deal closed this month. It is unclear what she plans to do next: Her name has come up as a candidate to replace Travis Kalanick as CEO of Uber. Mayer did not respond to a request for comment.
Verizon purchased Yahoo with the goal of combining its large audience with AOL, which it already owned. Last week, Verizon laid off 2,100 workers at AOL and Yahoo and combined them into a new division called Oath. The focus of the division is online video, particularly on the mobile devices running on Verizon’s network.
It’s unlikely that Verizon could repeat Mayer’s run of deals, even if it wanted to. Entrepreneurs who might have had their doubts about working at a company like Yahoo are far less likely to consider a behemoth like Verizon.
Analysts say that Verizon has its work cut out for it just dealing with what Mayer bought — and then sold. Yahoo’s difficulties in making money on Tumblr are now something Oath executives may find themselves swearing about. Rob Enderle of the Enderle Group said Verizon could sell Tumblr or spin it off. Verizon and Oath representatives declined to comment on that prospect.
“I would expect them to shut down anything that Yahoo has that doesn’t sit within the vision of Verizon,” Enderle said.