Business The Economy Hub

Why Yahoo is in trouble, in six words

In a New York Times story about the firing of Yahoo chief operating officer Henrique de Castro, there appears the following passage:

"In the end, the whole misadventure might not matter unless [Yahoo CEO Marissa] Mayer is able to redirect the company away from its failing core business of selling display ads." (Emphasis ours.)

Really? Yahoo's "core business" is selling ads? That's like saying Target's core business is running checkout lines. One would have thought that Yahoo's core business is developing and hosting websites and services that (it is hoped) attract an ever-increasing population of devoted users and on which -- if they're successful -- ads can be sold. Placing the selling of ads at the center of the business plan, as though once you do that everything else will follow, is mistaking the scoreboard for the game.

To be fair, the definition of Yahoo's core business is the Times', not Yahoo's. But it does reflect confusion about the company's mission that plainly emanates from Yahoo headquarters in Sunnyvale. 

What is Yahoo, exactly? It's been hard to say for years, under a succession of CEOs dating back to Tim Koogle, who left in 2001, and continuing from Terry Semel to Carol Bartz to the who-they? trio of Tim Morse, Scott Thompson and Ross Levinsohn in 2011-2012.

That dispiriting trend was supposed to end with the appointment of Mayer, but Yahoo is still an indefinable glop. Google is also a melange of sites and services, but they complement each other in ways that Yahoo doesn't match. Mayer's approach seems to be built around a succession of coups de theatre, like the hiring of Katie Couric as "global anchor" or David Pogue to run a tech gadget page that, for our money, has pretty much nothing you can't find on any other tech gadget page such as engadget or gizmodo. ("15 Wacky and Wild iPhone Cases"? Zzzzzzzz.) Oh, and the acquisition of Tumblr for $1.1 billion. 

Yahoo shares have doubled since Mayer's arrival, but much of the rise appears to be based on the company's holdings in the Chinese e-commerce company Alibaba. The top line hasn't budged, except to drift down, and Wall Street's thrill over Mayer is starting to turn brown at the edges. 

Reach me at @hiltzikm on Twitter, Facebook, Google+ or by email. MORE FROM MICHAEL HILTZIK

Obamacare success stories you haven't read

The toll of the anti-vaccination movement, in one scary map

Net neutrality is dead. Bow to Comcast and Verizon, your overlords

Copyright © 2014, Los Angeles Times
Loading