Credit: Jolie O'Dell/Flickr

Yahoo's disembowelment should surprise no one

Being a less-good Google simply doesn't cut it.

by Jack Torrance
Last Updated: 03 Dec 2015

Most west coast tech giants are really good at doing one thing. Amazon can sell you pretty much anything, often at an unbeatable price. Apple makes beautiful hardware that keeps its die-hard fans coming back for more. Google has an insurmountable share of the search engine market (and all the advertising revenue that entails) and Facebook keeps us all connected.

So what is Yahoo for? The news that Marissa Mayer’s outfit is considering a sell-off of its internet division might seem perplexing. Isn’t Yahoo one big all-encompassing internet division? Most of its money comes from advertisers, who pay to appear alongside its search results, media content and other online services.

But those income streams have been on the slide. Yahoo’s total revenue in 2010 was $6.3bn (£4.2bn); last year it was just $4.6bn. Though former Googler Marissa Mayer brought great expectations when she arrived as CEO in 2012, she has failed to arrest the company’s decline.

Last December Yahoo’s share price was at its highest level since the dotcom crash but it has been on the slide all year, falling 30% in the last 12 months to yesterday’s closing price of 35.99 cents (even after shares rallied on talk of a sell-off).

Yahoo does still have some things of real value. Its stake in Chinese ecommerce giant Alibaba, worth a hefty $30bn or so, accounts for most of its total market cap of just $34bn (it also owns a stake in Yahoo Japan, a joint venture it launched with Softbank). The previous plan was to sell the Alibaba stake off, making some cash to shore up the core. But that’s thrown up some difficult tax implications, leading its board down the path to disembowelment.

Selling off its core business won’t exactly be straightforward. According to Reuters’s Robert Cryan, the market currently values Yahoo’s online operation at less than zero. But private equity firms and ‘at least one media company’ are reportedly circling.

If they do pounce, Yahoo’s new owners will have a lot of work to do. Unless they want it to become an empty brand and an even smaller shadow of its former self, the company needs new innovative income streams that it can lead the world in. Being a less-good Google simply won’t cut it.

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