(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Jeffrey Goldfarb
NEW YORK (Reuters Breakingviews) - Marissa Mayer has made her mark on Yahoo YHOO.O in less than a year. The website chief’s $1.1 billion deal to buy blogging site Tumblr on Monday goes a long way to restoring the faded and vainglorious exclamation point to the company’s name.
When Yahoo poached Google (GOOG.O) employee number 20 last July, the $30 billion Sunnyvale, California, company was little more than a purple road kill stain on the information superhighway. In the five years leading up to her appointment, a succession of five chief executives failed to develop a coherent business model and ultimately destroyed value. Yahoo shares had tumbled 38 percent compared to the 6 percent gain in the Nasdaq.
The spiral into irrelevance is a hard one from which to recover in the world of technology. If nothing else, and despite little tangible sense of her “mobile first” strategy until the Tumblr announcement, Mayer has stopped the descent. Her chromosomal makeup alone generated fresh buzz for Yahoo when she was named CEO - and disclosed simultaneously that she was pregnant.
Culture-changing initiatives like providing free food at the office and scrapping Yahoo’s work-from-home policy brought the company more attention. Mayer herself became a bigger social media sensation and her Klout score shot up to be on a par with Facebook (FB.O) hotshots Mark Zuckerberg and Sheryl Sandberg.
Tumblr puts all the hype - and the 70 percent rise in Yahoo stock since Mayer took over - to the test. It’s a risky bet on capturing and keeping younger Web users in a winner-takes-most industry. Yet it shows Mayer has at least won the confidence of her board of directors, which allowed her to dig deeply into a bulging war chest created by the sale of a stake in Chinese web giant Alibaba.
Shareholders didn’t blink at the hefty price tag for a company whose ability to generate profit, or even revenue, remains questionable. And that’s despite Yahoo’s track record of bungling acquisitions like overpaying for GeoCities and mismanaging Flickr. Mayer has vowed “not to screw it up.” She was referring specifically to Tumblr, but may as well have been talking about Yahoo’s revitalized status.
- On May 20 Yahoo announced it had agreed to buy blogging service Tumblr for $1.1 billion, most of which will be paid in cash. Yahoo Chief Executive Marissa Mayer posted a notice about the acquisition on Tumblr, complete with graphics including a gif saying "Now panic and freak out". She wrote: "We promise not to screw it up." Mayer also wrote that more than half of Tumblr's users post through the mobile app and that combining the two "could grow Yahoo's audience by 50 percent to more than a billion monthly visitors and could grow traffic by approximately 20 percent." (Full story click here)
- Yahoo announcement: link.reuters.com/mub38t
- Marissa Mayer's Tumblr post: link.reuters.com/nub38t (Editing by Antony Currie and Martin Langfield)