Are Yahoo Digging Their Own Grave with Financial Metrics?


Image: Via Dark Government for BandT

The last four years must have been incredibly stressful for Marissa Mayer, CEO of Yahoo. According to the critical eye of the media she hasn’t exactly succeeded in turning Yahoo into a profitable business again, but she has tried. Finding the winning formula to bring Yahoo back to its Silicon Valley stardom it once claimed in the 1990s is proving to be harder than Mayer might have thought.

So why can’t Mayer get it right? Though the answer is not a simple one, it could be Yahoo’s heavy focus on financial metrics rather than marketing and innovation that has been stifling the growth of such an iconic company.

Acquisition is not Innovation or Marketing

Yahoo has been struggling for quite some time now, long before Mayer was on the scene. With the rise of Google and Facebook, Yahoo lost a lot of a talent which they failed to replenish. Without serious innovation Yahoo couldn’t compete against these other tech giants or keep up with consumer trends, such as mobile devices and social media. “…A shadow of their former selves”, according to the CEO of Optimal, their lack of innovation and adaptation has likely been the cause for the company’s continual downward spiral.

In her first attempt to save Yahoo, Mayer took an approach which focused mostly on growth by acquisition. It would be unfair to say that growth by acquisition can’t be an effective way to grow a business, however this was not the case for Yahoo. Their biggest acquisition under Mayer was the purchase of Tumblr, a blogging site for $1.1 Billion in 2013. Yahoo’s Chief Marketing Officer, Kathy Savitt defended the purchase at the time, but by 4th Qtr 2015 reporting period, Yahoo had already written down its value.

Despite some elements of the business improving, such as their video advertising, it hasn’t been enough to save the company just yet. For the last 3 months of 2015 Yahoo reported a loss of $4.4 Billion. The acquisitions and new product developments have come to a halt. Instead Mayer has announced more job cuts, bringing the total reduction in jobs to 42% since 2012, as well as the writing down and sale of company assets and real estate, hoping to save the business an extra $400 Million.

Marissa Mayer

Marissa Mayer, CEO of Yahoo. Image: Stuart Isett/Fortune Most Powerful Women

Look beyond the numbers

Unfortunately for Mayer, she is yet to understand the critical need for strategic marketing, creativity and innovation. Rather, she continues to use numbers as her basis for decisions, something Grant and Grant (2012) point out is an all too common way for big companies like Yahoo to ultimately kill themselves. They argue that when companies identify they’re nearing the end of a life-cycle, according to the sigmoidal growth curve (West in Grant and Grant, 2012, pg. 6), instead of adding to their innovation department and reinventing themselves, they are most likely to reduce or abandon this department when they need it most, saving on costs but inevitably ending the life of the company.

Perhaps if Mayer were to apply marketing over metrics Yahoo may have a better chance at survival. Wyner (2008) suggests that what is ‘easily measured may not be the most meaningful criterion’, failing to capture the long term benefits of investments, such as brand equity and brand value. He goes on to point out that applying metrics may risk many valuable marketing methods from being used at all, including market testing, consumer behaviour research, market research, and nurture and support for new ideas, inevitably crushing business growth (Wyner, 2008). It is unlikely Yahoo have applied many, or any of these marketing practices. If they had, perhaps they would not be abandoning new products and purchases every few years.

Another hint at Yahoo’s failure to apply well thought out marketing is their recent trial of banning users who have adblocking software from accessing their Yahoo email account. Of course customers took to social media to show their displeased responses. It was a potentially risky move for a company whose profits have continually plummeted for years and years. This just supports the theory that organisations that concentrate on ROI commonly have a poor understanding of why customers purchase from them (Clark and Ambler, 2011).

Yahoo logo purple

Yahoo’s new logo, developed under current CEO, Marissa Mayer. Image: Fonts in Use

Marketing is Maintenance and Brands are Assets

Mayer’s mistake is giving too much attention to financial metrics and continuing to make decisions around this data. However, her biggest mistake is ignoring the value and equity of the Yahoo brand. If the brand were being treated as an asset, which it should (Ambler and Roberts, 2008), such brand damaging decisions as mentioned above would be avoided. Until Mayer comes to realise that ‘marketing is maintenance’ above all else (Ambler and Roberts, 2008), it would be surprising if the former Silicon Valley icon were to survive.


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