Citi analyst Mark Mahaney said about Yahoo! this week:
Its core Display Ad biz seems like a Deteriorating Asset – a possibly perpetual market share loser – while its Asia Investment Portfolio would seem to contain significant Shareholder Value creation opportunities. We applaud YHOO’s significant share repo activity and would encourage the consideration of a dividend.
Mark Mahaney is a fellow Wharton alum (Go Quakers!) and a Hopkins alum (My wife’s school), so you would think he would be super smart, but I hate this analysis. This analysis is what you do when you are losing: Milk the deteriorating asset and give the cash to shareholders before the company throws it away. This is not how to win at all. Turnarounds require cash hoarding. Should Apple have paid a dividend a decade ago? Should Apple be paying a dividend now? Cash should go to investing in the business if there are places you can invest it that return a reasonable IRR (theoretically not hard given the interest rate at the moment). If Yahoo doesn’t have these, and Scott Thompson can’t figure out what they are, they truly are doomed, but I continue to think of Yahoo! as one of the most valuable media properties on the Internet today. Ironically, a Citi analysis tells the story:
There you go: Yahoo! is just behind Google and Facebook for time on site in the U.S. Admittedly, the inventory is not as valuable as Google’s directed intent inventory, but still, don’t go throwing in the towel. I vote for turning it around! That requires investing in awesome, not milking the business dry. You need to give Scott Thompson a fighting chance here.
Of course, I have to comment on the ridiculous things said by Business Insider as well. Here is the best part of that article:
This exec said: “I would like to know what the Yahoo board was looking for that this guy is the answer. Because I just don’t understand.”
This exec’s primary complaint is that Thompson has spent most of his career on the product development side of the tech industry and he has exactly zero experience in media or advertising.
“He doesn’t really know the company. He thinks there’s opportunity but was not specific about it. I think he doesn’t even really grok what business Yahoo is in.”
In this person’s view, Yahoo didn’t need an executive with product development experience as CEO because “there is very little that is wrong with the Yahoo product.”
“Maybe a year ago they had product problems, but [Yahoo product boss] Blake [Irving] has done a great amount of work and what Yahoo has in the product pipeline is more compelling than another other media company.”
In this person’s view, what Yahoo needed to grow its revenues again was a CEO who can “better position” the company’s various advertising offerings to agencies. After meeting with Thompson, this source said that could be a problem for Yahoo’s new CEO.
“He is not really familiar with the kinds of sensitivities in the agency business. This is a very relationship heavy industry and I don’t know if he’s best equipped for that. “
This guy is hoping they re-hire Terry Semel. I liked this hire because I thought they needed the second coming of Tim Koogle.
Yahoo! is not in the media business, it is in the new media business. Unlike movies and TV, where the format has really changed minimally in the last 50 years, new media is changing drastically every 5 years. The advent of online video like Youtube and Hulu, the emergence of the mobile Internet, and more mean that being a new media conglomerate leader is about having a vision of how technology will evolve more than it is about being a mac-daddy networker. Continuing to evolve the product pipeline over the next decade is at least as important, if not more so, than simply shilling what they have.
The job of Yahoo’s CEO is to change the world, not sell what they got to agencies. They need the Steve Jobs of media, not Greg Coleman. You want a guy with tight agency relationships? This guy is the CEO of Yahoo!, he can hire that guy. Can’t hire vision. Can’t hire game-changing. Plus, as many of the commenters point out – while agencies have lots of options, winning is about the audience. How are Zucks agency relationships? Bet he is not going to have too much trouble taking money out of agencies pockets. Eric Schmidt’s big fat agency rolodex? Non-existent. How is that Google advertising business doing? OK?
If you have the audience, and you have the products, you will overcome.
I wish Yahoo! the best of luck. The world needs more innovation and I would hate to see companies simply go “poof”. I feel the same way about Tim Armstrong at Aol. No one wants Aol to stop existing. The world is more fun when there is more stuff going on. We just want them to suck less.