Ronnie05's Blog

Can Marissa Mayer save Yahoo! (Part 4): Mobile, Advertisements and Monetization- Mayer still has a point to prove.

Posted in Mobile Devices and Company Updates by Manas Ganguly on August 4, 2013

One place where these hard-core researchers might focus their attention is search. Although Google dominates the space and Yahoo has had Microsoft (MSFT) power its search engine for the last three years, Mayer still believes Yahoo can find new ways to present search results. “Search is far from over,” she says. “It’s physics in the 1600s or biology in the 1800s. There’s miles to go before you get to quantum physics or even a microscope. There’s a lot of that you can do once you have mobile, and we are going to be very focused on the user experience.”

Unlike other mobile powers such as Apple (AAPL), Google, Facebook, Samsung, or Amazon, Yahoo neither controls an operating system nor makes popular hardware devices. And unlike Netflix—or HBO (TWX) or Showtime (CBS), for that matter—it doesn’t own blockbuster shows people are willing to pay to watch. Yahoo’s Weather app may delight design aficionados, but it doesn’t hold a user’s undivided attention the way an episode of Game of Thrones does on HBO Go. Mayer has locked up at least some exclusive content. In April, Yahoo purchased the online rights to old Saturday Night Live clips for an undisclosed amount. She says her strategy is to partner with other players, pushing Yahoo’s licensed content, original shows, and collection of apps to other companies’ hardware. For example, Yahoo makes the default stock-quote application on every iPhone, and Mayer has talked about doing more such deals. The risk is that any company might decide at a moment’s notice to replace Yahoo’s offerings with something else.

Even if its free mobile apps become huge hits, Yahoo has to figure out a way to monetize them. The company is no doubt quietly developing a strategy to advertise within its mobile services, though Mayer will only say she’s focused on developing products that users love. Even there, though, rivals are ahead. Facebook stock rose 30 percent the day after it revealed that 41 percent of its revenue now comes from ads on phones. Although Yahoo doesn’t disclose mobile revenue, Macquarie Securities analyst Benjamin Schachter estimates its mobile ad percentage is well under 10 percent.

For all her credibility with engineers, Mayer is an unknown to Yahoo’s biggest advertisers. “To be out there meeting with clients and advertisers is not her thing,” says Marla Kaplowitz, the chief of media agency MEC North America. As for its products, “Yahoo still needs to be a lot more nimble,” says Kaplowitz, noting that running large ad campaigns across Yahoo’s stable of services is particularly cumbersome.

Yahoo’s revenue topped $7.2 billion in 2008 and has since fallen by almost half. For the last 12 months, sales were $4.8 billion. “I’m not confused; I know we have a lot of work to do,” Mayer says, standing up in the URLs cafe as the FYI session is about to begin. “Up until now, things have gone really well. If you tell me that I’ve got to go back to last July and do it all over again, I’m not sure I could. I was optimistic, but a lot of the progress we have made has surpassed even my expectations.”

By way of explanation she mentions an improbable role model: Sarah Hughes, the American figure skater who competed at the 2002 Winter Olympics in Salt Lake City. “No one thought Sarah Hughes had a chance to win,” she says. Then all the favorites flubbed their routines, and Hughes landed seven spectacular triple jumps and ended up with the gold. “Afterward, Hughes said that she didn’t quite know how she had done it,” Mayer says, “and she wasn’t sure she would ever be able to repeat it. It was the routine of her life.”

It’s an inspirational story that could be interpreted in two ways: Plucky underdog triumphs because of talent or because superior rivals choke. “I feel like Sarah Hughes,” Mayer says. “Actually, I still have her performance saved on my TiVo.”

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