The New York Times says that Yahoo’s newest Chief Executive Officer, Marissa Mayer has done more good for the company in her first six months than any of her predecessors have contributed to the company. Investors have been waiting for good news from the company for some time now and the hiring of Mayer might just be the answer.
On January 28, Yahoo Inc.’s financial results for the fourth quarter were released showing off Mayer’s turnaround for the company was in progress with a 2% increase in net revenue to $1.35 billion, beating Wall Street’s expectations by 30% for the first time in years. Yahoo also experienced a raise in stock price to $20.91 in after-hours trading and a 36% overall gain in stock since Mayer began. Although Yahoo saw an increase in its revenue this year due to redesign of its web services, Mayer believes it is going to be a long journey to restore the Internet company’s fortunes causing analysts and investors to be skeptical. With tough competition from Google and Facebook, Mayer must show expansions in search or mobile technology to provide evidence of a future growth plan.
Investors are left asking does Mayer have the experience, leadership and innovation that Yahoo needs to survive? Mayer has presented some of her plans to analysts and investors to regain their confidence. Mayer plans to renew focus on its people, products and business strategy, which have all diminished over the years. Mayer believes the site will be more attractive with better-qualified, more motivated people behind it. This upturn in internal operations and changes to the website’s design and services are assuring but aren’t enough to restore faith in a declining Internet company according to investors.
Mayer’s improvements in Yahoo’s search business are being outshined by its continuous decline in their display advertising revenue, the business’s most profitable area. Analysts are concerned as Yahoo continues to lose share in a core business function and EMarketer predicts Yahoo’s share of the U.S. display ad market will fall to 8% in 2013 from 9% in 2012 as competitors continue to increase shares. To show substantial growth and increase shareholder’s perceptions, Mayer plans to increase the company’s mobile presence and display ad business by creating more personalized content and increased product innovation. Yahoo has about 700 million monthly users, which is steadily declining as more users pursue other smartphone apps. For example Facebook has successfully created one of the most popular apps. This leaves Mayer to take on the challenge of surpassing companies like Facebook and Google in the market by creating useful, personal and innovative apps for users to access mail, news, and other daily needs. According to an article from the Los Angeles Times found on StockTwits, Mayer’s most recent focus will be upon creating a “dozen or so applications that people use all the time on their phone” to increase usage time therefore, advertisers will spend more money.
Because Yahoo’s current focus towards investors is perceived future growth from mobile innovation, it is growth investors who the company will be targeting. Although a risky gamble, Yahoo is expecting that revenue will increase between 4.5 and 4.6 billion in the upcoming year indicating an annual growth rate of .7% to 3%. Today the stock price of $21.23 continues to rise since the release of Q4’s financial results. Finance Chief, Ken Goldman gives hope to investors as he alerts them to expect an investment phase in the first half of 2013 due to Yahoo’s plans for product engineering and marketing to ensure revenue growth.