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Wolff: What next for Yahoo and Marissa Mayer?

Michael Wolff
USA TODAY
Yahoo CEO Marissa Mayer speaks during a keynote address at the International Consumer Electronics Show on Jan. 7, 2014, in Las Vegas.

What will happen to Yahoo, really? And, as a both a subset and a wholly independent question, what will happen to Marissa Mayer, Yahoo's CEO, and will it be sooner or later?

Yahoo's big investment in Alibaba, the Chinese e-commerce company, effectively turned Yahoo into a tracking stock—you invested in Yahoo to bet on Alibaba. But now with Alibaba public, that function, and protection, are removed. Yahoo's core business—its hodgepodge of services, news and entertainment—previously overshadowed by Alibaba, will now again drive its value.

Likewise, Mayer, its CEO, effectively a figurehead—at least in the eyes of Wall Street—for the Alibaba interest since her arrival at the company two years ago, is now more strictly accountable for Yahoo's own performance.

Mayer is a caught-in-the-headlights figure. The entirety of Yahoo's operating revenue is from advertising, and yet at two major advertising gatherings—the Cannes Lions Festival in France in June and Advertising Week a few weeks ago in New York—Mayer's strange combination of terror and somnolence became the main gossip, if not drama, of the events.

Mayer came to Yahoo after two disastrous CEO choices had opened the company to a raider's—or "corporate activist's"—interests and ostensible reforms. Dan Loeb, the raider-activist, got rid of one CEO. Then -- acting on the brainstorm of New York consultant and former MTV suit Michael J. Wolf, now reconstituted as a digital guru -- nixed the interim CEO, Ross Levinsohn, and hired the then 37-year-old Mayer from Google. In a burst of publicity and lavish press, she seemed to inaugurate a new start for Yahoo, thereby raising the share price enough for Loeb to profitably exit.

Alibaba's value grew, further buoying Yahoo's share price, while Mayer presided over the part of the company that was functionally beside the point.

But now she is center stage.

At the Advertising Week event in New York. she was interviewed in the New York Times auditorium by Robert Safian, the editor of Fast Company, in what seemed like a highly negotiated encounter. Safian, an accomplished business journalist whose magazine is at the forefront of reporting on convulsions in the digital world, threw only the mildest of softball questions. But even thus protected and cosseted, Mayer seemed terror struck, grim and throttled.

Indeed, she is in some formal sense, following the Alibaba offering, the Silicon Valley figure now most tipped to fail. And much of the happy chatter on the long line to get into the event—one of the toughest tickets at Advertising Week—had to do with the anticipation of another train-wreck performance by Meyer.

And while she did not literally sleep through the interview, as she famously did at a key meeting with ad executives at the Cannes Lions event, she certainly seemed to be sleepwalking through this public effort to explain her company's current predicament. It is another one of the Yahoo paradoxes: The search engine without search technology has a figurehead CEO who can't be taken out in public.

Similarly, while she appears to be centralizing more power around her within the company—making herself, according to many reports, the singular and perhaps only decision maker in a complicated bureaucracy—she is also steering the company ever-more away from technology, her skill set, and towards media, a business she knows little about. Indeed, the immediate future of Yahoo—which has been unable to transform itself into a media company despite the efforts of the many top media executives it has hired—now rests on the success of an original programming video slate that it is producing under Mayer.

The crowd at Advertising Week was not just there for the unkind sport of watching Mayer's hapless performance, but also out of keen interest in that most basic of business questions: If you had all the money you could want—Yahoo realized about $8 billion in cash from the Alibaba offering—what exactly would you do with it?

The various answers—albeit not elicited from Mayer in the interview—remain, as they always have with Yahoo, obvious. Indeed, this may be one reason why Yahoo, which should really not be of much interest, remains a compelling story: it's a ritualized drama in which everyone knows the outcome.

In the first approach to deploying its vast resources, one apparently favored by Mayer, Yahoo continues to try to remain all things to all people and, despite the evidence otherwise, to see itself as a central player and major platform. Here, Safian afforded Mayer the opportunity to describe various strikingly banal initiatives for which the company has great hopes.

In the second, also seemingly favored by Mayer, Yahoo will use its Alibaba windfall to try to repeat the Alibaba experience. In this regard, Yahoo is now negotiating to buy an interest in Snapchat, the flavor-of-the-moment tech company. Pay no attention to the fact that Yahoo's investment in Alibaba was at a trainee price, whereas Snapchat is already valued at $10 billion.

In a third scenario, one that Yahoo keeps rejecting, the company merges with AOL, its doppelganger in corporate drift. The downside to this is that you merely double the drift, the upside is that you might be able to halve the costs of maintaining double the drift.

The fourth scenario is to drastically downside the business. In this view, the one thing Yahoo has succeeded at is centralizing large amounts of traffic in something of a habituated fashion. That traffic has, in essence, a commodity value. Spending more money on it doesn't make it more valuable; therefore, with some clear logic, spend less. You trade ambition, or grandiosity, or panicked disarray, for efficiency.

And, in the fifth scenario, another activist raider comes along, says the obvious, that the company is a hopeless mess, fires Mayer, hires a new CEO and, with much fanfare and bluster, promises a new Yahoo.

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