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Summary:

The arrival of Marissa Mayer at Yahoo is fueling the desire for a comeback story. Despite press reports suggesting the turnaround has come, Yahoo’s modest earnings improvement this week are not that story.

Wouldn’t it be nice if you could just wish something into existence? That’s what some in the media seem to be doing in hailing Yahoo’s latest earnings report as evidence of a comeback. Yes, the numbers were mildly better than predicted and the company’s star CEO sounded full of vim — but that doesn’t mean Yahoo’s position is any less hopeless than a year ago.

In case you missed it, Yahoo’s earnings came in at 32 cents a share yesterday which is better than the 28 cents that analysts had predicted. On the investor call following the earnings report, CEO Marissa Mayer stressed partnerships and the “tremendous internal transformation in the culture, energy and execution of the company.” She claims to have fixed hundreds of pressure points in the Yahoo bureaucracy and boasted that company employees worldwide are now enjoying free cafeteria food.

These are tactics, not a strategy. The reality is that Yahoo is still getting pummeled in its core business of display advertising and its search business, while posting higher revenue, is still losing market share. Despite some nifty content offerings (especially its finance and sports), the company is struggling for relevance in a world where no one says “portal” anymore. And while its stock is flying high, a big reason for that is Yahoo plowing money from asset sales into share buybacks.

To get an idea of where Yahoo stands, recall that the company was once regarded as an internet “giant” and that it stood astride the tech world like Apple and Amazon do today. Now, look at the chart below to see its relative significance today:

The other companies on the chart are not just other tech companies, but the companies with which Yahoo must compete directly. Google and Microsoft remain genuine giants while Facebook is still much smaller but, unlike Yahoo, is poised for powerful growth in the next two years. And, as my colleague Mathew Ingram noted, “partnering with everyone else is not a winning strategy.”

Mayer said on the investor call that Yahoo’s biggest opportunities lie in “search, display, mobile and video” but gave little indication how it would dislodge its immediate competitors — let alone the likes of Twitter, Tumblr and other upstarts.

The best that can be said for Marissa Mayer’s Yahoo is that the company is not outright dysfunctional. But it still needs a competitive advantage and a growth strategy. Until it has those things, let’s not waste our breath talking of a turnaround.

(Image by  Olesia Bilkei via Shutterstock)

  1. Typical Yahoo basher!

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  2. Marissa has only been at the company for 1 quarter.

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  3. to be fair, expecting Yahoo/Mayer to give you details of their strategy is not a good strategy, so wish people would stop complaining about that

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  4. Negative Nelly strikes again!

    What you’re missing is that enormous amounts of regular people would leave Google in a heartbeat if they could. If “Yahoo!” can make itself into a decent alternative to Google for search without stealing everyone’s user information, that alone will win the day. It’s not even that hard, it just shows a little vision.

    The way you will know if Marissa Mayer has this vision is when the rebranding happens. One of the biggest problems “Yahoo!” has, is the perception that it’s an old 90’s company and the biggest indication of that is the ridiculous, insanely annoying, guaranteed-to-get no-respect … name.

    A company with a scream for a name (with an explanation point no less) simply will never be taken seriously. It was cuddly and friendly for a few minutes when it was announced years ago, but it’s been a boat anchor ever since.

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    1. 1. while yes, it is early to talk about a revolution in yahoo, can anyone argue against that fact that now there is finally someone steerting it, rather than letting it drift?

      2. i assure you the name is not the problem. however funny it may sound, it is the fourth biggest internet brand, instantly recognizable by no less than a billion people. that’s way more profitable than a serious name. not every company can be called procter and gamble lol.

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  5. I agree with you. The gains from Ali Baba are the ones that are driving the EPS…..nothing on the part of the management or the company.

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    1. Yahoo should look for an ally…….perhaps facebook,twitter or somone that would enhance each other. Most companies would be stronger if they if they could choose a perfect mate.

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  6. “tremendous internal transformation in the culture, energy and execution of the company.”

    After working at Yahoo for 7 years my friend’s stock options expired, without ever earning them a penny. No adjustment to the strike price or trade in for RSU’s. Nothing. Thanks for the 7 years of work, now give us back those options and get back to work!

    If that’s part of the tremendous internal transformation I’m concerned for all Yahoo’s.

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  7. Yahoo should become just a photo site, flickr. Everything they do should be related to flickr. Problem solved.

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  8. Colleen Jones Friday, February 1, 2013

    I tend to agree with you, unless they have some secret strategy they haven’t revealed yet. I don’t see how Yahoo! will succeed without an innovative content strategy. Most of their content–which is the foundation for any advertising–is hardly engaging, compelling, or even useful. No amount of features or partnering will change that.

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