After a year with Marissa Mayer at the helm, Yahoo is no longer seen as a "dead company walking," according to one analyst.
An Internet pioneer whose fortunes declined to such a degree that it was regarded as a second-rate afterthought in recent years, Yahoo isn't exactly as cool as Instagram or as much of a powerhouse as Facebook or Google. But it's staging a comeback.
Yahoo CEO Marissa Mayer has made more than 16 acquisitions in her first year, most with a focus on mobile services. (Photo: Stephen Lam/Reuters)
Analysts say we haven't seen the best tricks that Mayer may be planning.
"Mayer has changed Yahoo internally much more than it appears externally. It will take until 2014 for these changes to make a major difference," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "With Mayer at the lead, Yahoo has a chance of regaining a lot of ground lost under prior leadership. They aren't viewed anymore as 'dead company walking.'"
The company's fiscal situation has improved: In its second-quarter financial report, released Tuesday, Yahoo announced that nearly a dozen product launches helped it tally net earnings of $331 million for the quarter, up 46% from $227 million a year earlier. But its second-quarter revenue of $1.14 billion was down 7% from the same period a year earlier.
Troubles at the top of Yahoo
On July 17, 2012, Mayer, who had been a top-line executive at Google, officially became Yahoo's CEO. She was Yahoo's third CEO in less than a year, and industry analysts unanimously agreed she had a huge job ahead of her.
Yahoo had suffered from the top down.
In September 2011, Yahoo pushed out then-CEO Carol Bartz and hired Scott Thompson, who had been president of eBay's PayPal division, as its CEO in January 2012. Five months later, Thompson was out amid a public scandal surrounding the inaccurate reporting of his academic credentials on his resume.
With Thompson out, for the second time in eight months, the company was not only in an embarrassing spot, but was without a CEO.
As if all of that didn't create enough challenges for Mayer, Yahoo also had more than its own share of business troubles.
The company had been an Internet giant -- a household name -- in the early days of the Web. But it went off track, sliding into the background as new companies like Google, Facebook and Twitter took the lead in innovations.
In the months leading up to Mayer's hiring, speculation swirled that Yahoo was up for sale and that Microsoft and Google were both looking to scoop it up.
"It's a bit of a train wreck," Rob Enderle, an analyst at the Enderle Group, said of Yahoo the week that Mayer took over.
Today, analysts generally agree that Yahoo isn't "fixed," but it is on a path to recovery.
"Yahoo has been going through unsettling changes for years," said Hadley Reynolds, an analyst at NextEra Research. "While the pace of change itself has probably accelerated under Mayer, she gets credit for bringing a stop to the company's negative churn and getting the company moving in a [positive] direction again."
On top of making 16 acquisitions -- including deals for Tumblr, at a price of more than $1.1 billion, and mobile app company Summly -- Mayer also quickly moved to reassure investors, motivate developers and make Yahoo interesting again, Reynolds said.
She also famously riled her employees with a controversial change in the company's telecommuting policy. In February, Mayer went against conventional business ideas and called in all of Yahoo's telecommuters. The idea was that working collaboratively in the office, instead of working alone at home, would make employees more efficient and creative.
It wasn't a popular move. Many observers criticized the decision, saying that having a well-known company like Yahoo end telecommuting would hurt employees' work/life balance. Yahoo eventually issued a statement to try to quell the furor.
A shift to mobile
Mayer did, however, live up to her stated goal of focusing on mobile, an area crucial for companies in a world dominated by smartphones and tablets. Nearly all of Yahoo's 16 acquisitions over the past year were focused on mobile apps and services. Summly, for example, built an app designed to condense information and make it readable on mobile devices.
Yahoo is making progress in its mobile numbers. In the first three months of 2013, the number of monthly, mobile active users on Yahoo surpassed 300 million for the first time. That's up from 200 million reported in its January earnings conference call.
The number of daily active users on Yahoo-branded apps, like Yahoo Mail and Flickr, also increased by more than 50% during the same quarter. On Flickr, mobile photo uploads increased by more than 50% quarter over quarter.
"Yahoo is better off today than before Mayer [arrived]," said Brian Blau, an analyst at Gartner. "But I also feel that this transition is still underway and it will be a continuous journey for some time, as I just don't think it would be possible to completely turn the company around in under one year."
Blau also noted that Yahoo still faces significant competition.
"Their troubles from the past still haven't all been resolved. But given their trajectory, I would not be surprised to hear from employees in the coming year or so, saying that Yahoo is a better place to work and that it has even better products in the pipeline," he added.
Reynolds said it's too early to judge what Mayer's best move has been.
"It could be the added audience brought by the Tumblr blogging platform, or it could be some great innovation coming from one of the four social recommendation companies that Mayer has acquired, or it could turn out to be the positive change in morale compared to the previous Yahoo eras," he said. "[Year] two and year three will be the sterner test of whether the company can make a real difference again."