[Author was long YHOO at the time of writing]
If you're running a company where your reported metrics don't look so good, what's the oldest CEO trick in the book? Change the metrics, of course.
Yahoo's CEO Marissa Mayer is nearly into her third year at the helm of the Internet pioneer. Not only have shareholders yet to see an improvement in the core business' revenues and EBITDA, they haven't even a stabilization in the decline of both those fundamentally important financial indicators.
Therefore, perhaps it wasn't a surprise on the January earnings call that Mayer introduced a new category to update investors on: MaVeNS.
What the heck is a MaVeNS? It sounds like some category name only a computer engineer could come up with.
It stands for Mobile And VidEo Native and Social. Got it?
Let's go to the Mayer earnings call transcript from January:
This is where we invest most heavily and these are the fastest growing areas of digital advertising.... Here at Yahoo! the MaVeNS grew 95% year-over-year and a 100% year-over-year in Q4. In 2014 these businesses accounted for more than $1.1 billion of GAAP revenue. The four MaVeNS businesses do have some overlap which we de-duplicate since we monetized both mobile and social, Tumblr for example with native apps. However please recall that the MaVeNS did not contribute meaningfully to Yahoo! prior to 2012 [i.e., pre-Mayer]. We had no native or social ads and mobile and video were nascent. We have created more than a $1 billion of new revenue annually, basically from nothing in just two years. In 2015 we expect the MaVeNS will contribute over a $1.5 billion to our business. If broken out on their own, as a company they would undoubtedly be one of the fastest growing start-ups in the world.
Now Mayer hasn't decided to report MaVeNS, and stop reporting some other categories like revenues and EBITDA (although I'm sure she would love to if she could). So, she's not trying to deceive anyone with what is reported. But she is clearly trying to say "Hey, investors, don't look at this here (overall revenues).... look over there instead (new stuff)..."
She's saying that this new category - MaVeNS - represents the future for Yahoo. She wants to be judged on the basis of how well MaVeNS do and not how well the legacy Yahoo businesses of search and display advertising do.
It would be similar to becoming the CEO of MySpace back in 2009 just as Facebook was taking off and eating MySpace's lunch and MySpace users were plummeting and getting on a MySpace earnings call and saying: "Don't judge me by all the users who are fleeing our platform. I just came up with a new way to play a song back on your MySpace profile and you should only judge me by how popular that becomes going forward." At some point, even if you're not totally responsible for all of Yahoo's problems in the past, you have to be judged on whether or not you can change people's perceptions that the Yahoo core business is actually worth a lot more than people thought 3 years ago. To this point, Mayer has failed in doing that.
Notice the line in the call where Mayer says "please recall that that MaVeNS did not contribute meaningfully to Yahoo prior to 2012." Since September, Mayer has been criticized by Starboard Value LP that she hasn't done enough to create value for shareholders. Her response naturally has been to suggest that Yahoo had no clue what it was doing before she arrived and that she has put them on the straight and narrow.
To hear Mayer tell it: Yahoo had never heard of mobile, video, native, and social before she started in July 2012.
Except that's not true.
Back in 2010 - two years before Mayer showed up - then CEO Carol Bartz was talking about the "four O's" - Local, Social, Mobile, and Video. These represented the future for the company, according to Bartz at the May 2010 Analyst Day, and the company was working on each.
It's unfair for Mayer to portray things as though the folks at Yahoo had no idea what was going on in the world relating to Mobile, Social, Video, and Native. Bartz had Yahoo already working on these areas. The biggest difference between Bartz and Mayer is that, unlike Mayer, Bartz didn't turn her back on premium display advertising for 2 years and decide to only focus on the new growth areas.
MaVeNS is just old wine in a new bottle.
If Bartz was working on these growth areas, why was she fired again by Yahoo's board?
In this September 2011 report in the Wall Street Journal, several Yahoo board-level sources said that Bartz had "failed on many fronts."
"There wasn't any lightning bolt here... there was just a series of not reaching performance targets."
Among the failed performance targets hinted at in the WSJ article, there was:
- Not "revving up" Yahoo's growth and share price
- Whether Bartz was "unrealistic" about the Microsoft Search deal signed in 2009
- Bartz's "abrasive CEO style, including her frequent use of swear words"
- Flat revenue in 2010 and "high-level executive departures"
- "Media speculation that other firms were plotting takeover bids for Yahoo" in 2010 and 2011
- That Bartz cried at a women's technology conference in Atlanta (seriously, that was mentioned in the article as a relevant detail)
- That she hired Ross Levinsohn to be head of Americas instead of promoting someone internally
- Some anonymous source near the end of the article said that Yahoo's board "didn't like the way things were going... Every week and month, you assess the CEO. And at some point, you just say, 'This is not going to work.'"
Yet, the article points out that "throughout this period [prior to her firing], there was one bright spot: Yahoo briskly sold its highest-priced graphical and video ads - a category known as display - to large "brand advertisers. The growth of display ad sales helped offset Yahoo's decline in search-ad revenue."
Looking back now nearly 4 years after this WSJ article was written, any Yahoo shareholder today would gladly give a good chunk of their remaining Yahoo shares if Marissa Mayer could deliver half as well as Bartz did in terms of keeping the display ad revenue stream going as long as possible.
Today, given how Yahoo has continued to stumble since Bartz's removal and how the move accelerated the decline of the core business without her in charge, the reasons given for firing Bartz back then seem superficial and laughable now in comparison to what's gone on in the core business in the last 3 years under Mayer.
Can you imagine what we'd be saying about Marissa Mayer if she had kept up the display ad revenue the way Bartz did? We would say it was a miracle. We'd throw her a ticker tape parade every other day down the streets of Sunnyvale. She would be pointing out what a fantastic job she had done on every earnings call. She'd probably come up with a wonky-sounding acronym to describe her success in Holding Up The Caving In Roof Of Display Ads -- HUTCIRODAs!
I think it's odd that Yahoo's board ran Bartz out on a rail after 2 years and 9 months on the job. Yet, it's been 2 years and 10 months that Mayer has been on the job and Mayer skates along as if nothing's wrong, even though revenue and EBITDA keep dropping and she's increased SG&A by $500 million in the last 2 years.
Where are the new products we were promised as shareholders when she took the job in 2012? It's been 3 years already.
Mayer and Bartz are basically following the same strategy as CEOs of Yahoo. There's nothing new under the sun nor in leading Yahoo it seems. I would just say Bartz did a much better job keeping the roof from falling in terms of the declining legacy businesses. Is Mayer's Yahoo really all that different than Bartz's Yahoo?
Mayer and MaVeNS are just old wine in new bottles.
