Yahoo Could Reach $18 With Mayer At The Helm

Yahoo (NASDAQ:YHOO) has been through a lot of leadership changes in the last couple of years. After the controversial reign of Carol Bartz which ended badly, Scott Thompson, the President of PayPal was appointed its CEO. However, that didn’t last long either, as Thompson was booted out earlier this year for fudging details on his resume. Since then, Ross Levinsohn has held the reins at Yahoo as its interim CEO. On Monday, Marissa Mayer of Google was named Yahoo’s CEO and President. ^[1]

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Mayer’s appointment as CEO signals Yahoo’s focus on product

Mayer has a very impressive track record at Google and was one of the first employees at the search giant. She is widely credited as being an important part of the Google’s search team. She also worked on Gmail, Google News and Google Images, and has more recently led its location and local services efforts which includes Google Maps.

With Yahoo’s reorganization, it had two choices – either be a media and content focused company or a product focused company. Ross Levinsohn would probably have been the right choice had it chosen to be the former. Marissa Mayer would be an excellent leader if Yahoo plans to focus more on its product offerings, given her extensive and diverse experience managing core product offerings at Google. She is great at running scalable product businesses and may be able to revive Yahoo’s dying product lines which have been disrupted by upstarts in the last couple of years. Products like Yahoo Mail, Yahoo Finance, Yahoo Sports, and even Flickr still attract a lot of users, but offer a worse user experience compared to their competitors. By bringing Google’s engineer driven culture to Yahoo, Mayer might be able to transform Yahoo’s product offerings and make it a force to reckon with.

She may also be able to attract more talent to Yahoo, which has been a big problem for it in recent times, given the talent crunch in the tech space. It’s going to be a tough job restoring Yahoo’s glory, but Mayer is probably one of the best people who could have been tasked with doing it.

Will her lack of media/content experience do her in?

Despite her strong product experience, Mayer hardly has any experience with media or content, which is arguably Yahoo’s biggest business and generates most of its advertising revenue. It could be argued that focusing on becoming a media or content business might be the right move for Yahoo, and if that were to be the case, Mayer might not be the right person at the helm.

However, we believe Yahoo should focus both on its product offerings as well as its media/content offerings. Mayer could very well hire a media/content expert as her number two, to balance the company’s focus between the two verticals.

While we can only speculate, we will know how exactly it will play out only after a couple of years. For now, Mayer seems as good a choice as any, if not better.

We currently have a $18 Trefis price estimate for Yahoo, which stands nearly 20% above its market price. Display and search advertising currently generate most of its revenue. It competes in the online advertising space with the likes of Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB).

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1. A Yahoo Search Calls Up a Chief From Google, NYT [↩]