By Lin Chen, Assistant Professor of Marketing, CEIBS

Verizon, the US operator, announced its $4.83 billion acquisition of Yahoo's core business on July 25, 2016, bringing to an end Yahoo's glorious 22-year history. The internet giant was sold for a tiny fraction of the more than $128 billion market value it commanded in its heyday. Many media comments blamed the failure of the Yahoo empire on Marissa Mayer, the company's female CEO, and her shopping spree.

When I was teaching in the US in 2014, I was honored and quite happy to receive a research award from Yahoo. I longed for a visit to its Silicon Valley HQ and often did academic research on the company in anticipation of the day that I would finally get there. At the time, Yahoo had just bought Tumblr and I wondered whether the company could use that as a transition to social media and tap into a younger market. I eventually did get to visit Yahoo's Silicon Valley HQ, but I was confused by what I saw there. A lot of my doctoral classmates who were then working for Yahoo seemed to have lost their previous innovative spark and vitality. In discussions with a company exec in Yahoo! Labs, I learned that everything they did had to go through an extremely bureaucratic system. That year, I returned to China to visit Alibaba. The difference between the two companies was very clear. At Alibaba, each individual and every team was fully focused on thinking about how they could go the extra mile. The difference between the two companies made a huge impact on me, and I was left wondering who on the earth had done that to Yahoo, the former internet giant?

Within the company itself, the assessments of Mayer's tenure as head of Yahoo have varied widely. Those who liked her, such as a classmate of mine who was working at Yahoo, appreciated her attempts to leverage lessons learned at Google; others were simply happy to have a Google-style canteen. Some of those who hated her complained that her leadership style was too feminine. Other opponents flayed her for what they saw as a shopping spree, pointing out that none of the acquisitions made during her tenure at Yahoo proved successful. Were these criticisms fair?

Did Mayer's acquisitions kill Yahoo?

In the five years before Mayer joined the company, Yahoo had changed its CEO three times. The chart below shows that the company had been gradually declining in performance and shares during these frequent regime changes, leading to a widening gap between Yahoo and other internet giants. Each CEO represented a different shift in the company's positioning. The changes in company leadership indicated how confused Yahoo felt about its identity and future development. All the CEOs were entrusted with important responsibilities and made a lot of effort in making the changes needed to fulfill their individual mandates. They all failed, and what they left to Mayer was a Paper Tiger.

(Based on online media reports)

Yahoo's missed opportunities

In 1998, Yahoo refused an offer to buy Google for $1 million.

In 2002, Yahoo offered to buy Google for $3 billion, but the offer was rejected. Google counter-offered with an asking price of $5 billion, and Yahoo gave up.

In 2006, Yahoo offered to buy Facebook for $1 billion. However Yahoo later lowered its offer to $850 million. An offended Facebook CEO Mark Zuckerberg publicly ended negotiations in a board meeting.

In 2008, Microsoft offered Yahoo $40 billion in cash. After several months of internal strife, Yahoo refused the offer.

In 2016, Yahoo is sold to Verizon for $4.6 billion.
(Information above compiled by the author, based on public reports.)

Besides frequent executive changes and fuzzy market positioning, there is still one major factor behind the decline of Yahoo. In stark contrast to the internet's laws of development, the company transformed technology into manual work. Ten years ago, Jerry Yang gave a core definition of the future of the internet, which included terms such as community, content, search and personalisation. Based on this definition, Yahoo's profit model appeared sound: create a large enough platform through the business of community, search and content fields, and push the company to profitability through selling ads on the platform. However, unlike other companies that were focusing on technology development and technology-driven content, Yahoo misunderstood the concepts of content and search; it also missed the future waves of content and community by choosing to manually create content. Yahoo believed that the key to content and search was in the portal so it gave free rein to Google, which killed the search engine side of Yahoo's business. Also, Yahoo believed that Facebook was overvalued so it missed out on a chance to buy the social networking site that is now worth well over $300 billion.

On the other hand, Mayer boldly completed 53 acquisitions within four years after she took the helm at Yahoo – almost half of the total number of acquisitions the company has made over its lifetime to date (there were 67 acquisitions in the previous 17 years.) Mayer's acquisitions were distributed throughout various industries and fields. Some of them were forward-looking and refreshing, such as the acquisition of Summly (dubbed Yahoo's Siri) along with media and social networking sites popular among the youth (Tumblr and Snapchat). All these acquisitions infused Yahoo with fresh blood. But the free-fall in the search and portal business resulted in very poor performance in integrated revenue and earnings. Of course, some of this could be attributed to the general climate within the internet industry at the time.

Yahoo's decline was a combination of factors, a series of missteps over a long period of time. The company's failure should be blamed on its entire board, which failed to make the right acquisitions at the right time and failed to capitalize on the trend-driven transitions of new media. The acquisitions Mayer made were a last ditch effort to save Yahoo, a chance for the company to survive its mistakes.

Only time will tell how history will remember her stint at the helm.