Marissa and the Peanut Butter strategy: 4 years, 53 acquisitions and a $3bn bill - how Mayer tried (and failed) to reignite Yahoo

Marissa Mayer

As the ink begins to dry on Verizon’s $4.8bn buyout of Yahoo and chief executive Marissa Mayer plans her exit, it brings an end to a challenging four years which failed to see her turn the company’s fortunes around.

The pressure was on Mayer from the start. She was plucked from Google where she– in the end – had been heading up its Maps and local products (a job she was moved into having been removed from the search team after losing a turf battle with engineer Amit Singhal). There, she earned a reputation as someone with a staunch eye for detail coupled with a tendency to micro-manage.

But it was this focus on products and a keen understanding of technology that Yahoo needed and what led the board at the tech company to overlook the limited experience she had in finance to unanimously vote her in as chief executive in 2012.

Equally enthusiastic were the Yahoo staff at the time, who believed that she would be what it needed to get back on track, reportedly marking her first day on the job by photoshopping her face on Obama-style “hope” posters.

Buy, buy, buy

From the moment that Mayer joined, it was clear that her strategy to making Yahoo great again would live and die by one tactic – acquisitions. If the company didn’t have the talent or products it needed to build out the mobile, video, native advertising and social arms then she would simply buy them in.

So, in just four short years an estimated $3bn was spent on 53 companies.

Compare this to the 65 acquisitions that had been made in the company’s entire history before Mayer’s arrival.

Most of these purchases were folded in to the wider Yahoo ecosystem while a handful were run separately, such as Brightroll, Flurry and Polyvore.

But it was Tumblr that was the jewel in Yahoo’s crown. With a $1bn price tag it was also the most expensive and as such Mayer promised she would “not screw it up”. But as evidenced by the massive revaluation of what the blogging platform was worth last week, Mayer sadly wasn’t able to keep her promise.

The acquisition spree failed to win over those inside Yahoo, with one senior exec penning a scathing memo – dubbed the ’Peanut Butter Manifesto’ with criticised Mayer for spreading resources too thinly and across too many areas, rather than targeting where it would add value.

Today, despite all of these acquisitions, the bulk of Yahoo’s value lies in its ownership stakes in Chinese e-commerce company Alibaba and Yahoo Japan, without which it would have been operating at a loss long ago.

Investor Concern

While there are a myriad of reasons that Yahoo ultimately struggled to regain its foothold amid the rise of Google and Facebook, Mayer’s big and bad bets on new companies gave investors the fuel to start to the fire. Her biggest critic was investment firm Starboard Value which called for Mayer and her board to be completely replaced earlier this year.

“Dramatically different thinking is required,” it said. “Together with significant changes across all aspects of the business starting at the board level, and including executive leadership.”

Losing staff confidence

And with the loss of investor confidence in turn came that of staff. Her chief accounting officer, chief marketing officer, chief development officer, senior vice presidents and vice presidents from across the product, engineering, sales and human resources departments all made their way for the door last year while this year saw some 15 per cent of its workforce cut.

What next?

Yet, summing up the achievements under her tenure in a letter to staff today (25 July) she said: "We set out to transform this company – and we’ve made incredible progress. We counteracted many of the tectonic shifts of declining legacy businesses, and built a Yahoo that is unequivocally stronger, nimbler, and more modern.

"We tripled our mobile base to over 600 million monthly users, we invested in and built Mavens from basically zero in 2011 into $1.6B of GAAP Revenue in 2015, we streamlined and modernized every aspect of our consumer products, and, with Gemini and BrightRoll, we dramatically improved our advertiser products. This only scratches the surface of what we’ve achieved … and we all know how much hard work it took to get here.

"It’s because of that hard work and resilience, that Yahoo will realize amazing opportunities in its next chapter."

However, the fate of Yahoo is now much like that of the companies she was so quick to swallow up.

Verizon will integrate the internet business with AOL under Marni Walden, executive vice president and president of the product innovation and new businesses at Verizon.

What will be left of Yahoo will be a 35.5 percent stake in Yahoo Japan and less than a fifth of Chinese ecommerce company Alibaba.

As for Mayer, she will receive a $54.9m severance payment as and when she exits.

However, that departure date is still unclear. “For me personally, I’m planning to stay,” she continued in her letter. “I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.”

In what capacity she stays will be decided in the coming weeks by those now higher up the chain at Verizon.

But nonetheless, speculation is mounting that a split from the newly-formed company is imminent (six to nine months, say some reports) and landing a CEO role at another publicly traded company seems unlikely.

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