Why Marissa Mayer is Finally the Right CEO for Yahoo!

The past five years at Yahoo! (Nasdaq: YHOO  ) have played out like a scene from a dating show, with the company dropping a new CEO in the hot seat year after year, only to be replaced soon after. So it isn’t surprising that discouraged shareholders are weary of Yahoo’s latest union with Marissa Mayer. However, I suspect this time is different. Yahoo! stands to learn a lot from Google’s ex-VP of search products and user experience.

Yahoo’s decision to name a key Google (Nasdaq: GOOG  ) executive as its new CEO was certainly a daring move. But was it the right one? Five failed chief executive officers in five years (including two interim chiefs) offers proof that reinventing Yahoo! won’t be easy. Let’s take a look at what Mayer brings to the table, and why her arrival is the best thing that’s happened to the struggling web portal in a long time.   

A natural leader
The longtime Googler has never before held the position of CEO, and many analysts worry that Mayer lacks the experience necessary for the role. However, I think it’s a mistake to let this overshadow her professional achievements (of which there are many). 

True, Mayer’s corporate strategy for Yahoo! has yet to be proven, though her instinct for success is undeniable. She began her career at Google as the search giant’s first female engineer, and spent the last 13 years helping Google build many of the search products and features that we know and love today, including Google search and Gmail.  

In hiring the former Google executive, Yahoo’s board is proving that they’re finally ready for real change. Mayer brings a bold new perspective to Yahoo! that I suspect will have a lasting impact on the company for years to come.

The problem with turnarounds 
Too many struggling companies grapple for too long with the notion of taking a new approach. Instead, they stick with what they know, fail to innovate alongside the competition, and slowly fade into irrelevancy. Such was the case with Research in Motion (Nasdaq: RIMM  ) , when rival tech giant Apple (Nasdaq: AAPL  ) entered the smartphone space.

When Apple debuted its first-generation iPhone in 2007, RIM’s co-CEO at the time, Jim Balsillie, dismissed the product as nothing more than a passing phase that would have no lasting effect on his company’s share of the mobile market. The Blackberry maker remained overly confident in its basic email-focused devices, and was slow to adapt. In hindsight, of course, we know this was a mistake.   

Today, I no longer believe that RIM has a shot at a comeback. But luckily for Yahoo!, Mayer’s arrival could provide a necessary shift in thinking, at preciously the right time. In fact, the 37-year-old isn’t wasting any time shaking things up at the company.

Prioritizing resources
Mayer’s first major change as Yahoo’s new CEO was to make the food in the company’s cafeteria free for employees. Free food is one way to win over employees, but that’s not the only perk she’s serving up in her new role. Mayer also requires that all Yahoo! employees participate in an all-hands meeting each Friday afternoon.

Mayer is creating a culture at Yahoo! that fosters collaboration and growth, similar to the work environment she enjoyed at Google. At first, these may seem like superficial changes, though a company’s inner workings often invisibly influence key aspects of its business. Incentives such as these should help boost employee morale, as well as help the company retain talent.

Additionally, what Yahoo! needs so desperately now are better products --- an area that Mayer knows well. In fact, in the short time since taking control of the struggling Internet company, Mayer has already refocused efforts toward greater product innovation and user experience.

These are steps in the right direction, but the bigger question for Yahoo! going forward is who the company is to the end user. Is Yahoo! a search engine, web portal, media company, or a combination of these things? As Yahoo’s third CEO in less than a year, determining a clear vision for the company is Mayer’s first major challenge as the new leader.

A long shot with a lot of potential  
To be clear, plenty of things can still go wrong. Yet, Mayer brings with her a different way of thinking that could be just what the doctor ordered. There's no denying that Yahoo! is in a transitional period. Of course, no shake up is without costs, meaning revenue will likely continue to be squeezed in the near future as Yahoo! works out the kinks of its new leadership style.

However, longer-term, I’m betting on Mayer to outthink the competition and turn things around. Similar to Apple’s transformation after Steve Jobs returned, a comeback for Yahoo! could take years. While we wait to see how Mayer fits into her new role at Yahoo! I encourage you to check out this new premium report highlighting the key opportunities and risks facing Apple today. Best of all, this special report comes with Apple updates for a full year. Click here now to get started, while this offer is still available.

Foolish contributor, Tamara Rutter owns shares of Apple. Follow her on Twitter, where she uses the handle: @TamaraRutter, for more Foolish insights and investing advice. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (3) | Recommend This Article (14)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 07, 2012, at 11:21 PM, Bunker555 wrote:

    The upward momentum in YHOOs stock price is strong since the Mayer appointment. Also, the Alibaba investment divestiture deadlines are getting closer.

    What is Microsoft going to do with all those empty boxes on the Windows 8 Home Page. Maybe they need some digital content. They saw YHOO as an asset three and a half years ago, so perhaps they need to take another look. Microsoft's tablet strategy is doomed for failure without the support of its traditional hardware partners,

  • Report this Comment On August 08, 2012, at 12:58 AM, poach wrote:

    Nah, Its always the nuts and bolts - eke out more revenues from what sells - Yahoo Finance and Yahoo Sports.

    Yahoo! is about internet real estate -- the rest was ceded a long time ago. Most of Yahoo's portals come in 1st or second place when you count visits - that's what should be monetized. Technology will help of course, yahoo mail is sloppy compared to gmail, fixing that should be a priority too. Unfortunately we have become slaves to comfort zones - I wanted an SEC 10K. three-four years back I would have happily taken it as an edgarpro, today the site looks unfamiliar and I promptly typed in the symbol for Sprint on the fool home page because I wanted to toggle only on 10K's and it seemed so easy.....to do it the way I do it everyday.

    Ms Mayer may not want to attempt something overly ambitious -- but likely to fail . Instead I'm betting that she will try to make the most of what is the best about the company. In my humble opinion, Yahoo should have been as unique as Google -- it made the mistake of being too many things. Mayer knows this. I bought Yahoo a week back based on that presumption that she will right the company based on its real estate potential.

    Poach

  • Report this Comment On August 08, 2012, at 1:04 AM, EvanBuck wrote:

    Good analysis Tamara, check out my blog post I wrote on the subject here, called "A Yahoo Search finds a new CEO...from Google."

    http://beta.fool.com/evanbuck/2012/07/20/yahoo/7385/

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