Yahoo To Lay Off 15% In Cost-Cutting Push, May Sell Off Core Business

yahooforsaleYahoo will dismiss around 15% of its workforce in Q1, including, more than likely, a large chunk of its global sales force. Five global offices will also get the chop.

The cuts are part of a $400 million cost savings plan that will seek to grow profitability ahead of a likely sale of the business. (Read the release here.)

As more money pours into the mobile ecosystem, programmatic will remain a major focus for Yahoo, with continued investment in its Gemini and BrightRoll platforms.

In the words of CEO Marissa Mayer, the company will engage in a “streamlining” of its sales support and operations teams to focus on fewer ad products, which seems to suggest that at least some of the workforce cuts will come from the direct sales team.

On the consumer side, Yahoo will keep buckling down on search, mail and Tumblr, and concentrate on four content verticals: news, sports, finance and lifestyle.

Daily active users will remain top-of-mind with continued investment in Mavens – mobile, video, native and search – in counterbalance to the ongoing decline in Yahoo’s legacy desktop and banner businesses.

Mayer tried to put some lipstick on the purple pig, emphasizing that Mavens brought in around $1.6 billion in revenue in 2015, a 45% year-over-year increase.

“We strongly believe that our strategic plan will create the best version of Yahoo,” she said.

But it’s hard to focus on the Mavens business when Yahoo itself might be up for sale.

Yahoo’s board will entertain all “strategic alternatives,” Mayer said, aka a potential acquisition is clearly on the table.

That said, Yahoo is still pursuing a reverse spin whereby Yahoo’s operating business and equity holdings in Yahoo Japan will be carved off into a separate entity.

Although Mavens saw growth in 2015, Yahoo’s forecast for Mavens-related revenue for 2016 is below investor expectation at $1.8 billion. Display revenue for the fourth quarter grew 13% to $601 million, while search revenue declined 8% to $866 million. Additionally, the company recorded a "goodwill impairment" charge of $4.5 billion relating to some assets, including Tumblr. The write-down is an indication that Tumblr's value was substantially below the $1.1 billion Yahoo paid.

Mayer placed some of the blame for Yahoo's continued mediocre performance on “rather intense legacy drag” and historical ad formats.

“But premium ad dollars are shifting into programmatic,” she said. “As that premium shift to programmatic happens, we will start to see the price appreciate.”

In the meantime, “our vision for Yahoo isn’t changing – we want to be known for discovery among consumers,” Mayer said.

That means Yahoo will be doubling down on search, communications (mail) and digital content, what Mayer referred to as a “three-legged stool” approach. Take any one of those legs away and the stool goes kaput, she said.

But all of that aside, one inescapable fact remains: There’s a “for sale” sign sitting prominently on Yahoo’s front lawn.

 

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