I wish to congratulate Yahoo on selling its stake of Alibaba, a Chinese Internet company, for a reported $4.3 billion dollars. After all, this transaction fulfills many financial analysts’ predictions and recommendations for Yahoo’s success when it appointed Ms. Marisa Mayer CEO back in July of this year.
“In the short term, just how much cash Yahoo gets from the sale of its Asian assets — including its share of Yahoo! Japan and Alibaba — is of greater importance than any long-term strategic vision”, says Laura Martin of Needham and Co.
At the time analysts strategized that such a sale was the logical next step in acquiring the needed cash reserves to allow Ms. Mayer to duplicate for Yahoo what she was credited for at Google. So all is looking up at Yahoo right? Well, let’s not get ahead of ourselves.
America’s Corporate Ethos: Profit (at all costs)
What the analysts forgot was that the culture at Yahoo is vastly different from Google. I’ve often argued here on Sensei Blogs that the ethos of modern corporate America is not customer value but shareholder value, a sentiment illustrated by Ken Sena, Corporate Analyst for Evercore Partners:
“Yahoo! needs to slash expenses, including partly by slashing its workforce, as it figures out how to boost its user base and whether or not to outsource ad sales.”
Notice that Mr. Sena called for an increased user base in the same sentence as “slashing expenses” and “outsourcing.” His statement, made in response to Ms. Mayer’s appointment in July 2012, is the perfect example of Corporate America’s short-term, profit-by-cutting-costs mentality. Further, he completely ignored “driving innovation” or “improving the customer experience,” the very reasons given for the selection of Ms. Mayer as CEO.
One can’t even argue that the needs of the customers fleeing Yahoo’s service were a secret and hard to uncover. As soon as Ms. Mayer’s appointment was announced armies of former fans took to the Internet pleading: “make Yahoo products cools again.” Some went so far as to create the www.DearMarissaMayer.com to express exactly what they wanted in order to return to Yahoo.
Yahoo Jumps the Shark
That same week, I predicted Ms. Mayer would not be successful as long as she reported to the board of directors and shareholders whose focus was driving personal profit rather than improving the company’s customer experience. While radical, I suggested that the Yahoo Board of Directors “shoot the horse” before considering a jockey replacement. As long as an improved customer experience was not the mandated top priority, no CEO would have the necessary power to turn Yahoo’s fortunes around regardless of his or her pedigree.
Fast forward to today and it seems my prediction was accurate. Yahoo did sell off its stake in Alibaba but announced that it would give $3.6 billion of that $4.3 billion to its shareholders instead of investing it in Ms. Mayer’s promised abilities. Analysts are patting themselves on the back. Shareholders, giggling like little school girls, are running for their banks. Customers, on the other hand, are left scratching their heads as they continue their exodus towards other Internet portals.
The reality is Boards of Directors task their CEOs with building shareholder value, not customer value. And building customer value only occurs when a business is accountable to customers and their needs, which is often the polar opposite (at least in the short term) to the immediate needs of the shareholders.
What Would You Do?
If you asked me: “As a Yahoo shareholder would you want the payout?” my answer would probably be yes. I’m no fool and I’m not averse to making money. But I’m not a shareholder.
Oh, and know what else I’m not? A Yahoo customer...at least not anymore.
Companies with the largest market share quickly tumble when they choose short-term shareholder value over building long-term customer value. In my opinion, Yahoo is making a cowardly retreat. Instead of fighting to stay in the game, they’re planning a strategic – and profitable – exit for their executives and shareholders. The irony is that a stronger investment in Ms. Mayer and in building customer value would result in even greater long term rewards for shareholders.
So to Ms. Mayer I say: Congratulations on your first quarter with Yahoo and, in advance, good luck finding a new job.
Sam Fiorella – Sensei
Feed your Community, Not Your Ego
What are your thoughts? Has Yahoo jumped the shark? Was Ms. Mayer’s appointment just a shell game? Should more of that capital been invested back into driving innovations and improved customer experiences?
*Image Credit: ABC Television, Take the Money and Run Logo