Yahoo’s (NASDAQ:YHOO) newly appointed CEO, Marissa Mayer, conducted an all-hands employee meeting on September 26 to lay out her plans for a company that she took over just two months ago.  Below we will discuss the key points of her meeting and the impact they could have on the company’s stock.
Products Will Focus on Personalization and Mobile
We had written an article earlier this week about how the cash from Yahoo’s sale of its Alibaba stake must be invested in social and mobile. It seems that Mayer agrees with our view since mobile and personalization will be her core focus, going forward.
With the personalization part, Mayer wants Yahoo to become a company that users access every day. She did not mention specific projects that she has in mind, but we think that personalization would leverage the current My Yahoo! platform, which provides users with a personalized home page depending on their preferences.
We think that an improved personalization platform could help drive the company’s revenue per page view (RPM) metric. If Yahoo’s large user base starts to personalize their profiles, the company would be able to leverage the information users provide about their interests to increase ad targeting across its sites. Since advertisers would be willing to pay for more targeted ads, we could see some upside to our RPM estimate.
Mayer also stated that she intends to make Yahoo the mobile leader by 2015. We think that if Yahoo is successful at innovating on the mobile front, it would attract new users who use smartphones to access Internet for the first time.
Cash to be used for “Acqui-Hires”
Mayer recognizes that talent will be the key to drive product growth that she is seeking. During the meeting, she stated her plans for small acquisitions, not the products but the engineering talent that created them. We think this a good strategy, especially given the talent wars currently ensuing in the Silicon Valley. Additionally, since Yahoo is at a point where it must innovate to drive growth, bringing in entrepreneurs with proven track records will assist Mayer in creating a culture of innovation.
Impact on Competitors
Yahoo primarily competes with Google (NASDAQ:GOOG) and AOL (NYSE:AOL) for traffic to its websites. We think Mayer’s plans to innovate quickly on the mobile front could spell trouble for competitors, particularly AOL. We don’t see a coherent long-term strategy from the AOL management and think that Yahoo’s attempts at innovation could leave AOL behind.
The fact that Yahoo’s leadership has laid out a clear plan for its strategic direction will help it focus its resources in a more efficient manner. We are encouraged by Mayer’s focus areas for the coming years and believe that the changes she envisions, if successful, would not only provide upside to the company’s value, but would also prove to be a catalyst in closing the difference between the market price and our price estimate.Notes:
- Here Is The Plan Marissa Mayer Just Announced To Yahoo Employees, Business Insider [↩]