Marrissa Mayer’s short time at Yahoo! (NASDAQ:YHOO) has been relatively uneventful even though the CEO has been working towards executing a turnaround at the struggling tech giant. Whether or not the the ex-Google executive can right the ship has yet to be seen. Here we look at two areas where we think Mayer must focus to drive long term growth at a firm which has seen its stock drop from $100 at the height at the tech bubble to $19 now. Specifically, we think that Mayer must focus on attracting new users to Yahoo! and improving their monetization via revenue per impression (RPM) growth.
How can Mayer improve RPM across Yahoo!’s properties?
In our opinion, one of the best ways that Mayer can drive RPM growth across its properties is to increase the data that the firm has on users. With this data, Yahoo!’s engineers can create advertising products which displays better targeted ads which have higher RPMs.
We think that one of the best ways to increase the amount and the quality of data that Yahoo! has on a user is to improve the firm’s personalization platform, My Yahoo!. On this platform, a user would be shown content based on his or her preferences, which will automatically give the firm data to improve the quality of ad targeting.
How can she attract new users onto Yahoo!?
We think that Mayer must invest in Yahoo!’s mobile platforms since this avenue can be a big driver of growth for the company. The opportunity is especially lucrative in the emerging markets as new members of the middle class are first accessing the internet via their mobile phones. Since these individuals aren’t familiar with various internet platforms, a successful mobile product would get them using Yahoo! and building user familiarity and loyalty.
Additionally, the mobile product line can be lucrative because it can also drive page views. Users are no longer restricted by wired connections or personal computers to get the information they need. In fact, a greater number of page views are occurring via mobile phones when compared to traditional personal computers. For example, research firm StatCounter, the percentage of total internet page views on mobile phones was 10.1% in May 2012, almost doubling the 5.8% that it posted for the same period in 2011. The growth was more pronounced in Asia, which saw the proportion grow to 18% in 2012 vs. 8.3% year-over-year and provides some indication of the growth trend in emerging markets. 
Overall, we think that mobile can be key to Yahoo!’s long term health. Not only can it succeed in the emerging markets due to the mobile internet trend, it can also get a substantial piece of the global mobile advertising pie, which will stand at approximately $26.6 billion in 2016 according to research firm eMarketer. 
Caveat: Mayer can directly influence only 30% of Yahoo!’s value
According to our estimates, Yahoo!’s value primarily consists of non-operating segments, which make up a total of 70% of the firm’s value. The three segments whose fate cannot be directly influenced by Mayer are the company’s stake in Alibaba, Yahoo! JAPAN, and cash (net of debt). If we include cash, we could say she has direct control of just over half of the company’s assets.
Over time however, we expect the non-operating stakes to decrease. Specifically, Yahoo! will exit its Alibaba stake after the Alibaba IPO, and the company is working towards exiting the stake in Yahoo! JAPAN. We expect the company to return cash from the sales to shareholders, which will make the firm’s operating segments a bigger portion of the firm’s value.
We currently have a $20 price estimate for Yahoo!, which is approximately 10% above the current market price.Notes: