For the past year Yahoo! Inc. worked to spin off its shares of Alibaba (worth $32 billion) along with its small business unit into a separate company. Now the company is reversing course and will spin off its Web business (Yahoo as we know it) into a separate company. The spinoff will take a year to complete.
So two years later, in 2017, Yahoo will resolve its corporate identity. As an independent company, the Web business will offer investors and prospective buyers a clearer view of what the business really is.
By that time Yahoo’s revenue will have decreased yet again, as it has four out of the past five years, as the company casts around for something to grow about.
A certain amount of exasperation greeted Yahoo’s latest plan, which was announced Wednesday. After all, the dot-com pioneer has been trying to find ways to generate more revenue for not just the past five years, but for most of this century.
Since Marissa Mayer became CEO in 2012, Yahoo has bought Tumblr, produced original news and entertainment content, improved its mobile presence, and made several high-profile acquisitions. This fall it produced the first webcast of an NFL game, the only way the game was available outside the stadium in which it was played. All have failed to move the revenue needle in a positive direction.
Yahoo’s market capitalization is right around $32 billion, which, you might notice, is the value of its Alibaba shares. (Yahoo invested in Alibaba, the Chinese e-commerce site, in 2005.) This means that investors value the remainder of the company — search, news, advertising, entertainment, and the rest – at close to zero.
Yahoo does have assets. Millions of people visit it to catch up on news and finance, check their Yahoo! email accounts, and watch videos on Yahoo sites. It is the fifth-most-visited website in the US after Google, Facebook, YouTube, and Amazon; it is #6 globally as Baidu, the Chinese version of Google, slips into fourth place.
But the company hasn’t been able to translate those visits into revenue. EMarketer projects that Yahoo’s share of digital ad spending in the US will drop to 3.5% in 2017 from 11.5% in 2009. Revenue has dropped from $5.4 billion in 2008, the all-time high, to $4.6 billion in 2014. The slide will continue for this year, to $4 billion, according to estimates.
For the next year, Yahoo will prepare for the separation, working through regulatory and tax issues (which was what wrecked the spinoff of the Alibaba shares), obtaining buy-in from third parties, and readying financial statements.
The company also will sort out and tidy up the web business for potential buyers, which, according to press reports, could include Verizon Communications, IAC/Interactive, or News Corp.
“In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth,” Mayer said in announcing the new direction. “A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”
Considering the value placed on the Alibaba stake, that entity should get custody of the exclamation point in Yahoo’s name when the spinoff occurs.
Tim Green has covered business, technology and science at newspapers and in higher education. At Hoover’s he covers computers and telecommunications. Follow him on Twitter.