Why haven’t Yahoo’s turnaround efforts yielded enough results?

A decline

Yahoo, which was once the web’s advertising leader and one of the most visited sites, over the last several years has seen its market value decline. Rivals Google (GOOG) and Facebook (FB) have overtaken Yahoo in the Internet advertising space. In 2008, the company rejected a $44.6 billion buyout offer from Microsoft on the grounds that the price undervalued the company. In May 2012, Yahoo saw an eighth straight monthly decline in terms of search market share. However, things have slightly changed since July 2012, when Yahoo named Marissa Mayer as CEO.

Why haven’t Yahoo’s turnaround efforts yielded enough results?In a move to revamp the slumping business, Mayer implemented a new business plan that was outlined as “people, products, traffic, revenue.” This was further explained as a “great teams build beautiful, engaging products, and those products drive increased traffic. The increased traffic generates greater advertiser interest, which ultimately results in revenue growth.” Mayer also emphasized that the  focus is on mobile, and that the core of Yahoo’s business is to personalize content.

This strategy has been implemented in the form of product enhancements and numerous acquisitions mainly focused on mobile content, apps, and services. During Yahoo’s 1Q 2013 earnings call, Mayer said that 14% of all hires during the quarter were “boomerangs,” or people who previously worked at the Internet company. Yahoo last year hired news personality Katie Couric as its “global anchor.” This was after New York Times technology columnist David Pogue, former New York Times news editor Megan Liberman, and political reporter Matt Bai were brought on board. For deeper insight on the turnaround efforts, please read Why Yahoo sees an upside as Marissa Mayer attempts a turnaround.

Despite these efforts, Yahoo!’s turnaround is progressing slowly, and the company has yet to monetize its increasing user traffic. In 3Q 2013, Mayer said Yahoo’s monthly active users were up 20% to 800 million globally, but revenue declined in each of the first three quarters of 2013.

Shares fell on the back of lower earnings and revenue in its recent 4Q results, although Mayer has reiterated that the company’s business will not turn around overnight. Full-year revenue ex-TAC was down 1% in 2013, to $4.4 billion from $4.5 billion in 2012, and GAAP net earnings were down 62%, to $1.26 per share, compared to $3.28 in 2012. Also, most of the stock price increases over the last year can be attributed to Yahoo’s stakes in the successful Asian Internet companies Alibaba Group and Yahoo Japan. Mayer said on the company’s 4Q earnings call that Yahoo expects to capitalize on the platform shift to mobile and core product areas remain search, communications, digital magazines, and video.