Yahoo! Employs a Winning Strategy. Is It Enough?


Yahoo! may finally have a real shot at a turnaround now that Marissa Mayer is at the helm. Since stepping in as Yahoo! CEO in July, Mayer has hired promising new talent. Also, in addition to revamping Yahoo! Mail and its presence in mobile, the Internet giant is also taking cues from its customers. Let's take a closer look at why adopting a user-focused approach may be just what the doctor ordered.

A CEO for the people
The struggling web portal's newest chief executive officer is not like the others. After five failed CEOs in five years (including two interim chiefs), it's going to take more than another fresh face to turn things around at Yahoo!. However, Mayer brings something different to the table: expertise in user experience.

The new CEO is proving she can take a hint. Shortly after stepping into her new role at Yahoo!, a website popped up with the address: As you can see from the screen shot below, the message was clear -- Yahoo! needed more compelling products. The company heard the message loud and clear and today released a much-improved version of its popular Flickr photo app.


The new Flickr app for Apple's iPhone and iPod touch now allows users to enhance pictures with color filters, as well as, edit, crop, and share pictures from a mobile device. More than this, the Flickr update is a way to lure users back from Facebook's Instagram app. The social media company purchased Instagram earlier this year in a deal initially valued around $1 billion.

Mobile power
Today, Yahoo!'s Flickr counts 85 million active users per day (compare that to 7.3 million active daily users for Facebook's Instagram). True, Instagram has the added benefit of being backed by Facebook's rich social media ecosystem. Still, the real value for Yahoo! is in growing its mobile business.

Additionally, Marissa Mayer announced changes to Yahoo!'s email service this week that make it faster and easier to use on mobile devices. Mayer explained, "Because mobile is everything these days, Yahoo! Mail now has a consistent look and feel across devices."

As an ex-Googler, Mayer knows what it takes to create a winning email platform. In fact, she spent the last 13 years helping Google build many of the search products and features that dominate the web today, including Gmail.

Internet-based email is still as relevant today as ever before. This is important for companies such as Yahoo!, Google, and Microsoft , because email encourages repeat visits to their respective sites. Let's see how these Internet giants' email platforms stack up in terms of active users.

Google's Gmail

245 million

295 million

Microsoft's Hotmail

335 million

284 million

Yahoo! Mail

303 million

282 million

Source: comScore.

As you can see, Yahoo! hopes to win back users that it lost to competitors in recent years. Both Yahoo! Mail and Yahoo! Messenger received a facelift this month. These product upgrades, along with the newly improved Flickr release, are the first major product launches for Yahoo! since Marissa Mayer stepped in as CEO in July.

Comeback or flashback?
While a Yahoo! comeback will certainly take years, it appears the company is now on the path to recovery. Moreover, if Yahoo! is able to tap into the mobile industry in a meaningful way, it should give shares a much-needed boost in the quarters to come. As it stands, the stock is up more than 21% year to date. And with shares trading at just five times earnings, the stock looks cheap.

That said, the company still faces a challenging road ahead. As a result, revenue will likely suffer in the near term. However, I'm confident in Mayer's ability to execute as well as Yahoo!'s new direction heading into the new year.

It's true that there remains an overwhelming amount of uncertainty in the name. To be fair, there's similar risk in other Internet stocks as well (Facebook, for starters). But the arrival of Marissa Mayer paired with a stronger focus on user experience have me optimistic about Yahoo!'s future. On the other hand, investors looking for the right entry point into Yahoo! rival Facebook can get the inside scoop from our new premium research report.

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Fool contributor Tamara Rutter owns shares of Apple. The Motley Fool owns shares of Apple, Facebook, Google, and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Apple, Facebook, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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