Editor's Note: This article was originally published on Real Money on March 13. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.NEW YORK ( Real Money) --It's easy right now to get disillusioned with Yahoo! ( YHOO). The last thing you ever want to hear from a company is that numbers have to be taken down. But it sure isn't for lack of trying. CEO Marissa Mayer has done an amazing job in one year's work. She inherited a company with terrible morale -- a company that was way off course and losing market share and relevancy to Google ( GOOG) and Facebook ( FB). But she had one thing going for her: the balance sheet. It was pristine. It was better than that, actually. It was brimming with cash. Pretty much everything, though, was going the wrong way. In a world where tech and the Internet are precisely at the point when the word "obsolete" has turned into its most violent and disruptive form of verb, Yahoo was about to be "obsoleted." So, if the company had to guide down, what's so amazing about what Mayer has done? I think it is threefold: 1. She's turned around declining page views. Unless you have been in this game for a while, you have no idea how hard that is to do. She's doing it via improved content, including some expensive content -- more on that in a moment -- as well as tack-on, acquisitions and some improvement in the experience. This is the kind of improvement we are more used to seeing from her predecessor company, Google, than from this one. 2. For ages, Yahoo was infamous for losing any employees who were any good. She has brought down the attrition rate by 59%, and 12% of the people whom she has hired are "boomerangs" -- typically talented, disaffected people who want back in because they've heard good things about what Mayer is doing. That's even as we know she promulgated "no right to work" rules -- meaning you had to physically show up to keep your job. Yep, there were a lot of mail-it-inners at the company 366 days ago. There aren't anymore. 3. She drastically reoriented the company toward mobile. If you think Facebook didn't have a good mobile strategy a year ago, consider that Yahoo didn't even have many engineers associated with mobile. "Dozens" was the word she used. Now there are hundreds: a sixfold increase.
She did all of this without dinging the balance sheet at all on the way to shrinking the shares outstanding from 1.4 billion in 2009 to 1 billion today. She still has $4.8 billion in cash, and a lot more monetizable firepower behind it. But there was one line in the call -- actually one word in the call -- that created the hush and then brought on the sell: "programmatic." That's a method of allocating advertising dollars that have swept an industry with too much inventory, and it is sucking all of the margin out of display ads. Gone are the days in "journalism" -- if that's what you want to call a lot of content on Yahoo and other sites around the Web -- when there was a finite amount of copy against which to advertise. In a world where 250,000 blogs are started each day at Yahoo's Tumblr division -- in a world where content is not only not king but even pawn -- you need machines to figure out where to get your best eyeballs. Wanting your ads placed to the right copy, and being willing to pay a premium for it, used to be the bedrock of journalism. That whole idea is now gone. Algorithms tell you where to place those ads. You don't do precision daylight bombing, either. You carpet bomb with machines. While you may end up bombing some places you don't need to reach, you get the job done at a much lower cost, and a much lower profit for those purveying the content. So display ads were "challenged." What about the new page views? Yahoo has "yet to translate into revenue growth." I don't know how it will. Because the money you get for advertising has to come from somewhere non-programmatic. It has to be somewhere that has truly proprietary non-replicable content. A good example is the "Saturday Night Live" deal that everyone was so gaga about on the on-call: old material that is proprietary enough that advertisers might like it. How important is this to Yahoo? There is an incredible mismatch between a lack of video -- which you can still get good rates against -- and what the advertisers want from Yahoo. I think that might be the surest way to reverse this trend, but we can't be sure. With programmatic buying, who knows?
So, despite all of those good works, the stock is going down because its competitors, Google and Facebook, are ahead of Yahoo in trying to cover their flanks against this kind of buying. Google does it in search, while Facebook does it in novel ways to get eyeballs and a plethora of users, including mobile users -- double the number of overall eyeballs that Yahoo has. Now here's the toughest part. You had to bet, with Mayer, that she would solve the basic problems of Yahoo when she took the job last year -- and she has done so. That's points one, two and three above, which she solved without really denting the cash hoard. Now you have to bet with her that she'll solve the programmatic challenge and grow revenue. I was quite confident that she would fulfill miracles one, two and three. I am not going to bet against her now. She has the smarts. She has the firepower. She'll figure it out. I get the profit-taking. But a big selloff? That means you should buy it, not sell it. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB.