Yahoo!'s Next Hire Will Make or Break Marissa Mayer

NEW YORK (TheStreet) - Yahoo!'s (YHOO) CEO Marissa Mayer is about to demonstrate her leadership abilities with one of the most influential decisions for the company since assuming the helm almost two years ago. She's said to be ready to hire a new chief operating officer.

YHOO Chart

Mayer had hired former Google (GOOG) colleague Henrique De Castro as COO but showed him the door out after 15 months. Don't feel too terrible for De Castro, though, his total compensation for his time at Yahoo! was almost $60 million.

Mayer's search for a replacement may be nearing completion, according to reports. It's a good thing, too, because operationally the company is behind in several areas including updating Yahoo! Finance Yahoo's profile page to reflect De Castro's departure.

A whole new approach towards advertising is necessary. Obviously, De Castro wasn't the revenue-generating officer Mayer expected. But, she had better get it right this time or things may become uncomfortable for her in upcoming earnings conference calls. Yahoo! shares are down over 16% as of the Tuesday close of $33.83.

Despite significant operational improvements, she's been given a free pass because she's new (although the newness is fading quickly), and fortuitous timing in Yahoo!'s investments has helped rocket the share price by more than double since her arrival. The two most significant investments include Alibaba and Yahoo! Japan.

Alibaba is expected to open the doors to the public with its IPO later this year. Yahoo! owns a 24% stake in the Chinese e-commerce powerhouse and the lion's share of Yahoo!'s share growth since Mayer started is a result of Alibaba's increased valuation.

The remaining rise in share price comes from Yahoo!'s 35% interest in Yahoo! Japan (you may have thought Yahoo! Japan was part of Yahoo, but it's a joint venture with Japanese company SoftBank).

The company needs to bring in someone to transform the company's massive inventory and user base into a monetized juggernaut it can be. The formula is so simple even a caveman can do it. Yahoo! doesn't have to reinvent fire, just copy Google's self-serve user interface allowing everyone with a credit card to place ads.

Google's greatest advantage over Yahoo! and Microsoft (MSFT) is the self-imposed denial to allow small advertisers the ability to advertise without picking up a phone. After years of watching Google grow in size and profitability, Yahoo! and Microsoft continue to operate their advertising business as if we are still in the 1990s.

Operationally, Yahoo hasn't grown profits in over 10 years. Meanwhile, Google increased operational profits over 2,000% and Microsoft already mature managed to double its operational profits. If Yahoo!'s former CEO Jerry Yang wasn't as great of a private equity manager as he is, Yahoo probably would trade for less than $10 if it wasn't already bought out. 

YHOO Operating Income (Quarterly) Chart

I hope Mayer hires someone who can sell to Madison Avenue, but more importantly, I hope she hires someone who can sell to Main Street. Investors will want to pay close attention to Yahoo!'s new revenue officer because this person will hold the key to unlocking an incredible amount of shareholder value.

If that person gets it right, I'm a buyer with both fists. If not, expect more of the same, only without the Alibaba and Yahoo! Japan appreciation to pump the share price higher.

At the time of publication the author had no position in any of the stocks mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

More from Opinion

Why Ether and Ripple -- But Not Bitcoin -- Prices Might Come Under Pressure Soon

Why Ether and Ripple -- But Not Bitcoin -- Prices Might Come Under Pressure Soon

Daily Chatter: Here's Where the Markets Stand After Tuesday's Beating

Daily Chatter: Here's Where the Markets Stand After Tuesday's Beating

3 New Investing Myths That Must Be Busted

3 New Investing Myths That Must Be Busted

Why a Global Stock Market Crash Is Coming

Why a Global Stock Market Crash Is Coming

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry

Sears CEO Eddie Lampert Looks Like He Is Sucking Company Dry