Why Firing Yahoo CEO Marissa Mayer Would Be a Dumb Move

NEW YORK (TheStreet) -- I feel compelled to challenge activist investor assertions -- most recently here at TheStreet and on CNBC -- that the time has come to fire Marissa Mayer at Yahoo (YHOO).

Before I set the table and make my case, allow me to begin where I end because it's important to understand an incredibly practical point roundly ignored by the hypercritical media:

Here's the key -- Marissa Mayer is in the process of giving Yahoo's ad sales people differentiators to take out on the street with them. This isn't about making friends on Madison Avenue or showing up on time for a meeting in Las Vegas. It's about building a slate of programming nobody else on or offline can match. As that happens, advertisers will increasingly make Yahoo their number one choice for a larger and more dynamic share of their ad spend. Mayer's job is to provide her sales folks the tools they need to sell something that's different from what everybody else is mindlessly schlepping (in largely uninspired and programmatic fashion).

On the surface, there is what seems like an airtight case to be made. One that's near impossible to poke direct holes in. And that's because, in and of themselves, writers can cherry pick excellent points (or lies of omission) against Mayer. All else equal, it's difficult to argue with Mayer's inability to grow core advertising revenue, which, ultimately, is what all other criticisms link back to.

That said, within the strength of the case lies its biggest problem. We're not dealing with a surface level situation at Yahoo where all else is equal and points made in favor of firing Mayer stand on their own. It's more complicated than that. The folks calling for Mayer's head don't seem to get this. In fact, I'm not sure they understand why Yahoo hired Mayer in the first place.

Yahoo could have hired any number of standard-flavor wonks to mind the company's stagnant advertising business. One that's stagnant both in terms of growth and structure. By that I mean, it's not growing impressively, but it's also not a very dynamic business to begin with. Ads and clicks. Although Mayer came from Google (GOOG), I don't think that's her strength -- babysitting what amounts to an automated advertising business. As I see it, if Mayer can keep that core reasonably steady -- as she has -- she has won. 

Mayer has her sights set on something bigger. And so did the Yahoo Board of Directors when it made the relatively controversial move of hiring her. They didn't want a bean counter or phony LinkedIn networker who could kiss Madison Avenue's ass. Or a firebrand who could cuss a big game during interviews, but get nothing done in the trenches for the long-term benefit of Yahoo. They've been there and done that to little more than rousing mediocrity bordering on failure. The Board hired Marissa Mayer to transform Yahoo, not keep it humming along as a quarter-by-quarter squeeze water out of a rock modest revenue growth "success."

While there have been hiccups, Mayer is doing exactly what she needs to do to not only turn Yahoo around, but build something that will endure as well as matter over the long haul. Her critics ignore the building blocks she has put in place -- quite possibly because they don't understand them -- choosing to focus on today's obvious, but ultimately meaningless targets for snark and angst.

Maybe Mayer's critics haven't thought long and hard enough about what she means when she says she wants to make Yahoo "a daily habit."

Maybe they don't quite understand what she means when she says "premium content draws premium advertisers."

Maybe Mayer's critics haven't read the many articles where I predicted and further visioned live concert streaming as a cornerstone of the excellent Yahoo! Screen.

See, for example, December's Marissa Mayer's Biggest Game Changer Yet, April's Live Concerts Would Lift Yahoo's Video Strategy and last month's Why Yahoo's Marissa Mayer Is 2014's Top CEO By a Landslide. These articles go a long way to filling in the gaps conveniently left by the folks misguidedly calling for Mayer's ouster.

Maybe the critics have been conditioned by media hacks, snarks and unproven companies masquerading as high-flying IPOs to expect the impossible and improbable ahead of schedule. For better or worse, too much, real fast isn't always the best way to play the game. Even in tech. Even when you're a public company. And especially not when you're Yahoo, a company that has never been able to get out of what has been more than a decade-long rut.

Consider a blurb from and something Live Nation (LYV) CEO Michael Rapino said in a recent article about his company's live concert streaming partnership with Yahoo:

On the Yahoo Screen app featuring the new Live Nation channel, such advertisers as Kraft, Kellogg’s, Citigroup and Sprint are running pre-roll advertising and in-stream overlays. Given robust demand for the commercial time, Live Nation CEO Michael Rapino told investors in May the streams would be “a positive revenue channel almost (from) Day One.” He went further last week, saying he expects to expand programming with Yahoo and other distribution partners to help accelerate advertising revenue growth.

I can confirm -- more partnerships are on the way for Yahoo! Screen, particularly with respect to live concert streaming. But more important than that is the almost roundly ignored importance of what Mayer is doing in this space via Yahoo! Screen. The fact that Mayer's biggest critics have literally, to my knowledge, never uttered the phrase "live concert streaming" in any of their articles ought to discredit them right from the start.

Yahoo already is "a daily habit" for many of us. From news to weather to sports scores and stock quotes, many of us go to Yahoo multiple times a day. That's how it has been for me since I started using the Internet. But what does Yahoo derive from this incredibly casual, non-committal relationship? Nothing but errant ad clicks. To become the type of "daily habit" Mayer refers to, she needs to develop Yahoo as a destination for content that triggers emotion and fosters loyalty. The day-to-day, mundane type stuff is fine. It even needs to be there. But, to take Yahoo to the next level, there has got to be more.

And that's what Mayer is attempting to build -- a destination that can attract premium advertising. The type where you go out and sell multi-million dollar packages over several years to giant brands. Not the type where an algorithm places a spam-like ad on the viewer's sidebar. It makes little sense to focus on the latter. That's what everybody else is doing. Mayer's smart to let that business run on what amounts to autopilot as she enters territory every other media/tech company has, for all intents and purposes, left uncharted.

Here's the key -- Marissa Mayer is in the process of giving Yahoo's ad sales people differentiators to take out on the street with them. This isn't about making friends on Madison Avenue or showing up on time for a meeting in Las Vegas. It's about building a slate of programming nobody else on or offline can match. As that happens, advertisers will increasingly make Yahoo their number one choice for a larger and more dynamic share of their ad spend. Mayer's job is to provide her sales folks the tools they need to sell something that's different from what everybody is mindlessly schlepping (in largely uninspired and programmatic fashion).

But it takes time to build. Today live concert streaming on Yahoo! Screen is basically a once-a-day event in conjunction with Live Nation. It's incredibly well done, but, as I explain here, it must evolve. If Mayer takes this thing where I think she should and will, expect live concert streaming at Yahoo to morph into an advertising- and subscription-supported endeavor that approaches, if not surpasses $1 billion in annual revenue on its own.

My focus on live concert streaming might seem narrow, but it's not. It feels that way because, pretty much to a publication and to a person, nobody else has sniffed out this trail and, in turn, articulated its massive potential. But just because they're not writing about it doesn't mean it's not a big deal. Don't expect Mayer's critics to start covering how she's disrupting the music industry because a) they didn't think of it and b) it would go against the obvious and shortsighted criticisms they fire off at the CEO.

It's also important to note that, if Mayer plays her cards right, she can take the seemingly narrow live concert streaming space and broaden it out into multiple prongs of lucrativeness. That's a trajectory of thought I'll tunnel with considerable depth in coming weeks here at TheStreet. And it includes an acquisition I, if I were Mayer, would aggressively pursue. I previewed it earlier this year and will add more support for my case later this month. 

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola writes for TheStreet. He lives in Santa Monica. Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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