Yahoo Inc. has hired consulting firm McKinsey & Co. The media giant wants the firm to advise on core reorganization. McKinsey is expected to decide which of Yahoo’s units can be shuttered, which can be sold, and what new ventures Yahoo can invest in, indicated people who are aware of the proceedings.
Yahoo Inc. has sought investigative and analytical services of management consulting firm McKinsey & Co to help with the large-scale reorganization of its various core as well as ancillary businesses. According to Re/code, several people who are intimately aware of the situation have indicated that McKinsey has been asked to sift through Yahoo’s rather large portfolio and help the media company sort out its priorities. The consulting firm has been awarded a trio of responsibilities.
Yahoo has been struggling against its competitors like Google and Facebook. Yahoo hasn’t managed to boost its earnings from ad sales, owing to fierce competition from the search giant and the social media behemoth. Essentially all these companies rely on ads to generate revenue. A majority of the ads are contextual that rely on readers and the content. Though Yahoo seemingly never faltered on content, it appears to be losing out on audience, which is being pulled by Google and Facebook.
When Yahoo had hired Marissa Mayer, it was already struggling to boost revenue from ad sales. Mayer has been trying to revive Yahoo’s core media and online advertising business. In order to gain users and get them on Yahoo media properties, the company has been burning a lot of money, but the results are mediocre at best. After deducting fees paid to partner websites, Yahoo’s revenue fell to $1.0 billion in the third quarter, from $1.09 billion a year earlier, reported Reuters. Facing dwindling users, Yahoo cut forecast for the current quarter. The company hopes to make between to $920 million and $960 million in the current quarter.
For more than three years now, Mayer has been trying for a turnaround for Yahoo’s fortunes. Apart from somberly reflecting on what should happen to revive the core, which largely remains an advertising business, Mayer has always been struggling to hold on to many mid and high level executives, who seem to be abandoning ship. Incidentally, quite a few top executives, including Media head Kathy Savitt and Chief Development Officer Jackie Reses, have left Yahoo after Mayer asked them for a long term commitment with the company. They left after Mayer asked them to commit to staying with the company for the next three to five years, which might have forced the executives to reevaluate their future with the company.
Despite the rather gloomy outlook, Yahoo still holds a strong position from a financial perspective, indicate market insiders. However, the company has to prove it can have sustainable and profitable future, if it intends to hold on to investor loyalty. Shares of Yahoo have fallen by 32 percent in this year, which has significantly eroded the company’s net worth.
What can McKinsey do for Yahoo? Yahoo needs a significant overhaul, or in simple words, a thorough spring-cleaning. Just like its competitors, Yahoo, too, has its hands and money locked in several projects that may or may not offer a reasonable rate of return. At its current stage, Yahoo may not be able to nurture projects which may not have a promising future. The company needs tangible assets, which churn out revenue, against those which merely promise it.
With thorough investigation, McKinsey could advise Yahoo what projects are worth pursuing and more importantly, which to either shutter, dissolve, or sell-off. Moreover, the consulting firm could also advise Yahoo, which new ventures are worth investing in.
Interestingly, to compete against the likes of Google, Yahoo does have a weapon called “Project Index,” reported the Street.
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