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Wednesday, April 4, 2012

Yahoo to lay off 2000 employees - USA TODAY

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Yahoo to lay off 2000 employees - USA TODAY
Apr 4th 2012, 13:29

By Jon Swartz and Scott Martin, USA TODAY

Updated

SAN FRANCISCO —Yahoo CEO Scott Thompson wasn't kidding when he vowed to jostle the embattled Internet pioneer out of its slumber.

  • A sign is seen in front of Yahoo! headquarters in Sunnyvale, California.

    Justin Sullivan, Getty Images

    A sign is seen in front of Yahoo! headquarters in Sunnyvale, California.

Justin Sullivan, Getty Images

A sign is seen in front of Yahoo! headquarters in Sunnyvale, California.

The company today said it would slash 2,000 jobs and that it would begin the process of notifying employees immediately.

New Yahoo CEO Scott Thompson green-lighted the drastic moves, just weeks after firing off a memo in which he vowed "real change is coming."

A slimmed-down Yahoo may be the only manifestation able to survive an onslaught from Google, Facebook and Microsoft.

"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose — putting our users and advertisers first — and we are moving aggressively to achieve that goal," Yahoo CEO Scott Thompson said in a statement.

Rumors had swirled for months that something would need to be done at the beleaguered company. Thompson, the former president of online payment service PayPal, was installed in January to replace Carol Bartz.

"I think the big thing is connecting the dots," Thompson told USA Today in January, when he was hired. "We're going to do it at a high rate of speed, and then we get to change the game a little bit." He mentioned mobile, social media and TV as prime opportunities.

Thompson inherited a battered brand that is losing advertising dollars to Google and Facebook. Its cache has diminished in Silicon Valley despite an enormous audience — 700 million online visitors per month — and a net profit of more than $1 billion on revenue of nearly $4.4 billion last year.

Under the announced layoffs, Yahoo expects to save $375 million a year with the cutbacks. The company plans to take a pretax charge of $125 million to $145 million in the second quarter for employee severance costs.

"They have problems, but still command a huge audience with email service, Yahoo Finance, and some of their sports and news content," says David Hallerman, an analyst at eMarketer. "The online space is filled with snobbery. Yahoo's audience is trending older than other social sites, which makes them not as hot or chic."

Arguably one of the biggest missed opportunities of the last decade for Yahoo has been social networking. "The writing is on the wall. Yahoo doesn't have social, Yahoo doesn't have mobile," says IDC analyst Karsten Weide.

Company executives contend that Yahoo has many social-related assets.

"One of (our) interesting assets is the amount of content that jumps from Yahoo that's already in social," Thompson told USA Today in January. "We're not starting from zero. We're starting from a positon again that can be leveraged. What will social be when it relates to commerce? Everyone is trying to imagine what that might be."

Facebook's enormous growth trajectory forced Google to push out its Google+ social network to be part of the evolving ad landscape. But Yahoo languished without new efforts to capture social audiences. Meanwhile, Yahoo failed to keep up with Google in ad technology.

"Yahoo has proven unable to be a leader and disruptor in the ad technology area," Mike Walrath, founder and former CEO of RightMedia, a company Yahoo bought for $680 million in 2007, wrote on his blog. "Right Media has languished… Yahoo's legacy ad systems are extremely outdated and expensive to maintain."

Walrath resigned from Yahoo in late 2009.

As revenue for search and online display advertising in the U.S. catapults the next few years with the growing popularity of smartphones, tablets and social media, Google will cement its dominance.

The search king is expected to extend its lead in search, with $20.3 billion in revenue in 2014, vs. $15.2 billion this year. Yahoo will steadily decline to $764 million in 2014, according to eMarketer.

The situation isn't much better for Yahoo in online display ads, though its predicted take of $1.6 billion is an improvement from $1.4 billion this year. Google and Facebook, by comparison, will soar to $4.8 billion and $3.7 billion, respectively, in 2014.

"They are not going to be as important, but they will be a money-making enterprise as they leverage a large audience to sell lower-cost ads," says eMarketer analyst Hallerman. "Can they evolve by selling ad inventory at a lower rate?"

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