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Marissa Mayer – How Yahoo! went from mess to an Apple Design award

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Fortune Live Media

Two years ago everyone was talking about the 37 year old woman who had just become CEO of Yahoo!. They still are. Hot Topics profiles Silicon Valley’s ‘geek goddess’, Marissa Mayer…

In September 2013, Vogue ran an interview with Marissa Mayer in which the Yahoo! CEO was photographed draped upside down on a lounger. In her hand was an iPad displaying a glamorous portrait of…Marissa Mayer.

Vogue had not done anything similar with Steve Ballmer.

But Mayer does not fit the standard template for a hi-tech CEO. She’s female, beautifully dressed and – let’s not be coy – conventionally good-looking.

And yet, and yet. Read the actual Vogue article and Mayer stresses: “I’m just geeky and shy, and I like to code.”

Clearly, Mayer is a mass of contradictions: the UI specialist who understands users instinctively but can be harsh when the users are her colleagues; the nerd who wears Oscar de la Renta and lives in the penthouse of San Francisco’s Four Seasons Hotel.

These contradictions, along with her photogenic qualities, have made Marissa Mayer possibly the most closely watched Fortune 500 CEO of them all. Meanwhile her work ethic and deal-making abilities have put the previously moribund Yahoo! squarely back in the game.

Emphatically, Mayer has made a massive impact. But is she any good? Two years after her appointment, no one has a clear answer.

 The decade-long decline

Mayer arrived at Yahoo! in 2012 with the company in a slump. A succession of different CEOs with different approaches had failed to return the company anywhere close to its 90s glories.

Yahoo! was the standard-bearer for Web 1.0. It was founded in 1994 by Stanford students Jerry Yang and David Filo as a directory of the internet – when the launch of a new site was a big deal. During this time Yahoo! was the internet. Everyone went there, and advertisers inevitably followed. By 2000, Yahoo! was worth $128 billion.

The bursting of the dotcom bubble saw and end to that ludicrous valuation. But so did a change in the fundamentals of web search. Google had a better system for organising the web and helping users find things. Yahoo! began its long decline.

The company had to decide: was it in content or technology? Yahoo! hired Terry Semel from Warner Bros to rebuild it, and he did a decent job, with revenues climbing from less than $1 billion in 2001 to almost $7 billion in 2007.

But Semel was old school, not tech-savvy and was regarded as incapable of handling the emergence of a new ubiquitous internet embracing social and mobile. He presided over the purchase of lots of startups, but famously messed up the buyout of Facebook, which had agreed to a deal.

Semel gave way to founder Wang, who nearly sold Yahoo! to Microsoft but didn’t. Later, he licensed Microsoft’s Bing to be Yahoo!’s search engine – an act that seemed to confirm Yahoo!’s technological eclipse. After Yang came Carol Bartz, whose short-lived reign ended in a phone call and some ripe language.

Enter the small town Google girl

Yahoo! was a mess, but there was still value (and certainly heritage) there. After all, 700m people a month used Yahoo! for e-mail, news and more. Then there was the 40 per cent Yahoo! had in a Chinese company called Alibaba – an e-commerce giant in the world’s fastest growing economy.

Wall Street investor Dan Loeb knew this, and made a play for control. He took a five per cent share and manoeuvred to get his own pick in to run the company. The board ignored him and hired for eBay boss Scott Thompson instead, who lasted 130 days. After that debacle, Yahoo! promoted from within and made Ross Levinsohn interim CEO. He was assured the full-time job would be his.

But by then Loeb had been dazzled by Mayer. He was convinced she was the one.

Mainstream America may have been surprised to see a 37 year old female take the reigns of an iconic tech brand. But Silicon Valley knew all about Marissa Mayer.

She had grown up a small town girl in Wisconsin and attended Stanford, where she would later teach. Throughout her formative years, Mayer loved to study and loved to work. These admirable qualities were so overwhelming that Mayer simply didn’t see barriers. A familiar anecdote from this time explains how Mayer was intrigued when reading in The Stanford Daily about “the blonde woman in the upper division computer sciences classes.” Who could this be, she wondered, not recognising herself.

During her teaching years, Mayer fielded many calls from recruiters. But something told her to follow up when one suggested checking out a startup called Google. Soon after, she became one of its first employees.

As vice president of search products and user experience, Mayer defined the search firm’s look and feel with great success. She also proved an eloquent and credible advocate for a firm full of publicity-shy engineers. And she wasn’t bashful about her own contribution telling Glamour: “It’s hard to tell where my aesthetic ends and Google’s begins.”

Preparing for the exit

Mayer is widely credited for being extraordinarily smart and hardworking (famously she gets by on four hours’ sleep a night), but this hasn’t made her universally popular. Some colleagues at Google clearly resented the Mayer myth and the publicity it was getting. In person, Mayer can be brusque and dismissive of others though she is also reported to be fiercely loyal, which inspires immense devotion too.

Whatever the real story, the fact remains that Mayer was demoted. In 2010 she was put in charge of Google’s location and local services. A pretty big role for sure, but one removed from the heart of the company’s operations: search. Mayer was also denied a place on the newly created L Team, which oversaw Google strategy.

If Mayer was slighted, she fronted it up well. Her public position was that she was now in charge of more departments and a bigger team. And she remained as public a figure as ever, taking to the press and touring the conference circuit. But it’s possible to speculate that this was the point at which Mayer began plotting her exit from Google. And when Yahoo! made its approach, she applied her brain and work ethic as never before.

The presentation she gave to the Yahoo! board members answered every question they could have had. It defined a clear vision to return the firm to the center of technology and innovation. It was obvious Mayer must get the job.

Winning an Apple Design Award

During her first few weeks, the new CEO came to realise what a state the firm was in. Staff arrived late and left early. Everyone had a Blackberry even though Silicon Valley professionals were all using iPhones. The whole organisation was mired in a slump.

Mayer told TechCrunch that in her first few days a staffer approached her in the cafeteria and asked: “Is it time to go?”. She thought he was enquiring whether he should leave the company but what he actually meant by ‘go’ was ‘do things’.

She recalls that he then said: “We’ve been sitting here through hostile takeovers and recessions and cost cutting and all this craziness …is it time to do stuff?…I said ‘please go! By all means run! I was so pleased to unleash all that energy.”

And Mayer certainly did that. Her leadership transformed the culture inside Yahoo! and made its people believe that this could be a company where ideas could become products again. She wasn’t afraid to make controversial decisions either. In early 2013, she famously sent out a memo telling employees that they could no longer work from home. And she re-designed Yahoo! Mail, upsetting many loyal users in the process.

Mayer’s biggest realization was that Yahoo! needed to reclaim what she called ‘digital daily habits’, especially in the smartphone era. At its height, Yahoo! was the primary destination for people in search of online news, mail, search and listings. It still had significant pull in this area online. But on mobile it didn’t figure at all.

So Mayer radically upped the quota of mobile engineers from 60 to 500, and set about making Yahoo! a bonafide app maker. There were some big successes: Yahoo!’s weather app was heaped with praise and won an Apple Design award.

Tumbling back into action

But the in-house teams couldn’t do everything. Which is why Mayer went on the acquisition trail, buying 40 companies in two years. They included interesting signings such as Summly, the UK news summarising firm run by a 17 year old.

Without doubt, the marquee signing for Yahoo! was the social blogging platform Tumblr, which was bought for $1 billion. Tumblr was desired by most of Silicon Valley’s giants, so Mayer was given much credit for convincing the team to choose Yahoo!.

But kudos only lasts so long. In time, the Tumblr deal will be validated by revenue. And as of 2014, there have been reports that the site is still struggling to find a model that works for advertisers without alienating its 180m bloggers.

Having transformed the culture inside Yahoo!, presided over 40 acquisitions and raised Yahoo!’s stock price by 125 per cent, one would assume Mayer has been an unmitigated success. So why the ambivalence?

The doubters say most of Yahoo!’s residual value and its high share price is down to one factor alone: its 23 per cent stake in Alibaba (and to a lesser extent Yahoo! Japan). Alibaba will IPO in September as Hot Topics goes to press and some experts say the share is so valuable that it accounts for all of Yahoo!’s market cap.

In other words, Yahoo! is effectively worthless.

That rather dramatic analysis ignores complexities around tax and so on, but neither can it be completely discounted. Still, Yahoo! could net around $15 billion from the IPO, which would give Mayer another war chest with which to complete her project and restore Yahoo! to its place alongside Google, Facebook, Apple, Microsoft and Amazon at the top of tech.

Will she succeed? The world will be watching.