Advertising dollars are the lifeblood of companies like Yahoo, so it should well look to expand that business. Its display advertising business has been flat for several years, and its revenue from search advertising fell 40 percent in 2012 from 2010. Tumblr started putting ads in users' feeds on the desktop in May, following the introduction of advertising in mobile streams in April.
University of Michigan's Gordon thought Mayer may have made her big bet too soon. Instead of spending $1 billion on a purchase like Tumblr now, Yahoo might have been better off waiting until it had boosted its "cool" factor with a few smaller acquisitions. "Then you can buy Tumblr, and you don't scare away all the [users]," he said.
Mayer also needs to keep her employees happy. On Fridays she holds "FYI" town hall-style meetings for the 3,000 workers at Yahoo's Sunnyvale, California, headquarters. She has also extended maternity and paternity benefits to give mothers four months paid leave and fathers two months. New families can now expense up to $500 for things like laundry, house cleaning and child care.
She's also generated some controversy, especially with a policy change that prevents employees from working from home. But that may not have harmed her reputation at Yahoo: According to data compiled by Glassdoor, which lets employees write anonymous reviews, Mayer held an 85 percent CEO approval rating as of July 10. And year to date, 12 percent of the company's hires have been boomerangs — people who left Yahoo and have come back.
But ultimately, Yahoo's products and services will be a crucial element in Mayer's rebuilding strategy. In that regard, it may be hard to differentiate the company from other big online firms like Facebook and Google, which increasingly seem to be offering the same services as each other.
For Yahoo to compete, it has to offer a similar set of products and services to the other big online players, said Gartner's Blau.
"Eventually they might do other things, but that could be five, 10 or 20 years out," he said. "It's too risky to make a complete left turn right now."
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