In 2012, Ross Levinsohn was Yahoo’s interim CEO and in the running to take on the job permanently, having spent years running the company’s sales organization.
Yahoo gave the job to former Googler Marissa Mayer, who on Monday announced that the company was being sold to Verizon for $4.83 billion, putting it in the same company as AOL.
Shortly after the acquisition was announced, Business Insider asked Levinsohn whether four years ago he could have imagined it would end up this way.
“No,” he said. “I think the company tried many different paths – not just over the last four years, but certainly over the last decade – and I don’t think there’s a single person, or article, or company, or analyst who thought this company would sell for less than 1X revenue. If you looked at analysts reports in 2010, 2011, and 2012, you’d see something significantly higher.”
Yahoo reported $4.97 billion in revenue in 2015, down 7.6% year-on-year. Adjusted Ebitda, or earnings before interest, tax, depreciation, and amortization, fell from $1.34 billion in 2014 to $952 million.
Levinsohn said ultimately the strategy the company took under Mayer just didn’t take off.
“Just look at Tim Armstrong at AOL and how he was able to focus this business on monetizing its assets in the best way possible,” Levinsohn said. “He has done a remarkable job with AOL, which frankly was a quarter of the size of Yahoo in 2012, and now it’s buying the company.”
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“Hats off to Tim for being really pragmatic about what the AOL business is and focusing it and growing it – now he’s the acquirer.”
Levinsohn and Mayer had differing battle plans when they laid out their strategies to the Yahoo board in 2012 as they competed for the top job at the company.
Mayer wanted to focus on new products, mobile, and taking on Google in mobile search. Levinsohn’s turnaround plan involved trimming costs, divesting itself of business units, and signing partnership deals with companies like Microsoft and CNBC, rather than trying to battle Google and other digital media businesses alone.
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Levinsohn said: “Marissa clearly focused on mobile, which nobody would quibble with, but mobile is not monetizing – unless you’re Facebook – at the rate desktop was. So I think that was a challenge. It let the other parts of the business [decline] – if you look at the erosion of Yahoo Sport and Finance in terms of traffic and monetization as an example – that probably was a detour from where the company would have been.”
Yahoo also spent a lot of time acquiring search revenue, partnerships, and acquisitions, which drove down the margin on the business, Levinsohn said.
“Competing with Google in search is a really tough task, and I know Marissa knew that well,” he said. “Certainly, search done right is a high-margin business, but I think she made a lot of bad decisions in acquiring companies and people versus accretive revenue.”
Despite the mistakes of the past, Levinsohn said current employees should feel positive about the future that lies ahead of them.
Levinsohn said: “If I was an employee at the company right now, I would be excited. They have found a great acquirer in Verizon and AOL: They know the business and they’ve got the resource, capital, and knowledge, more importantly. Tim really knows how to run this business. Marni Walden,” Verizon’s executive vice president and president of product innovation and new businesses, “has done a remarkable job at making Verizon a real player in the digital world – I’d be excited if I was an employee.”
That said, many Yahoo employees will be facing the real possibility of job cuts as Verizon will look for synergies in the combined AOL/Yahoo entity. “Synergies” is often used as another word for layoffs.
But Levinsohn said he thought those remaining were likely to have a brighter future.
“Look, the discussion as far back as 2012 was that the company needed to get smaller and more focused. All the last four years did was delay it,” Levinsohn said. “It’s a tough pill to swallow for any company, but it allows the company to live, breathe, and expand in the future.”
After exiting Yahoo in 2012, Levinsohn went on to become the CEO of Guggenheim Digital Media, an investor in media properties such as Billboard Magazine and The Hollywood Reporter. He left Guggenheim in 2014 and now sits on the board of Tribune Media and the video identification company ZEFR.