The Yahoo saga is over and Verizon (VZ - Free Report) has officially purchased the one-time internet search giant for $4.83 billion. The deal includes Yahoo’s core business and web properties, while its stake in Alibaba (BABA - Free Report) and Yahoo Japan, as well as its patents and cash, will be spun off into a separate publicly traded company.
As of right now, Verizon has not said exactly what it plans to do with its new purchase, and some investors are already scratching their heads over how the communications behemoth plans to turn around the struggling Yahoo.
Luckily for the Verizon executives reading this article, I have some ideas. Despite its struggles, Yahoo does have a few bright spots that Verizon will need to exploit if it wants this deal to be a long-term benefit. Here’s what Verizon should do with Yahoo immediately.
Get Rid of Mayer
I’m not going to sit here and bash Marissa Mayer, but I think Verizon’s first step is to part ways with the embattled Yahoo CEO. Mayer joined Yahoo four years ago to start a turnaround effort, and that effort failed. It’s time for someone fresh to take her position and start a new turnaround plan.
Verizon and Yahoo have both been silent on Mayer’s future after the deal. In an open letter to employees posted on Tumblr, Mayer confirmed the deal and touched on how she saw her position at the company.
“For me personally, I’m planning to stay. I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter,” Mayer wrote.
To me, keeping Mayer on board, especially in the same role, is a waste of time. Verizon needs to try new things with Yahoo, and I think that is going to require a new chief executive. While Mayer will be owed a large severance package, Verizon should be willing to shell out a bit more cash if it’s serious about making this merger work.
One things that Yahoo does have is a user base. The site has about one billion monthly active users, including 600 million mobile users. Yahoo Mail also has about 280 million users, making it the busiest segment of the site.
Verizon needs to do everything it can to learn about these users. We’ve seen companies like Facebook (FB - Free Report) and Alphabet (GOOGL - Free Report) succeed with targeted advertising because they do a very good job learning about their users’ online tendencies.
Verizon was able to execute a similar plan when it purchased AOL about a year ago, and it will need to repeat the cycle now. Even if there is not yet a clear plan on what to do with Yahoo, learning about its users will almost certainly be beneficial somewhere along the line.
Focus on Content
While we may think about Yahoo has a major internet search engine, it just doesn’t have the share of the market it once did. In fact, Yahoo’s share of the U.S. search market is only about 11%, and that figure is just 2.1% worldwide.
The newly formed Verizon and Yahoo entity should not try to be a search engine. Instead, Verizon should use Yahoo to boost the amount of web content it actually owns. This means putting a focus on things like Yahoo Sports, Yahoo News, Yahoo Finance, and Tumblr.
When we look at these segments, it becomes a bit clearer where the value in Yahoo’s core business is. Over the past several years, the company has built up a formidable amount of content, and with the right tweaking, it could become an internet content king.
Yahoo Sports recently launched “The Vertical with Woj,” a basketball-focused corner of the site hosted by acclaimed sportswriter Adrian Wojnarowski. Along with Tumblr, Yahoo Sports, “The Vertical, and Yahoo Finance have grown to be incredibly popular with millennials.
Sometimes when you buy a rusty old car from the dealership, it can be tempting to break it down and sell it again for parts. In this case, Yahoo is the rusty car, and it just doesn’t make sense for Verizon to take that route. Instead, Verizon needs to return that old wagon to its former glory by putting in new parts that it’s never seen before. Yahoo is no longer a search giant, and Verizon should keep its focus on trying new things within Yahoo’s budding content areas.
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