Billionaire investor Paul Tudor Jones’ recent misogynistic comment,“You will never see as many great women investors or traders as men. Period. End of story,” was prefaced by his belief that mothers lose focus when they have children. This can be rebutted with a single name…Marissa Mayer, CEO of Yahoo! Inc. (NASDAQ:YHOO).
Pass GO and collect 200 million
users
I like the way she rolls. Every holiday we have a Monopoly marathon and Mayer runs the board just the way our family champion does, buying disparate properties, snatching other players’ rejects, and building upon the buys.
Since last July she’s bought Summly, the news brief site, the aforementioned Tumblr, PlayerScale (a gaming infrastructure company), and video chat team On the Air. I almost forgot another buy, Flickr, the photo sharing service that competes with Instagram, which is owned by Facebook Inc (NASDAQ:FB). Yahoo! Inc. (NASDAQ:YHOO) could have had their own YouTube if it weren’t for the protectionist French government nixing the Dailymotion bid. Quel dommage!
But wait! There’s more! Yahoo has made significant progress with developing its own entertainment content, simultaneously challenging Netflix, Inc. (NASDAQ:NFLX), Amazon.com, Inc. (NASDAQ:AMZN), and Google Inc (NASDAQ:GOOG), doubling its video content. In less than a year Mayer has built up what could only be called a moribund and demoralized Yahoo! to being well on the way to a triple threat: cloud, content, and search. Yahoo! Inc. (NASDAQ:YHOO) has sat out the game for the last decade in its own version of Silicon Valley jail. But as my family knows a motivated player can come from behind by running the board.
Now, Yahoo! Inc. (NASDAQ:YHOO) investors have every reason to wake up and anticipate a day of new headlines. Maybe Mayer’s back-to-the office edict stirred up controversy, but these strategic acquisitions and offers are making that very old news indeed.
And what she has stayed away from is significant — no tablets, phones, gadgets, or geegaws. With a search and content company you can have enormous margins with fairly low overhead just keeping enough M&Ms and free food to keep the developer and engineer geek brains on full throttle. The company has very little debt compared to total cash — just $36 million to $3 billion in cash.
I sometimes wonder if Yahoo! Inc. (NASDAQ:YHOO) changed its name to the Sunnyvale Times Company and put out a Summly print edition would Warren Buffett snap it up. Right now it’s one of the best buys in all of tech. I would be remiss if I didn’t mention its 23% stake in Chinese e-commerce site Alibaba.com.
Winning over its advertisers’ much desired youth demographic is really Job One, as she has acknowledged. As Facebook loses its dominance with those under 30, Yahoo! Inc. (NASDAQ:YHOO) is winning them with Flickr, Tumblr, the new gaming acquisition, and entertainment content.
Snatching Tumblr with its100 million-300 million unique monthly users (the debate on that number here) away from Facebook was a masterstroke in taking share of young followers. Let’s split the difference and say 200 million users.
Google is the established competition that owns Boardwalk and Park Place right now with hotels on them, no less. It is the number one search engine, it’s got a cloud component, a soon-to-be monetized YouTube, Android system, and Nexus tablets. Many stock pundits argue that Google’s focus is diffused by Google Glass and other visionary projects (puns intended).
No argument from me there. But Google hasn’t sat out the game over the last few years as Yahoo! has with five CEOs in almost as many years sitting dazed in the CEO chair like deer in headlights. Google has the advantage of size and its reputation as the best company to work for in the US. How well Mayer knows this as one of the original Googlers.
Google has had the love of the Street for over $450 in share price gains in the last two years. Yahoo! has only recently gotten some sugar and that led to a higher share price surge than Google’s 49% rise in the last year. Google is less the value that Yahoo! is with a higher trailing P/E of 26.13. Their five-year EPS growth rates as predicted by analysts are 14.93% for Google and 13.53% for Yahoo!
Both are competing with Facebook for advertising dollars. Facebook keeps rolling out new initiatives to please its advertisers but investors shouldn’t be tempted with a trailing 528 P/E and constant question over the loyalty of its users. In the ever fluid world of social media Facebook has been losing traction among that devoutly wished for youth demographic as more of the older generation joins Facebook. There is just no moat for Facebook as Google Plus, twitter, and Tumblr breach their former supremacy in social.
Needless to say, a year after its IPO, Facebook is still a hotly contested battleground stock. In October it celebrated a billion users. But it has earned roughly less than half of Yahoo!’s revenues of $390 million last year as Yahoo! goes on to disrupt the world of content and cloud.
A Game of Throngs
It all comes down to users, young users that attract advertisers. Every buy Mayer makes gives her the leverage to attract throngs of new users with multiple platforms, a new Yahoo! Inc. (NASDAQ:YHOO) ecosystem, taking share from Facebook. Google may be winning for the moment but while it sits back counting its money, Mayer is running that board becoming a media monopoly.
The article Mayer Shows How the Game Is Played originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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