Yahoo, It's Coming

| About: Yahoo! Inc. (YHOO)

Staging a turnaround is difficult, and it requires a lot of hard work - especially when the entity going through that process is not an individual, but a $20 billion company such as Yahoo! (NASDAQ:YHOO) Their path officially started, as far as investors are concerned, on July 16th, when Marissa Mayer took the helm as CEO of the company. In my last article, I discussed how Mayer's plans are structured, what she must do to succeed, and what her actions thus far have meant for shareholders. Mayer indeed has laid down a great plan, but, as the saying goes, the best laid plans of mice and men often go awry. As part of Capital Ladder Advisory Group's ongoing commitment to provide the best possible research and analysis on the company, it's important to check continually and make sure that Mayer and the rest of the Yahoo! team are executing properly.

As with most good plans, Mayer's is not one of revolution and overhaul, but incremental changes to the company and its services. While Yahoo! aims to become mobile friendly, it looks to remain a very similar company to the one it is today - simply better organized and better adapted to how we engage with technology today.

The most high-profile change made by the company cements this idea. On February 20th, the company released a new update. It was not for email, IntoNow, Flickr, or any of Yahoo!'s mobile-centric services; it was to the homepage. Changes were made both to the PC interface and the mobile one, as Yahoo! attempts to strengthen its core market and assimilate winning mobile strategies and services to its business.

The new home screen, while still similar to the old one, has some noticeable differences. First off, the page is cleaner and less chaotic - somewhat reminiscent of Google's (NASDAQ:GOOG) page. The fonts are larger and clearer, the page has a lot more white space, and some of the peripheral Yahoo! properties that had links on the left-hand side of the page no longer do. More importantly, the company has included a newsfeed with an infinite scroll. By default, the scroll aggregates news stories of all sorts, including, fashion and entertainment, finance, sports, politics, and lifestyle.

The real advantage to the update, however, lies in its personalization and sharing friendliness. The news feed can be customized to include more or less news regarding a particular category. As you read more stories through the Yahoo! homepage, it will learn your preferences and automatically start compiling news stories that are better suited to you. Additionally, users can sign into Yahoo! using both their Yahoo! IDs or Facebook (NASDAQ:FB) accounts, allowing them to see stories shared by all of their friends. Fortunately, sharing your own stories is made remarkably simple as well. Moving your mouse on any article brings up a close and share button; when you hover your mouse on the latter, it allows you to instantly share via Facebook, Twitter, or email. The right-hand side of the site has become more personalized as well, including local weather forecasts, a Flickr window that shows users' photos taken by people they follow, and Facebook friends' birthday.

These changes have not only been implemented for the PC, but for the company's mobile website as well. Using the new Yahoo! page on a mobile device helps accentuate the social benefits of the update. Additionally, many of the mobile interactions are done via swiping, as opposed to the clumsier and less intuitive tapping method that was utilized before.

Yahoo!'s homepage is critical to the company's success. It may come as a surprise, but the page is currently the third most visited in the U.S., with only Google and Facebook generating more traffic. And, with immediate access to so many Yahoo! properties, the homepage acts as a remarkably effective portal to services that may generate high ad revenue. Unfortunately, as the company has struggled to stay relevant over the last few years, its traffic has decreased, falling by over one-third from May 2009 to May 2012.

Consequently, it's critical for the company to maintain a stellar homepage to continue reversing the trend and attracting more traffic to its peripheral properties. The new homepage has the potential to do exactly that. Even better, by allowing people to log in with their Facebook accounts and encouraging more sharing, the company may be able to extract valuable data on user preferences to generate higher prices for advertisements.

More recently, Mayer made some splashes in the media when a memo leaked revealing that, starting in June, all employees will be required to work from the office. While plenty of studies have shown there are significant advantages to having a telecommuting workforce, Mayer worries that collaboration and creativity are not reaching their full potential. "To be the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side," the memo reads.

The announcement was met with a wide array of emotions and quite a few very critical reactions. Regardless, it seems that this is a step in the right direction - at least for now. While it's true that telecommuting has been known to increase worker productivity and cut costs, those are not Yahoo!'s main goals at this moment. The company has over $7 billion in cash; cutting costs, while always advantageous for a business, is not Mayer's top priority. What is her main priority is making Yahoo! relevant and user-friendly, and a company can't do that without ideas, no matter how cheap it is to run.

Forcing workers to come into the office, as others have pointed out, is a smart and effective way to promote Mayer's agenda. Most importantly, it forces collaboration in a way telecommuting doesn't. As anyone who's ever worked on a project knows, dividing the project and working on it alone can be remarkably convenient, but exchanging and expanding upon ideas with one another is near impossible. For a company trying to catch up to the tide of social technology that has swept the market, promoting as much communication as possible is critical to the company's success.

The fact is, simply, that in a company of 11,500 employees, unless everyone shows up, it's difficult to know which workers are really putting their best foot forward, and which are just getting by, doing the bare minimum while working on their own start-ups from home. Mayer's plan, while controversial, will not only result in telecommuters less dedicated to the company to quit, but will send a message to the employees that Mayer is adamant about improving the company, and that requires effort from every single individual.

Of course, time doesn't wait for Yahoo! to reorganize itself, and competitors don't often rest on their laurels. While still a small presence in the search market, Microsoft (NASDAQ:MSFT) has started a large campaign to promote its Bing search engine. In an attempt to show people that Bing produces better results that Google, Microsoft has created the bingiton challenge, inviting people to blindly compare the two sites. The campaign has proven to be remarkably successful, allowing Microsoft to boast that roughly two in three participants select Bing. While this isn't a direct attack on Yahoo!, both are struggling to gain even a shred of market share from Google, and any success by Microsoft can slowly erode Yahoo!'s position as the main alternative to Google.

Fortunately, the new Bing campaign is the source of the greatest rise in competition - at least in the US market. Yahoo! still faces stiff competition from Google, Baidu (NASDAQ:BIDU), Yandex (NASDAQ:YNDX) and others both domestically and internationally, but the industry landscape remains relatively unchanged from where it stood last month.

In short, nothing monumental took place since Yahoo!'s earnings call. Perhaps that's monumental in itself. For a company like Yahoo!, still trying to crawl back from the hole it slowly fell into years ago, no news is good news.

Yahoo! has proven that it has a solid fundamental business model; it's the second most popular search service, the most popular email service, and has extended its influence into sports, finance, entertainment, and social networking with some remarkable success. Any improvement that has taken place in Yahoo!, and any improvement that will continue to take place, will be in small, incremental steps. The new homepage and office policy are great starts to cleaning up the clutter the company has gathered and generating more efficiency, both on its sites and among its employees. So, while Google made headlines when its share prices recently reached $800, perhaps it's the slowly improving Yahoo! investors' eyes should turn to now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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