Mayer And Yahoo - It's The Software, Stupid

| About: Altaba, Inc. (AABA)
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A respected tech entrepreneur on my Twitter feed just sent out a copy of this story about Marissa Mayer's turnaround plans for Yahoo (YHOO), with an added "we are rooting for her."

That's an interesting data point that deserves investor attention. Why does Marissa Mayer have such a "halo factor" working for her, which previous Yahoo leaders did not have?

It's not because she's a woman, not because she came from Google (NASDAQ:GOOG), and not entirely because she's young. It's because, I think, she's an engineer -- a software engineer -- and techies love to believe that the beating heart of any successful tech company is software engineering.

They're right.

Right now, Yahoo is hovering at close to the level it rose to when Mayer was hired in July. Despite the fact that all Wall Street's best-laid plans for the company -- hatched and executed over 15 years -- have failed, there is immense skepticism about her "engineering first" idea among investors.

Well, want to know why The Huffington Post got big enough to basically take over AOL (NYSE:AOL)? It wasn't Arianna Huffington (bless her heart) -- she was the front. It was engineering. Engineers figured out how to scale intimacy around news and commentary, turning newspapers into talk radio, and that makes money. Lots of money.

Investment bankers have a bad habit of thinking they rule the world. Wall Street tends to think it's the center of the universe, and that the ideas it comes up with are the only ones that matter. I see this all the time on CNBC and, frankly, I resent it. Wall Street today is a TV studio, a Potemkin Village. The action is out here, in the field, and when it comes to companies that make their money on the Internet -- including content companies -- that means the software engineering field.

When I joined Seeking Alpha a little more than a year ago now, it was easy to become No. 1 in technology. Now I'm barely hanging in at No. 5, and the reason for that is growth. This site is growing. And the reason it's growing isn't that I'm such a brilliant raconteur (although I am -- get a couple of glasses of wine in me some night if you don't believe me); it's because engineers here have learned how to scale intimacy.

It's the software, stupid.

I have a friend, a veteran publisher, who expresses amazement at this site's growth. Then he showed me the platform he was using. One word comes to mind -- oy.

And oy was the word at Yahoo for years. Its search algorithms were poor. Its presentation software was second rate. Its engagement was years behind the times. Fix what's really wrong, goes this argument, and the company will grow organically without making any significant acquisitions. To use the football phrase, it's about blocking and tackling. Putting money into engineering talent is like a football team running the ball on first down, with its big uglies knocking the other guys on their butts. Purists like that.

Can it work at Yahoo? I think it can, which is why I speculated on 100 shares a month ago at about $15.30. But only time will tell, and the questions for Mayer are how much time her board will give her, how much talent she can bring on board, and what they can deliver.

The goodwill is there. For the first time in over a decade, Silicon Valley is rooting for Yahoo. That's got to be worth a speculative flyer, doesn't it?

Disclosure: I am long GOOG, AOL. 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.