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Yahoo plans to lay off more than 20% of its total workforce as part of a major restructuring of its ad tech unit, executives told Axios. The cuts will affect more than 50% of Yahoo’s ad technical staff — more than 1,600 people.
why it mattersThe changes will end Yahoo’s years-long effort to compete directly with Google and Meta for digital advertising dominance.
running newsIn an interview, Yahoo CEO Jim Lanzon insisted that the layoffs were not attributable to financial challenges, but rather strategic changes to the company’s Yahoo for Business advertising unit, which is not profitable.
- These changes, he said, would be “tremendously beneficial to Yahoo’s overall profitability”, allowing the company to “go on offense” and invest more in other parts of its business that are profitable.
- Yahoo is profitable overall and brings in about $8 billion in annual revenue, Axios reported.
catch up quickYahoo and AOL were to be acquired by global private-equity firm Apollo in 2021 from Verizon for $5 billion. Apollo renamed the combined company Yahoo and hired Lanzone to run the business.
- AOL and Yahoo combined made more than 30 ad tech acquisitions more than a decade ago. When Verizon acquired the two firms in 2015 and 2017, respectively, Verizon aimed to take advantage of their vast data sets and their acquired ad tech businesses to create a unified digital advertising platform comparable to Google or Meta (then Facebook). compete with.
- But parts of the integrated platform, which allows advertisers to buy and sell ads, have failed to deliver on that promise over the years, leading to Thursday’s announcement of layoffs.
- “A lot of resources in that integrated stack were going to the point of no return,” Lanzon continued. “This was an old issue with every variation of this company … that needed to be resolved eventually.”
by numbersRoughly 1,000 positions will be eliminated on Thursday, representing 12% of the total planned cuts at Yahoo. The remaining 8% or more reduction will happen in the second half of this year.
- Lanzon said he could not provide an exact number of future cuts, but confirmed that the total number of layoffs would be more than 50% of the ad technology unit’s current employees and more than 20% of Yahoo’s current employees.
DescriptionYahoo: As part of the changes, Yahoo will spin off a part of its advertising business called its SSP, or supply-side platform, which helps digital publishers sell automated ads against their content.
- It will also shut down its native advertising platform, called Gemini, and will instead leverage its newly formed partnership with ad tech giant Taboola to sell native advertising on its own content.
- Lanzone said that by moving to Taboola, Yahoo will be able to increase the number of advertisers competing for ad placement on properties by up to 8x.
- Lanzon said the company is choosing to spin off the SSP business rather than sell it, as it did not want to be locked into a post-sale agreement where it would be forced to use its SSP exclusively. Working with several different SSPs will help Yahoo optimize its advertising revenue.
yes but: Yahoo isn’t exiting the ad tech business entirely.
- It will also double down on a portion of its advertising business, its DSP, or demand-side platform, which helps advertisers buy ads automatically across multiple publisher websites. The DSP business will be renamed Yahoo Ads.
- Lanzon plans to take on more roles and potentially make more acquisitions in the coming months to grow Yahoo’s DSP business. “Our DSP is world class and has billions in revenue,” Lanzon said.
- Under Yahoo Chief Revenue Officer Elizabeth Herbst-Brady, the company will streamline its DSP business to focus on selling advertising to Fortune 500 businesses and premium accounts in its most lucrative global markets.
- To do this, it will build a premium advertising sales team for Yahoo’s owned-and-operated properties such as Yahoo Sports, Yahoo News, Yahoo Mail and Yahoo Finance, Herbst-Brady said.
big picture: These moves will help Yahoo’s focus on growing its owned-and-operated properties as attractive standalone brands, a centerpiece of Yahoo’s strategy under Apollo.
- Lanzon said that reliance on its own SSP and native ad tech businesses negatively affected Yahoo’s ability to monetize those channels.
- Lanzon said last year that those units could one day be spun out through a private sale or IPO.
Bottom-line: “The move is intended to simplify and consolidate the good parts of the business, while sunsetting the rest,” Lanzon said.
- “It was too resource intensive to do everything at once.”