Despite a profitable 2022, Yahoo has decided to lay off 1,600 of its staff members, equating to one-fifth of the company. Following similar announcements made by eBay and Zoom this week, these changes will impact the company’s ad tech employees, with the team shrinking by 50% as a result.
Employees were notified on Thursday that 1,000 of the company would be laid off before the end of the day, while a further 600 workers are due to be released in six months.
According to Jim Lanzone the CEO of the pioneering platform, this decision was made as part of a restructuring of Yahoo’s advertising unit, which is not currently proving to be lucrative, and will help them “go on offence” by investing in other areas of the company.
Yahoo Lays Off 1,600 Workers Amid Company Restructuring
After losing money from its SSO and native ad tech businesses, Yahoo has decided to join the ranks of other tech companies like eBay, Zoom, Google, and Meta by axing over 20% of its staff.
These cuts will predominantly be made to the company’s ad tech employees, with 1,000 workers already being shown the door on Thursday, and a further 600 employees facing the same fate in six months’ time.
“These decisions are never easy, but we believe these changes will simplify and strengthen our advertising business for the long run, while enabling Yahoo to deliver better value to our customers and partners” – Yahoo Spokesperson
With the US web service provider generating a healthy $8 billion per annum in profits, Yahoo’s CEO, Jim Lazone, maintains that this decision was not borne out of financial hardships. He explains that instead, the layoffs are part of a strategic change that seeks to make other parts of the business more profitable.
Yahoo Drops the Curtain on a Number of Ad Platforms
Yahoo and AOL, another trailblazing US web portal, were acquired by the private equity firm Apollo in 2021 for $5 billion. At the time of purchase, Yahoo and AOL housed over 30 ad tech companies, with the acquisitions spanning over ten years.
Combined, this ‘unified stack’ of businesses had access to enormous data sets that were thought to give ad platforms like Google and Meta a run for their money. Unfortunately, these ad platforms never lived up to the company’s expectations, and instead of conquering the market, lead to depleted resources and diminished returns on investments.
“A lot of resources were going into that unified stack without a return. This was a longstanding issue with every variation of this company…that needed to be solved eventually.” – Jim Lanzone, Yahoo’s CEO
The failure of this ‘united stack’ has resulted in several native advertising platforms being shut down, including Gemini and its supply-side platform (SSP) which helped digital publishers monetize their content through ads.
Is Yahoo Out of the Ad Game Forever?
While Yahoo may be ditching its unified ad stack, the service provider isn’t vacating the advertising space altogether.
Earlier this year, the California-based company announced a partnership with advertising powerhouse Taboola. According to Lanzone, by letting Taboola sell native ads on its pages, this new alliance could increase the number of advertisers competing for Yahoo’s ad placement eightfold.
The company is also planning to strengthen its demand-side platform (DPS) which helps advertisers buy ads automatically across multiple publisher sites. This DPN resource will be renamed ‘Yahoo Advertising’ and will be focusing on selling ads to Fortune 500 businesses and premium accounts across the world.
Despite 20% of Yahoo’s workforce facing the chopping block, Lanzone has announced plans to hire more roles in this team, as part of his vision to “simplify and strengthen the good parts of the business, while sunsetting the rest”.
However, even with the company’s recent strategy shift, it’s unlikely that Yahoo will be able to compete with the big players any time soon. Yet, with Yahoo’s biggest competitors in the space, Google and Meta, being forced to make similar cuts recently to recover costs, its as good a time as any to take a stab at the advertising duopoly.
