Yahoo has announced plans to cut 20 per cent of its 8,600 workforce as a part of a major restructuring initiative in its ad tech unit.
Employees were notified on Thursday that 12 per cent of the company, 1,000 employees, would be laid off before the end of the day. Another 8 per cent, or 600 workers, will also be axed in the second half of this year.
The job cuts mostly affect the company’s ad tech unit, which will lose more than half of the department by the end of the year as the company re-thinks its adverting strategy.
In an interview with Axios, CEO Jim Lanzone said that the layoffs were not the result of economic challenges, but intentional changes to overturn Yahoo’s unprofitable Yahoo for business advertising unit.
The changes will be "tremendously beneficial for the profitability of Yahoo overall," he explained, allowing the company "to go on offence" and invest more in other parts of its business that are profitable.
Yahoo has announced plans to cut 20 per cent of its 8,600 workforce as a part of a major restructuring initiative in its ad tech unit.
In November last year, Yahoo took an almost 25 per cent stake in advertising network Taboola, which has since become the firm’s native advertising partner in a 30-year agreement.
The veteran company said it would shut down other advertising platforms such as Gemini and its supply-side platform (SSP) as a result of the restructuring effort.
Instead, it will focus on its demand-side platform (DSP), which will be renamed Yahoo Advertising. The new division will focus on deals with Fortune 500 companies.
“Over several years, the strategy of our ads business was to compete in the ad tech industry by offering a ‘unified stack’ consisting of our DSP, SSP and Native platforms,” a Yahoo spokesperson said in a statement to TechCrunch.
“Despite many years of effort and investment, this strategy was not profitable and struggled to live up to our high standards across the entire stack.”
The fallen giant
The layoffs mark the end of Yahoo’s longstanding attempt to compete with tech giants like Google and Meta in the fight for digital advertising dominance.
While Yahoo is one of the oldest surviving tech firms around today, it has struggled in recent years due to its failure to keep up with rapidly changing shifts in user behaviour and stiff competition from other search firms.
Once the most visited site globally and valued at over $125 billion, it was sold to Verizon for a mere $4.48 billion and then sold again to Apollo Global Management in 2021.
Yahoo announces a 20% layoff of their staff. This is surprising because no one knew they still had a staff.
— Finance Philosopher 🖌 (@FinPhilosopher) February 9, 2023
But Yahoo believes its reshuffle of staff may help reverse its historic failures and help it compete in both the widespread economic uncertainty of 2023 and the future search market.
“In redoubling our efforts on the DSP on an omnichannel basis, we will prioritize support for our top global customers and re-launch dedicated ad sales teams towards Yahoo’s owned and operated properties – including Yahoo Finance, Yahoo News, Yahoo Sports and more,” a Yahoo spokesperson said.
The move will help shift Yahoo’s focus towards growing its owned properties as lucrative standalone brands, which is the firm’s main strategy under Apollo.
Big Tech bye-byes
Yahoo joins a host of other tech companies forced to shrink its workforce in recent months due to uncertainty brought on by the macroeconomic headwinds and a looming recession.
Last month, Google announced it would be axing 12,000 staff. A week prior, Microsoft announced it would be slashing 10,000 jobs in a bid to shift funds for its ChatGPT investment.
Twitter, Meta and Amazon have also each announced cuts of over 10,000 staff respectively since the end of November last year. Apple remains the only one of the big five tech companies yet to announce layoffs.
To read more about the recent Big Tech layoffs, visit our Business Agility Page
Unlike these tech companies, however, who were forced to downsize after investing in extra staff to meet pandemic-era demand, Yahoo’s layoffs are not the result of economic challenges.
In fact, the tech firm is reportedly profitable, earning around $8 billion in yearly revenue. Yahoo hopes the job cuts will allow it to prioritise key areas of the business and further increase this profit.
“The moves are meant to simplify and strengthen the good parts of the business while sunsetting the rest,” Lanzone told Axios.
“It was too resource intensive to do everything at once," he added.
