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The appointment of Marissa Mayer as Yahoo CEO has been a godsend for those in the media. If nothing else, the photogenic, enigmatic and workaholic chief executive has made people interested in the company again.
In 2011, Yahoo was never mentioned in the same breath as Google or Facebook. But now, Mayer has propelled the company into the top tier of Internet Companies That Tech Writers Like to Cover. Like investors, the media loves a comeback story, and Yahoo seemed to fit the bill: Since Mayer joined the company on July 16, 2012, its stock price has risen 159%.
See also: 7 Things You Didn't Know About Marissa Mayer

YHOO data by YCharts
While Mayer is doubtlessly part of the reason for the increased valuation, skeptical analysts now say the company has benefited more than most realize from its 24% stake in Alibaba and that company's impending IPO. A rash of mostly small-time acquisitions has helped keep Yahoo's name in the news, but has masqueraded the fact that its core business is still anemic. That may change now that COO Henrique de Castro is out, but until Yahoo can monetize the impressive array of new products that Yahoo has created under Mayer's tenure, she will be struggling to turn the company around.
Yahoo is known for its string of strategic errors over the last few years, but not all the deals were blunders. In particular, a $1 billion stake in the Chinese ecommerce firm Alibaba has paid off handsomely. Yahoo now owns 24% of the company, which is now worth between $100 billion and $170 billion, according to analysts.
The run-up on Alibaba's valuation has done a lot to boost Yahoo's as well. Unfortunately for Yahoo, Alibaba is planning to go public, possibly this year, which will decrease Yahoo's stake in the company from 24% to 14%. While that will yield $10 billion or more for Yahoo, investors will have to base their assessment of Yahoo more on the company's growth prospects and less on Alibaba's.
"The reality is from a fundamental perspective we haven't seen fundamental improvement," said Scott Kessler, Internet equity analyst at S&P Capital IQ. "The revenue line seems anemic at best in terms of growth."
If you subtract Alibaba from Yahoo, the company's Mayer-era performance isn't so stellar. For the first nine months of 2013, Yahoo's display and search revenues were down 10% and 9%, respectively. Frustratingly for Yahoo, that comes as the company topped Google in the amount of U.S. visitors last year for the first time since 2011, according to comScore. Revenues aren't rising with traffic because of an industry-wide phenomenon in which CMP (cost per thousand readers) rates are falling, on average, as more consumers migrate to mobile. There's more to it than that, though.
When she took over as CEO, Mayer focused on creating products and left the ad business to Henrique de Castro, a Google colleague she enticed to join the company with an exorbitant pay package that netted out to about $60 million when de Castro was fired on Wednesday after 15 months at the company.
De Castro wasn't just lavishly compensated, though; he was also tone deaf to the demands of the advertising industry that he was supposed to be charming on Yahoo's behalf. Instead of wooing the industry, he was repelling them with an arrogant attitude and slow response to industry trends, notably programmatic buying. His lack of enthusiasm for the industry was epitomized in this this February 2013 IAB speech, which was widely panned in the industry.
One media buyer who spoke to Mashable characterized de Castro as a "disaster" who never had what it took to rebuild Yahoo's ad business. The buyer — and others — were heartened when the company brought on former AOL exec Ned Brody as SVP of ad sales for the Americas in September. "Ned's a smart guy," said the buyer. "He's been at AOL, where you have to work for your lunch, as opposed to Google where you walk in and smile and people start throwing their wallets at you."
With de Castro gone, things may be looking up, and not just because of the change in personnel. During CES, Yahoo also announced that search data is now part of all its ad products; this means if you search for a Subaru Outback, you may see an ad for the car on Tumblr. Although that linkage is a decade too late, according to this buyer, better late than never. Despite the new capability, Yahoo still has to grapple with the same forces bedeviling the rest of the industry — including that switch to mobile. If the ad business improves, Mayer might be able to be able to monetize her new Yahoo products and her vision will have been achieved.
Luckily for Mayer, she still has some time to let this happen; investors appear to still be patient with her. The Alibaba IPO puts that vision on an accelerated timeline. Though the picture may look better without de Castro, for now, don't call it a comeback.
Image: Yahoo