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Yahoo Mail fail casts shadow over efforts to turn firm around

SAN FRANCISCO — Even for Yahoo Inc., a company with a lengthy track record of failure, this was an epic fail.

For five days this week an untold number of its 100 million users couldn't send or receive email, prompting many longtime, loyal users to savage the company on social media and threaten to leave for another email service.

Despite the misery the outage caused people and businesses — who could have sent a letter faster than they could an email — Yahoo was slow to respond and even slower to inform users about it.

And that has cast a shadow over Chief Executive Marissa Mayer's yearlong effort to turn around the troubled Internet company.

Peter Sealey, adjunct professor of marketing at Claremont Graduate University, said the handling of the email outage was a major public relations stumble and a "blemish" on Mayer's tenure as CEO.

Colin Gillis, an analyst with BGC Partners, called the outage "an embarrassment."

For all of the Sunnyvale, Calif., company's challenges over the years, some 800 million people log into Yahoo each month to check their email, get stock quotes and scan headlines.

Yahoo Mail is one of the main ways the company keeps a hold on users. Mayer identified Yahoo Mail — one of the world's largest email services — as one of the company's biggest missed opportunities that she planned to fix.

But so far, Yahoo email users have not been happy with the results. A redesign has triggered loud protests and many users say the service is no longer reliable.

Even Yahoo employees don't want to use it. In an internal memo leaked to All Things D tech blogger Kara Swisher, Yahoo management begged employees to switch their corporate email accounts from Microsoft Outlook to Yahoo Mail.

According to Swisher, the executive in charge of Yahoo Mail, Jeff Bonforte, joked at a staff meeting last month that while users might be dissatisfied with changes to the product, the company would have to give them a swift kick in a delicate body part to get them to stop using it.

Yahoo is now issuing frequent updates on its progress in fixing the outage. Still, many users may be missing a couple of weeks of email, and some users were still reporting problems Friday.

Yahoo did not respond to questions about the outage, including how many people were affected and how many may have dropped the service.

Dwana De La Cerna, a government worker who lives in Chicago, says she has been frustrated because her 17-year-old son is waiting to hear from his No. 1 college choice, Indiana University. He has only one email account, Yahoo, and that's the one he gave the school, she said.

"We kept wondering why we hadn't heard anything," she said.

Kathy Badertscher, director of content with public relations agency Knock Twice, says she's had a Yahoo Mail account since 2000. It was her first personal email address. She stuck with Yahoo after opening a Google Gmail account in 2007.

Even before the latest prolonged outage, Badertscher said email access had become "more spotty." And she was not a fan of the redesign. She says she has slowly begun to use Gmail more, and now she's thinking about switching over permanently to Gmail.

"Frustrated? Yep. Disgusted? A little," she said.

Alienating loyal users such as Badertscher won't help Mayer in her difficult quest to breathe new life into Yahoo products, jump-start its advertising business and transform the company culture.

The former Google Inc. executive joined Yahoo in July 2012 to help revive a company that had not kept up with the rapid migration to mobile devices.

Yahoo shares, which rose 38 cents, or 1%, to $39.73 on Friday, have more than doubled this year. But investors are not valuing the stock on Yahoo's business, but on that of Chinese e-commerce giant Alibaba, in which Yahoo has a 24% stake. Alibaba accounts for about half of Yahoo's market valuation.

Mayer has warned investors that it will take years to turn Yahoo around. But Wall Street won't necessarily be that patient. Analysts note that she has not managed to grow the company's core advertising business even as digital advertising spending surges and competitors Google and Facebook capture big gains.

In October, Yahoo reported that its third-quarter profit fell 13%, excluding a gain from the sale of some of its stake in Alibaba, while revenue fell 1%. And Yahoo again lowered its revenue and profit outlook for 2013.

Yahoo this week was also forced to reveal that it is more dependent on its search deal with Microsoft Corp. than it had previously said. That search deal accounted for 25% of its $5 billion in revenue last year and 31% of its $1.1 billion in revenue last quarter. Yahoo had previously said the contract with Microsoft was responsible for more than 10% of its revenue in 2011 and 2012 without being more specific.

On the plus side, Mayer has been given credit for improving morale at Yahoo and pushing the company to develop products for mobile devices. She has purchased several start-ups to bring new blood and ideas into the company, including spending $1 billion on blogging platform Tumblr. She is also pushing redesigns of Yahoo websites and mobile apps to make them appeal to a younger crowd.

Yahoo has made some strides in growing its audience. The company said in October that its websites now draw more than 800 million users a month, up 15% since Mayer took over as CEO. Monthly mobile users rose 15% in the third quarter to 390 million.

Alibaba has given Mayer some breathing room on Wall Street, but that won't last, said Gillis, the BGC Partners analyst.

"Most investors are eyeing the Alibaba piece, not the core business," Gillis said. "But one day the core business is going to be valued on its own merits."

jessica.guynn@latimes.com

Twitter: @jguynn

Copyright © 2014, The Baltimore Sun
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