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Pressure Mounts on Yahoo’s De Castro

COO needs to deliver results or could face ouster by end of the year

Photo: Getty Images

Yahoo finally got its latest ad savior yesterday when the company officially announced that former AOL executive Ned Brody will become svp of Americas, reporting directly to chief operating officer Henrique De Castro. But the question going forward will be, how long will De Castro be Brody’s boss?

Sources close to Yahoo say that De Castro is feeling increasing pressure to deliver better ad results, as the blustery exec has found himself on the outs with CEO Marissa Mayer. There even has been talk that De Castro could be gone by the end of the year, according to numerous sources.

The big knock against De Castro is, despite Mayer's string of mobile acquisitions, lots of positive press and the massive Tumblr deal, the companys ad business has languished in a marketplace that is enjoying robust growth. Particularly alarming is that Yahoo’s display business is getting hit on both the branding front and programmatic, which would theoretically be a De Castro strength, given his Google background.

“That’s what really stuck out,” said one analyst. “They aren’t moving the needle in programmatic when everyone else is.” In fact, just last week eMarketer revised its forecast for programmatic ad spending, predicting that 2013 would see $3.34 billion in spending vs. the $3.32 billion estimate predicted just a few months earlier.

The other complaints against De Castro, according to executives inside and outside the company: He moves too slow and has had trouble building out his team. Moreover, De Castro has never endeared himself to Madison Avenue, an area where Mayer has also fallen short (De Castro’s underwhelming speech last February at the IAB Annual Meeting is now infamous). Buyers say he comes off as arrogant, and while that perhaps was a more acceptable stance to hold at Google, it’s more than a little off-putting given Yahoo’s relative position in the market. 

“I do not believe he has been very front and center,” said one buyer. “We have been dealing mostly with his team [which] is very competent.”

The latter point makes the Brody hire even more curious to some observers. While certainly well respected for his work in building up Advertising.com, one of AOL’s bigger successes in recent years, and helping AOL build a solid tech stack, Brody is cut from the same cloth as De Castro. He’s not a “Michael Barrett type”—the well-respected ad sales veteran who was hired just before Mayer became CEO and then quickly let go.

“Ned is a great addition to a strong global team reporting to Henrique De Castro,” said a spokesperson. Yet many still wonder, does Yahoo need a traditional martinis-and-golf sales exec to complement Brody? And what of the company’s beleaguered ad exchange Right Media?

Yahoo’s third-quarter results, which will be announced in October, will be crucial for De Castro. Talk inside the company is that Mayer is holding frequent heated conference calls with the sales staff, and that pressure is intense.

But if Yahoo’s display performance once again disappoints, could De Castro really be sent packing? Here’s the catch: Between salary and bonuses, Mayer is said to be on the hook for $56 million for her COO. Like the Yankees and A-Rod, the two parties may be stuck with each other. Plus, there’s the potential PR impact. As one executive noted, “Changing the COO would send a very strong signal to Wall Street that things are very much off the tracks.”

It has been Mayer’s contention that Yahoo’s turnaround won’t happen overnight. The plan has been to bring in better talent, embrace mobile and respark engagement—with revenue to follow.

“We’ve talked about how Yahoo’s path to growth will be a multiyear series of sprints,” said a Yahoo spokesperson. “Hire and retain a great team, build great products that will attract users and increase traffic; that traffic will increase advertiser interest and ultimately translate into revenue. We’re doing exactly what we said we would do, and we’re already seeing positive trends in our traffic numbers. In fact, last quarter, we saw crossover and year-over-year growth in pageviews, effectively erasing the declines of the last year.”

Regardless, given that Mayer has some leeway courtesy of the companys Alibaba investment, she may look to course correct quickly. Another factor to consider is that activist investor Daniel Loeb is no longer on Yahoos board, perhaps freeing Mayer to shake things up as she sees fit.

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