For Yahoo, the party is almost over

The internet starlet looks aged and worn out, having been bested by smarter, more glamorous rivals

The great American novelist F. Scott Fitzgerald wrote about money, youth, excess, alcohol, parties, passion, beauty, obsession, and of love and its consequences. Fitzgerald himself drank to excess and his life described a sad arc from a rise where he was feted as one of the greatest writers of his generation, with accompanying riches and fame, to hack work, obscurity and death aged 44. The New York Times noted in a story yesterday that the faded internet starlet Yahoo allegedly spent “double-digit millions of dollars on parties and events, including a ‘Great Gatsby’-themed holiday party several weeks ago that was held with no apparent irony.” The symbolism is rich indeed.

Yahoo, like Gatsby at his nadir, is under severe pressure as investors unpick [PDF] the modern equivalent of Fitzgerald’s “gaudiest spree in history”. Seven-and-a-half years ago Yahoo could still interest as serious a suitor as Microsoft, which was ready to pay close on $50bn for the company’s internet properties. Today it is widely asserted that Yahoo, without its hugely valuable holding in Alibaba and Yahoo Japan, is valued at roughly zero. That seems overly negative but there’s no doubt that this is a company that has seen far better days nor that for all its regular changes of leadership that Wall Street perceives an upswing in its outlook.

Yahoo CEO Marissa Mayer has spent and spent to acquire new internet properties that would restore the zest and zing it had in its boom days. Most of those companies are obscure and critics say she overpaid for what turned out to be a collection of duds. Even her biggest deal, to acquire the one-time fashionable blogging platform Tumblr, does not appear to have turned around Yahoo’s fortunes. Other measures include providing free food to staff that one investor said resulted in a bill of about $108m a year. That would work out at about $9-10,000 per employee. If the fundamental business was in rude health such matters would win scant attention - but they get picked up and scrutinised at times like these.

Today, Yahoo flounders, upsetting its investors and desperately flapping about for a future, like one of Fitzgerald partying characters who has fallen into the swimming pool. The company remains well known but its story shows that while Apple may have reinvented itself in a most remarkable fashion, very few businesses can pull off a return to fame and riches once a rot has set in. Mayer’s defenders say she has been bold and shown leadership; perhaps nobody could have restored Yahoo to become an internet leader.

Yahoo was incorporated just 20 years ago but in internet terms it is a veteran that has been overtaken by nimbler competitors like Google and Facebook. The ending of the Yahoo story is not yet known but it is quite likely that it could feature a usurping of Mayer, a drastic restructuring and possibly a sale. When the party is over, Yahoo will be so much confetti on the dancefloor.