The reason the Yahoo board hired Marissa Mayer as its CEO instead of sticking with interim CEO Ross Levinsohn was that Mayer, a "products person," planned to return Yahoo to its "tech company" roots, and Levinsohn was going to make it more into more of a content-creating media company.
The board told Levinsohn: sorry, we like you, but Wall Street likes tech company multiples more than we like media company multiples, and that means we do too.
Mayer may turn out to be an excellent choice, but this particular reasoning for choosing her may have been a mistake.
Consider the following metrics for traditional media companies CBS, Disney, News Corp, and Comcast:
- They are all at, or near, all-time high stock prices
- Their median next month PE multiples are holding steady at ~15X versus ~15X three years ago.
- Their median projected long-term EPS growth rates have come up to 14% today versus 9% four years ago.
Meanwhile, Apple, Facebook, Google, and Netflix are not doing as well:
- They are, on average, trading 42% off their all-time highs.
- Their median next twelve months PE multiples are contracting, down to ~15X today versus 24X three years ago.
- Their median projected long-term EPS growth rates are trending down, at 19% today versus 22% four years ago.
Some caveats:
- These numbers certainly represent just a "snap shot" in time.
- Correlation =! causation.
- Yahoo can't have media without products.
During Business Insider's media/tech conference Ignition last week, we talked about these surprising numbers with a lot of our panelists – some of the biggest names in the industry.
Here are some potential conclusions we came up with after those conversations:
- It's wonderful to be the tech company that "owns the platform," but disruption is happening so fast right now that this wonderful moment never seems to last very long.
- Maybe it's better to be the company that owns the content that consumers will always want on whatever "platform" is hot at on any particular day, month, or year.
- It does seem like big media companies have done a good job bringing content from broadcast TV to cable, then to the Web, and now to apps. (It does seem like that's an easier task than inventing cable, the Web, smartphones, and then whatever is next.)
- A couple years ago, it looked like maybe the Internet would kill TV the same way it killed newspapers. That doesn't seem to have happened.
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