Midnight at Yahoo

The next 12 months will be a very interesting time for Yahoo as they try to reinvigorate their core business: online advertising.

For the past two years, Yahoo CEO Marissa Mayer has been the darling of fawning stories from both industry press and those who pen Vanity Fair profiles. She comes across as incredibly talented and whip smart, the type who kept at the books long after everybody else in college partied. In a tech world that is still considered very much a Boy's Club, where immaturity and misogyny is par for the course, it makes me smile to see a woman at the head of Yahoo.

Thus far, Yahoo's stock price is way above its benchmark when she arrived. She moved quickly to become the face of the tattered brand. She ordered everybody back to the office, which was a smart move. Some of the early acquisitions, like Tumblr, have raised the right kind of eyebrows. Better still, as Yahoo begins to partially unwind from its 24 percent stake in Alibaba, Mayer should have nice windfall of roughly $10 to $12 billion.

So why aren't there Champagne corks popping over in Sunnyvale? Worrisome still, why are there storm clouds on the horizon? It's fair to say that Yahoo's stock price has risen because of their position in Alibaba as well as the charismatic effect that Marissa Mayer has experienced in the past two years. For those unfamiliar, Alibaba is a huge Chinese juggernaut that combines the functionality of Yahoo, eBay, Google, and a whole host of Silicon Valley for the emerging marketplace of 1.3 billion Chinese who are quickly moving to broadband and mobile. In fact, Yahoo's windfall should position itself to deal itself back into the game when it comes to online advertising.

However, the ability for a company like Yahoo to stay relevant for the long haul is dependent upon the success of its core business. Acquisitions, while important to the bottom line, represent ancillary lines of revenue and are entities that can be sold off when the timing is right. It's all about the core business.

The sad fact is that Marissa Mayer has not turned around Yahoo's online advertising. If anything, they are falling further behind, as evidenced by her firing of Henrique De Castro, who served as Yahoo's Chief Operating Officer and was designated to spearhead matters. While search revenue increased nearly 5 percent between Q1 2014 and Q1 2013 for Yahoo, the US growth figures for Facebook and Google are simply staggering -- 50.5 percent and 33.3 percent, respectively.

In the end, this means that Yahoo is not simply treading water, but losing share. As the Alibaba IPO readies itself for this fall here in the United States, Yahoo will get a sweet check, but its diminished position will send its stock price tumbling downward. In the end, Mayer's earnest charisma alone cannot defy gravity.

It's hard for first stage tech companies to reinvent themselves on the fly. Apple came within weeks of running out of money in the 1990's before it rebounded. Unlike Friendster, MySpace and a whole host of other companies in the Silicon Valley Graveyard, Yahoo is still in business. After its smashing success in the 1990's, Yahoo got lost. The campuses in Sunnyvale and Santa Monica seemed to be two different companies; the former had the buzz of a tech company while the latter seemed more like an entertainment portal. This confusion only underlined the schizophrenic nature of its troubled corporate culture.

Acquisitions were made but they were poorly integrated into Yahoo and shareholder money and value were often wasted or poorly optimized. In the end, Yahoo looked like the old New York Mets, who could build a World Series team -- based on players they traded away.

Here is the issue. Marissa Mayer can pin the blame on De Castro for his failings, but at some point, the eyes of the board will hold her accountable her inability to turn the advertising ship around because advertising is what pays the light bill over at Yahoo. When that happens, the adulatory press will turn fickle and no dynamite magazine spread will save her. For some, "the Marissa Mayer Death March" has already begun.

The marketplace keeps asking this question, "What can Yahoo do that Facebook and Google can't do better?"

I have always been wary of CEO's who ride into tech companies on a white horse. They can charm the socks off on CNBC's "Squawk Box," become the doyenne of either Aspen or Davos but stumble when it comes to their own bottom line. The best example of this remains Carly Fiorina, who could shine on Charlie Rose but had a troubled history of meeting her numbers. While we can debate the merits of the HP-Compaq merger, it created a civil war within HP, which echoes even to this day. Even those who believed that it was a success concede it came at a great cost. Finally, when she was fired, she blamed everybody around her but herself. After she lost the race for the US Senate in 2010, she left the state.

Thankfully, Marissa Mayer is no Carly Fiorina. Unlike the former HP CEO, Mayer possesses an even keel that Fiorina lacked. She remains a breath of fresh air for a company that lost its way. The one saving grace about online advertising is that it reinvents itself every 24 months and Yahoo could catch a wave or leverage an acquisition to help it leapfrog into a resurgent place.

However, the focus has got to be about righting the online advertising ship -- and there is only a tough road ahead.