♪ >> from our studios in new york city, this is "charlie rose." charlie: marissa mayer is here from yahoo!. she inherited a legendary, iconic company in internet history. people want the company to succeed and they want her to succeed. she does not do many interviews, but we are pleased to have her here to talk about the future and the past. we begin with the future. as many know, yahoo! owns 40% of the chinese company, alibaba. they sold 50% of that stake in 2012.

yahoo! still owns a part of alibaba, said to be valued at $24 billion. there was an idea of a spin off, but the board decided a reverse of the spinoff, operating businesses by committees selected by the board. she has announced a plan to return the iconic company to greatness and that is what we will talk about. i am pleased to have her. welcome. marissa: thank you for having me. charlie: good to have you here. tell me how you see see yahoo! today and what you want to do to return this iconic company to greatness? what is the plan? marissa: yahoo! was the original internet icon and a huge part of people's daily lives, more than half of the viewers will view a yahoo! product sometime today.

and it is an amazing opportunity to say, how can we take something that was such a huge part of people's lives, even today, and transition as we see a shift in technology. with mobile, with video, wearables, so many great opportunities in terms of, how do we guide people? this is a guide to the world wide web, how can we be that guide? how can we be that modern version of that? we have come so far and i am proud of our progress, but there is still more to do. and we have tremendous assets, a large stake in yahoo! japan. we also have, as you mentioned, the alibaba stake, and so you know, there is quite a lot overall. there is the operating business, how do you provide the service to one billion users every month, mail, sports, finance, and how do we manage these large assets that we have in china and japan? charlie: so the board has decided to do what?

to have conversations about selling core assets? marissa: the alibaba asset has grown to be really large inside of yahoo!. and one thing we are looking at, how do we create the most value for a shareholder? one element of that is really around, how do we get alibaba into an entity by itself. by doing that, we unlock opportunities in terms of tax efficiency, greater valuations, etc. one thing we endeavor to do was a forward spin. the all about us take into its own country, we've decided to pause that, now we're looking at we can do a reverse spin, or an alternative with a business that could be a merger, ultimately, basically get both the operating business of yahoo! and alibaba into separate entities.

charlie: you are downsizing the core business by 42%? marissa: we have terrific traffic, advertising revenues, but when we look at where we want to put our energy, we really want to have fewer, fewer arrows for strategic pushes, with more people on them. we have tried to change the focus, from autos, to personal, to today, our focus is search, mail, and a tumbler. those are three platforms. in terms of the verticals, news, finance, lifestyle and sports. charlie: what will this do for you and how will you make it a success? marissa: we want to focus on our end users, how do we provide them with the best possible service? the best possible news. also, the shareholders.

we want to generate the most possible value for them and there is great opportunity in this asset stage to really unlock more value. charlie: there are big five companies, yahoo! used to be one of them, but is not in that ranking now, microsoft, amazon, facebook, and others. where does yahoo! fit? will you find a place in search? or looking at e-mail? marissa: search today, web search is what a lot of people think about. we are really proud of how far the search industry has come, but if you look at search on a mobile phone, it should be different than what it is today. it says a lot about you as a person. an example, if i type in jfk into web search, i am probably looking for john f. kennedy. if i type it into my phone while i am going down the freeway and you know from my e-mail that i

have a receipt to be on a flight later that day, chances are, i am trying to find out where jfk is, what gate the flight is leaving from, etc. so there are new forms emerging. this would be like a personal assistant, like siri, cortana. we really think that given our heritage of search, there is a lot we can do using preferences, even e-mail, obviously with their permission. to really rethink how search can work. today, our market share is around 10%, overall. i think when you look at the broader world of search, a majority of searches are done from about phones. the other thing we know, we have and analytical side, knowing that 8% percent of time is spent on browsers, 92% of time is spent on applications and web search is confined to the browser.

how can we really unlock the information data and capability of all of the different apps to help make phones more effective. charlie: that is a promise people have been talking about for a while. search moving to app do you think that will happen? marissa: i think that when you start to see something like the voices search, image recognition, a lot of these problems have been solved in recent years and when i look at the ecosystem, the fact we now have apps on our phone, they can help you get an uber, book a flight, if i know your preference and what services you like, i can help with a search assistant, which can help pull that together and make life more seamless. charlie: when you came to yahoo!, there was high expectation about where you had

come from and the role you played at google. do you think that expectation for you was too high? you had great ideas, you looked at yahoo! and you knew what the future was going to be in terms of mobile, you saw that coming. you look at the possibilities of mobile ads, and yet who had generated company because of ads. marissa: i think hopes were high because there is a perfect team at yahoo!, great people behind the products and you can feel it when you use the website. there are great personalities and opportunity and i think that people like to cheer for yahoo! and when -- charlie: was the expectation for you enormously high? marissa: the brand is very iconic and the team is very excellent. there is a strategy that made sense. mobile is yahoo!'s future. we have mail, search, news,

sports, finance, those are all things that people like to do on their phone. so there is a great opportunity for us and we have made a lot of progress over the last few years, going basically from having no users, to having $600 million on mobile. to having almost no revenue in terms of mobile advertising, and last year, we had $1.6 billion of advertising, and this is a business that we have grown in less than three years. charlie: why is there some as criticism of yahoo!? looking at what you have done since 2012, they said that they were a flurry of acquisitions, including tumbler, and most of them did not work. she spent $2 billion and most have not worked and have been written off. marissa: i would say that -- i think it really was a matter of, we needed to rebuild talent base. we had 50 engineers in a company of 14,000, working on mobile.

today we have more than 500 engineers working on mobile. we have one of the biggest app shops in the world could we had to build that and we did it through talent acquisitions. we saw the benefits of those acquisitions in our mobile. yes, we did see a write down, but that is not because of acquisitions. charlie: and with tumbler? marissa: with tumbler, we have fallen a little behind. but i am still optimistic about tumbler. this is a great platform. the time spent in there is really high and overall it is a great opportunity to take things like advertising and mobile. tumbler is growing nicely in terms of daily active users. it is a really creative platform. charlie: look at the 3.5 years, since july 2012, and here we are in march of 2016.

when you look at what has happened, what did you do wrong? marissa: i think that, one, i do not think that the story has played out. when we look at this, we still have plans for the company and we should look at the turnaround. a turnaround takes about 5, 6, 7 years. charlie: it is rare when you are able to turn a tech company around, apple being one. marissa: i can see the strategic plan, we can see how it is working. there are 600 million mobile users. we are generating revenue. this is a feature that we built ourselves and when i came to yahoo!, and came in because i wanted to work hard and about it was a great challenge. i met with all the business leaders and reviewed things, every single one was in decline and nobody had any idea about the turnaround. charlie: the ceos -- marissa: everything was in decline, i came and i thought,

wow, this is a problem. i went to the board and said, we have a problem. we need to get these things growing again. nobody knew how to do it. yahoo! became the banner ad. banner ads are still very popular and effective, but mobile is where the action is. we had to build ourselves a new feature and we needed to build it to scale that matters for yahoo!. today, the mobile video and revenue is material over all to the company. we are really proud of that. we had taken it from a few million dollars to today, $1 billion and one of the fastest-growing businesses we have seen. i am very proud of what we did, but we needed to decide in the turnaround, how do we stabilize that declining revenue, because there was a lot of it.

$4 billion to $5 billion a year. and then be able to grow fast enough to offset that and actually show hypergrowth you expect, but -- charlie: 2.1 is the expectation level and the difficulty of the challenges you face, declining revenues. but you see yourself any situation in which you have stockholders, shareholders, making certain demands and the board deciding to say, yes, we will consider selling these assets and you on the other hand, you are trying to develop a plan to make these assets function, including illuminated businesses you are not in, that you have found unsuccessful. marissa: but they are completely complementary, at least for the shareholders, this -- separate the alibaba stake. we could spin it off. charlie: why didn't you do that? marissa: we didn't do that because -- charlie: why not? marissa: overall the market was -- now we are looking at a reverse spin and we are doing work on that.

we are also looking at sales and corporate in fact, those two processes, looking at a different alternative in terms of the overall strategic outcomes for the core. this is the same as a reverse spin. you end up with a public entity at the end versus a privately held company. i think that either of those outcomes would be really good for yahoo!. i can see outcomes where we could become stronger terms are strategic execution. either because we get more mobile distribution, or ultimately, these could be done more privately. overall, i can see an outcome where we can achieve separation of the alibaba stake, which is critical for unlocking value. while we also get a boost to the core operating business for yahoo!. charlie: when you sold one half of your stake in 2013, what happened to those revenues? marissa: the proceeds were

returned to shareholders. today, we have over $200 billion, but we actually return $10 billion to shareholders. so, we have done a significant number of buybacks and returned a lot of the value to shareholders, which we think is appropriate. charlie: if there is a sale, you go with the company? marissa: the biggest piece for me, taking this iconic company to the right place. charlie: apart from the alibaba stake. marissa: yes, that question for me, the primary issue is yahoo!, technology, the services, the employees, how do we get that to the best possible place for yahoo! and find it the best possible future, and i am secondary to that. charlie: what would you like? you put all this time and care of these assets and redesigning them, i would assume that you want to go or they are. marissa: i love running yahoo! and i think that the people are terrific, i love the products that we get to work on, this is really exciting and i would love to see it through.

but obviously, we have our duties to find the most value, so i hope that the strategic alternative has a place for me. we will obviously honor our commitments to our shareholders. ♪

♪ charlie: there was a story about one of the other firms, it could be true for you, of talent flight. in circumstances like this, you had to increase the premium you pay for employees at a time like this, true? marissa: i think that that is true. one thing that people need -- nobody does their best work when they are afraid. you need to remove uncertainty and what we have done is make sure that people understand they are part of the future. certainly right now, talent is a hot issue at every company in silicon valley. especially for us, and we have had to take steps in terms of compensation to make sure that people understand how we value their efforts. charlie: how difficult was it for you and's 2012, to get -- since 2012, to get a firm position on mobile ads, because predecessors had not left you in a firm position?

you had to play catch-up. marissa: when i came, my thesis was on mobile. how do you take all of those great services over to mobile. when i got to yahoo!, i spent the first few weeks hanging out in the cafeteria my talking to anybody who would talk to me. i finally ran into a mobile engineer, his name was tony. and i asked, what are you doing? he said, i am about. and i asked how big is the mobile team? and he said 30 people. i was really taken aback that it was only 30 people. and he said, don't worry, there are more of us. and i said, how many? he said, maybe twice that. and i said, maybe 60. and i said, guys, how many engineers do we have that work on mobile? and i said 100 -- and they said 100. and we needed to build competencies they are really quickly and we really needed to

come it was obvious at the time, but there was a lot of discussion around native applications, which forms measured -- mattered, and without a native apps where the right thing to do. we were working on different apps at that time we decided that ios and android were the two platforms that would become dominant and we were right on that that did-- right on that that -- bet. at the time, it was not obvious at all. and there is a terrific leader and manager in the company, his name is adam, who became the senior vice president of mobile and he has done a great job of recruiting engineers, recruiting people into a place where they can do terrific work. we wanted -- we won a design award for two years in a row. one for weather and one for news digest.

we came a long way, especially where we came from. there is still more to do. we love to have even more engagement on mobile and we are working on this. charlie: what about decline? marissa: we started very low. charlie: and the dominance of these five huge companies? marissa: 600 million mobile users, and in the top five, audiences globally. and mobile advertising business, that is more than $1 billion, that is as easily into the top mobile advertising companies in the world. part of the issue is that we were so big to begin with. there are only three u.s. based companies that have more the one

billion users every month. there are only three u.s. companies that have had more than $4 billion in digital advertising a year, google and facebook. we came from a very large place. and that makes it really hard to generate growth. 10 million new users. $10 million of additional revenue on $4 billion. charlie: the number of users you have had for a number of a long time -- the number of users you have had for a long time? marissa: well, we have been growing users and it continues to grow. it is actually higher than one billion. charlie: why do you think that people come to yahoo!? marissa: our businesses around informing and connecting users and for me that search, male, and digital content. it really is a digital network, because the three really work together. there are some people who come for mail and to the state and to do a search or read a news article. some people come for sports, and they might read e-mails. search is really around helping people do discovery and in terms of the business, it really is a lucrative form of digital advertising.

male, there is less frequency, they are checking the mail dozens of times a day and for us, the news is our voice. it allows us to personalize, it allows us to differentiate -- charlie: he was done magazines. the number of people you brought in to provide a kind of news base for the company. and you also raised the question, fundamental credit they say, look at the core assets and if you take the alibaba stake outside of it, the value is very small. marissa: i do not think the value is small, the way the market is valuing them today is small. charlie: it is almost minimum. marissa: we think that they are very undervalued. charlie: but the market says that those core businesses are not worth much. marissa: this is part of why we are considering -- because we think there is more value their that can be realized.

considering alternatives is one way to unlock the value. charlie: do you think that he will be running yahoo! a year from now? i ask that because people ask that. marissa: again, i would love to be running yahoo!, we have a three-year strategic plan and i want to see how it could work and get the fulton around. -- full turnaround. but it is about the users and about employees, and what is happening with all of them. i certainly hope that our services are here a year from now and that they run even better than they do today. that should easily be the outcome. and we have a terrific team at yahoo! and a really help that they are allowed to continue to do the work. we are going to look at all possible strategic alternatives and i am positive we will find the right one. charlie: i am told that you have reached out to lots of people to ask for, look at the position we are in, what is the best way to

go. you are speaking advice from a cross-section of people, to say, this is the challenge we have and this is my plan, what do you think? marissa: yes, we have gotten a lot of advice. our situation is complicated, so it'll take a complicated solution. charlie: explain what you mean by complicated. marissa: when you look at our business that the search, the mail, the content, when you also look at the stake in alibaba, the joint venture with yahoo! japan, a joint venture in australia, and we have yahoo! seven, when you look all the different elements of the business, this is a complicated base. when you look at how we can maximize the value that is recognized by all the different pieces, it is, look it appeared -- it is complicated. charlie: in order to get a spin off of the alibi the assets, who would have to -- alibaba assets,

who would have to sign on to do that? marissa: the price we bought the state for was relatively low. but it has gone on to really multiply, it has a tremendous return. so, given that there is a large liability on that stake, there are various ways to address it, obviously it is tied closely to the value of alibaba over all. it is a publicly traded company. but basically, the thought is, there is more tax liability introduced by a spinning out of alibaba, then there is with a reverse spin and the company that we built to operate yahoo! is a smaller tax liability. charlie: do you feel pressure from stockholders? marissa: we certainly see their criticisms and challenges. and my view is, i think that having a lot of different viewpoints on the issue is helpful.

we really take that seriously, we engage with them, we engage with all shareholders and we integrate that to the best of our ability to alternately find the right path. charlie: if you look back in the last 3.5-4 years, was there a big bet that you wish you had made my that you do not make -- made, that you do not make? marissa: we have made some really big that -- bets. we have tried to populate the talent. charlie: this was an acquisition? marissa: they now work on mobile, these are the people that build mobile -- all of those different mobile applications. we have taken what was a really scattered framework of mobile applications, i think at one point we had over 80 applications, and now we have about seven or eight that are really strong. i think the big bet on tumbler to me, while it may not be yet

material, this is a terrific asset, terrific network, the team working there is exceptional. and we have a great path forward in terms of what we can do, how we can help to continue to grow that community of creators, while providing a great opportunity for brands and advertisers. charlie: then why was it necessary to reduce, to write down some of the value of that? marissa: there are a whole set of accounting rules, part of it is that the market cap is in fact, complicated. when you're trying to find a market cap of our operating systems, it becomes attractive. there is only so much left. and if your book value exceeds the market value, you need to give a breakdown. charlie: yahoo! is a company that everybody has affection for and want to see succeed, as they do for you, because you have been a part of the silicon

valley for a while. what have you learned, not about specific things, but any sense of coming into a certain likeness? what do you wish you had known? what has been a learning experience? marissa: again, what is great, i get to learn every day. and i think that, it has been amazing. i love design and getting to work with the team at yahoo! to design the future, how the future -- how the cup and he works, this has been in a credible spirits. -- and cripple experience. -- incredible experience. think that pacing and time is always important. i think that there are some things that we did too quickly and some things we probably did too slowly. charlie: and not enough. marissa: and not enough. but i think that we learn from that and we are constantly getting better. and when i look at the strategic plan we rolled out, this is the combination of all of that learning credit one thing we should do is get away from declining revenue more quickly