Wow, this is a great article! Thanks for stashing, Eric.

Generally speaking, there are only a few ways to make money on the Internet. There are e-commerce companies and marketplaces — think Amazon, eBay and Uber — that profit from transactions occurring on their platforms. Hardware companies, like Apple or Fitbit, profit from gadgets. For everyone else, though, it more or less comes down to advertising. Social-media companies, like Facebook or Twitter, may make cool products that connect their users, but they earn revenue by selling ads against the content those users create. Innovative media companies, like Vox or Hulu, make money in much the same way, except that they’re selling ads against content created by professionals. Google, which has basically devoured the search business, still makes a vast majority of its fortune by selling ads against our queries.

One idea: Better content.

As an ad-supported business, Yahoo had only two ways to increase its revenue. It could display more ads by attracting more people to its products — a plan that would require inventing (or acquiring) new products, improving old products or some combination. Alternately, it could elevate ad prices by upgrading its content. In the opinion of Thompson’s interim successor, Ross Levinsohn, Yahoo would be best positioned as such a “premium” content company. In Levinsohn’s vision, Yahoo had fallen so far behind its competitors in building successful back-end technology, like real-time advertising auctions and search, that it should cede most of those businesses altogether. In the process, the company could also shed more than half of its 15,000 employees, and home in on its best asset: reach. Some 700 million people still visited Yahoo’s home page every month, making it almost seven times as large as the combined online audiences of The New York Times, The Daily Mail and The Washington Post. Levinsohn believed that offering this audience better content could raise Yahoo’s earnings by up to $2 billion in two years.

When Marissa joined Yahoo they had 60 mobile engineers.

Mayer saw her plan as a return, in a sense, to Yahoo’s original mission. Yahoo grew in popularity and value during the late 1990s, when it was the most user-friendly way to peruse the World Wide Web. Now, Mayer believed, it could ride the shift from P.C.s to smartphones and make the mobile web-browsing experience more user-friendly too. Yahoo, in other words, would need to become a really great apps company. Mayer wanted to narrow its product portfolio down to approximately a dozen from more than 100. She and her C.M.O., Kathy Savitt, did some market research and found a list of common user activities on mobile devices. She called this list the “Daily Habits,” and they included news-reading, checking weather, reading email and photo-sharing. Mayer was determined to ensure that Yahoo had the best mobile app for each.

This was going to be difficult. Previous Yahoo C.E.O.s had underinvested in mobile-app development, plowing money into advertising technology and web tools instead. A couple of days into the job, Mayer was having lunch at URL’s when an employee walked up to her and introduced himself as Tony. “I’m a mobile engineer,” Tony said. “I’m on the mobile team.”

Mayer responded to Tony, “Great, how big is our mobile team?” After some back and forth, Tony replied that there were “maybe 60” engineers. Mayer was dumbfounded. Facebook, for instance, had a couple of thousand people working on mobile. When she queried the engineering management department, it responded that Yahoo had roughly 100. “Like an actual hundred,” Mayer responded, “or like 60 rounded up to 100 to make me feel better?” The department responded that it was more like 60.

Workaholic:

In reality, Yahoo needed to move fast. And Mayer, who had begun her tenure while six months pregnant, tried to lead by example; she often slept only four hours a night and thrived on the breakneck pace. In her first months on the job, she unveiled a new version of Flickr, Yahoo’s photo-sharing social network, and a new Yahoo home page. Then Mayer overhauled the same products again, even as the company released new apps like Yahoo Weather and Yahoo News Digest. She outbid Facebook by a couple hundred million dollars to buy Tumblr. In the three quarters before Mayer’s arrival, Yahoo’s home-page team tested five new looks. In Mayer’s first two months, she prototyped 37.

Marissa compared herself to Steve Jobs:

At a board meeting in April, Mayer admitted that she had not yet identified a “breakthrough product,” but she reminded those in attendance that Steve Jobs didn’t come up with the iPod until five years into his second tenure at Apple. At an F.Y.I. around that time, she read a speech that Jobs gave to Apple employees at the beginning of his turnaround. Afterward, channeling Jobs, Mayer told hundreds of employees sitting at URL’s, “Our purpose is to inspire and delight our users, to build beautiful services, things that people love to use and enjoy using every day, and that’s our opportunity.” She continued: “We are the world’s largest start-up. We have $5 billion in revenue, but it can and will go in the blink of an eye if we don’t do our jobs.”

This sounds unpleasant:

Mayer’s largest management problem, however, related to the start-up culture she had tried to instill. Early on, she banned working from home. This policy affected only 164 employees, but it was initiated months after she constructed an elaborate nursery in her office suite so that her son, Macallister, and his nanny could accompany her to work each day. Mayer also favored a system of quarterly performance reviews, or Q.P.R.s, that required every Yahoo employee, on every team, be ranked from 1 to 5. The system was meant to encourage hard work and weed out underperformers, but it soon produced the exact opposite. Because only so many 4s and 5s could be allotted, talented people no longer wanted to work together; strategic goals were sacrificed, as employees did not want to change projects and leave themselves open to a lower score.

One of the uglier parts of the process was a series of quarterly “calibration meetings,” in which managers would gather with their bosses and review all the employees under their supervision. In practice, the managers would use these meetings to conjure reasons that certain staff members should get negative reviews. Sometimes the reason would be political or superficial. Mayer herself attended calibration meetings where these kinds of arbitrary judgments occurred. The senior executives who reported to Mayer would join her in a meeting at Phish Food and hold up spreadsheets of names and ratings. During the revamping of Yahoo Mail, for instance, Kathy Savitt, the C.M.O., noted that Vivek Sharma was bothering her. “He just annoys me,” she said during the meeting. “I don’t want to be around him.” Sharma’s rating was reduced. Shortly after Yahoo Mail went live, he departed for Disney. (Savitt disputes this account.)

It's possible Yahoo will no longer be a growing company,

Aswath Damodaran, a professor at N.Y.U.'s Stern School of Business, has long argued about the danger of companies that try to return to the growth stage of their life cycle. These technology companies, he said, are run by people afflicted with something he calls the Steve Jobs syndrome. “We have created an incentive structure where C.E.O.s want to be stars,” Damodaran explained. “To be a star, you’ve got to be the next Steve Jobs — somebody who has actually grown a company to be a massive, large-market cap company.” But, he went on, “it’s extremely dangerous at companies when you focus on the exception rather than the rule.” He pointed out that “for every Apple, there are a hundred companies that tried to do what Apple did and fell flat on their faces.”

In many ways, Yahoo’s decline from a $128 billion company to one worth virtually nothing is entirely natural. Yahoo grew into a colossus by solving a problem that no longer exists. And while Yahoo’s products have undeniably improved, and its culture has become more innovative, it’s unlikely that Mayer can reverse an inevitability unless she creates the next iPod. All breakthrough companies, after all, will eventually plateau and then decline. U.S. Steel was the first billion-dollar company in 1901, but it was worth about the same in 1991. Kodak, which once employed nearly 80,000 people, now has a market value below $1 billion. Packard and Hudson ruled the roads for more than 40 years before disappearing. These companies matured and receded over the course of generations, in some cases even a century. Yahoo went through the process in 20 years. In the technology industry, things move fast.

“Sometimes,” Damodaran told me, “companies have to act their age.” For Yahoo, embracing its maturity means settling for a business that earns close to $1 billion in profit every year. It has outlasted other formerly iconic Internet portals, from AltaVista to Excite, and even dwarfs more recent web sensations like Myspace and Ask.com. For a company that started out as “Jerry and David’s Guide to the World Wide Web,” that’s not a bad way to grow old.