Yahoo Slashing 20 Percent of Its Workforce by the End of 2023

Yahoo's company headquarters in Sunnyvale, Calif. (AP Photo/Marcio Jose Sanchez)

Yahoo announced that the layoff of more than 20 percent of its workforce by the end of 2023. The tech company said it would eliminate 1,000 positions by the end of this week, the company said in a statement on Feb. 9.

A total of more than 1,600 employees are expected lose their jobs in these latest cuts, which suggests that the company’s current staff levels are closer to 8,000, Axios reported.

The cuts will impact more than 50 percent of Yahoo’s ad tech employees.

Private equity firm Apollo Global Management purchased a 90 percent majority stake in the tech company from Verizon for $5 billion, along with its control of AOL, in September 2021. Apollo merged the two companies under Yahoo label.

Yahoo had about 10,000 employees when the acquisition took place, according to PitchBook.

Yahoo Redefines Its Role After Losing the Ad Wars With Google and Meta

The mass layoffs mark the end Yahoo’s attempt to recover its formerly dominant position in the the digital advertising market from Google and Meta and are part of a broader effort by the company to streamline operations in its advertising unit.

Yahoo CEO Jim Lanzone told Axios that the layoffs were not attributable to financial challenges but rather to the lack of profitability in the company’s “Yahoo for Business” advertising unit.

Lanzone explained that the changes will be “tremendously beneficial for the profitability of Yahoo overall” and will allow the company “to go on offense,” so it can invest into the more profitable areas of its business.

“The moves are meant to simplify and strengthen the good parts of the business, while sunsetting the rest,” Lanzone said.

“It was too resource intensive to do everything at once.”

A Yahoo spokesperson told CNBC that the “Yahoo for Business” department’s strategy had “struggled to live up to our high standards across the entire stack,”

“Given the new focus of the new Yahoo Advertising group, we will reduce the workforce of the former Yahoo for Business division by nearly 50 percent by the end of 2023,” said the Yahoo spokesperson.

Yahoo will now shift its efforts to focus on its 30-year partnership with Taboola, a digital advertising company, to fulfil its ad services and shut down its supply-side platform (SSP), which helps digital publishers sell automated ads against their content.

Lanzone told Axios that Yahoo’s reliance on its in-house SSP and ad tech businesses has negatively impacted the company’s ability to monetize those channels.

Tech Firm Will Expand the Remaining Part of Its Ad Business

However, the tech firm will double down it on its commitment for the remaining part of its ad business, called the demand-side platform (DSP), which helps advertisers purchase ads in an automated fashion across multiple publisher websites.

The DSP business will be renamed Yahoo Advertising, which Yahoo intends to expand, with additional hires and new acquisitions throughout the year.

“Our DSP is world class and does billions in revenue,” Lanzone said.

Yahoo’s chief revenue officer Elizabeth Herbst-Brady told Axios that the company will streamline its DSP business to focus on selling advertising to Fortune 500 businesses and premium accounts in its most lucrative global markets.

She said that the firm will create a premium ad sales team for Yahoo’s owned and operated properties to fulfil that role, based on Yahoo Sports, Yahoo News, Yahoo Mail, and Yahoo Finance.

The Yahoo spokesperson told CNBC that the company would provide severance packages to the employees losing their jobs, but did not provide specific details on the size or value of their packages.

“These decisions are never easy, but we believe these changes will simplify and strengthen our advertising business for the long run, while enabling Yahoo to deliver better value to our customers and partners,” the spokesperson told CNBC regarding the layoffs.

Reuters contributed to this report.