Yahoo chief operating officer de Castro fired

Yahoo chief operating officer Henrique de Castro, who had been poached from Google by CEO Marissa Mayer in 2012, has been fired after being taken on to transform the company’s advertising business.

He had the second most senior position in the firm. No reason has been given.

De Castro’s departure is seen as bad news for Yahoo’s efforts to revive dwindling advertising revenue in the face of fierce competition from rival online companies such as Google and Facebook.

Experts say serious differences must have developed between de Castro and Mayer for her to decide to get rid of him. de Castro is one of Silicon Valley’s top-paid executives and is expected to receive a massive severance package, possibly worth up to $42 million.

Yahoo has refused to comment on why de Castro was fired or what kind of severance package he will receive. A Yahoo spokeswoman said the performance-based part of the package was still being determined.

Yahoo still struggling with declining advertising revenue

Despite de Castro’s recruitment a year ago, he failed to persuade marketers to spend more on reaching visitors on its websites and mobile apps. During the third quarter of 2013, display advertising income dropped to $421 million, seven percent less than in Q3 2012. Display advertising represents 40% of the company’s sales.

During the company’s last earning’s release in October, Yahoo reduced its profits outlook.

EMarketer Inc. reports that Yahoo’s share of the American digital advertising market is forecast to drop to 5% in 2015 from 5.8% in 2013, while Facebook and Google are expected to increase theirs to 9% and 42% respectively.

In the United States Exchange and Securities Commission, Yahoo registered de Castro’s departure. The departure officer wrote:

“Henrique de Castro, Chief Operating Officer of Yahoo! Inc. (the “Company”), will be leaving the Company effective January 16, 2014. Mr. de Castro will receive the severance benefits provided for in his Employment Offer Letter, dated October 15, 2012, Severance Agreement, dated February 28, 2013, and equity award agreements.”

de Castro and Mayer often locked horns

The Wall Street Journal quotes an anonymous person who said Castro regularly clashed with Mayer. This person, who was familiar with the situation, said “There were tensions after the first couple of months. He didn’t deliver the advertising growth they were hoping for.” The person added that Mayer had been under pressure from Wall Street to revive advertising sales.

In an interview with Bloomberg Businessweek, Scott Kessler, an S&P Capital IQ analyst said “It’s a negative for Yahoo. This is someone who had a tremendous amount of responsibility. Now, there’s a hole in the executive team.” Kessler recommends holding the stock.

de Castro is believed to have made approximately $109 million from his 14 months at Yahoo, including salary, stock awards, bonus and compensation for leaving Google and severance payments, Bloomberg Businessweek wrote.

Has Mayer managed to revive Yahoo’s outlook?

Most experts agree that apart from buying a stake in Chinese e-commerce company Alibaba Group Holding Ltd, which has done well, Mayer has failed to make any difference to Yahoo’s dwindling prospects.