Yahoo Inc. will lay off more than 1,600 employees, or about 20% of its workforce, as part of an effort to streamline its unprofitable advertising technology business.

The news was first reported by Axios this morning.

Yahoo, a major player in the early internet, provides tools that help online publishers sell ad space to brands. It also develops software that brands can use to manage their ad space purchases. According to Axios, more than half the employees at Yahoo’s advertising technology business will be let go as part of the workforce reduction announced today. 

Executives told the publication that the move is “not attributable to financial challenges,” but rather comes as part of a change in business strategy. Yahoo will shut down the part of its advertising technology business that helps website operators sell ad space to brands. The company also plans to discontinue Gemini, a service that allows brands to embed native ads in websites.

Currently, Yahoo’s advertising technology business is operating at a loss. Yahoo Chief Executive Officer Jim Lanzone stated that the planned changes will be “tremendously beneficial for the profitability of Yahoo overall.”

Following the restructuring, the company plans to continue investing in the advertising tools that it offers to brands. Yahoo’s so-called demand-side platform, which brands use to buy ad space, reportedly generates billions of dollars in annual revenue. Lanzone stated that the company will recruit more employees to support the platform’s growth and may also make acquisitions as part of the effort. 

Besides the advertising technology market, Yahoo also competes in several other segments. It provides a search engine that companies such as online retailers can embed in their websites. Additionally, Yahoo operates more than a half-dozen popular online publications, including Yahoo News and Yahoo Finance.

Some of the publications that the company operates were originally part of AOL, another major player in the early internet. Yahoo absorbed AOL’s assets after the two companies were acquired by private equity firm Apollo Global Management last year. Apollo bought the companies from Verizon Communications Inc. in a $5 billion transaction.

Yahoo expects that the overhaul of its advertising technology business will benefit its publications. 

Until now, Yahoo’s publications delivered native ads to readers using Yahoo’s Gemini service. The service is among the products the company plans to discontinue as part of its newly announced restructuring initiative. Afterwards, Yahoo will switch from Gemini to rival service Taboola in a move that is expected to increase advertiser demand for its publications’ ad space.

Last October, Axios reported that Yahoo is profitable and generates annual revenues of about $8 billion across its business units. That’s up from $7.1 million in 2020, the year before the company was acquired by Apollo.

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