Yahoo is laying off 20 per cent of its workforce, or 1,600 employees, that will impact half of the company's ad tech business.
In an interaction with Axios, Yahoo CEO Jim Lanzone said that these changes will be "tremendously beneficial for the profitability of Yahoo overall".
The layoffs will help the company "to go on offense" and invest more in businesses that are profitable.
12% of the workforce
According to the company, 12 per cent of the workforce (around 1,000 employees) would be laid off on Friday.
In the next six months, another 8 per cent (600 people) will be let go, the company said.
Lanzone said the total number of layoffs would amount to more than 50 per cent of the ad tech unit's current staff, and more than 20 per cent of Yahoo's current staff.
"Yahoo will shut down a part of its advertising business called its SSP, or supply-side platform, which helps digital publishers sell automated ads against their content," according to the report.
'Gemini' to be shut down
The company will also shut down its native advertising platform called Gemini.
It will leverage its newly-formed partnership with ad tech giant Taboola to sell native advertising.
Over several years, "the strategy of our ads business was to compete in the ad tech industry by offering a 'unified stack' consisting of our Demand Side Platform (DSP), Supply Side Platform (SSP) and Native platforms," a Yahoo spokesperson said in a statement.
"Despite many years of effort and investment, this strategy was not profitable and struggled to live up to our high standards across the entire stack," the statement added.
Yahoo joins a growing list of tech companies which have laid off thousands of employees amid global macroeconomic conditions.
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