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Yahoo plans to lay off more than 20% of its workforce as part of restructuring of its ad tech division.
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Nearly 50% of Yahoo's ad tech employees will be impacted by the end of the year, including almost 1,000 employees this week.
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The move aims to narrow the focus and investment on the flagship ad business called DSP or demand-side platform.
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The restructuring is due to the impact of record-high inflation rates and uncertainty about a recession.
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Many advertisers have reduced their marketing budgets because of these factors.
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Several US companies, including Goldman Sachs and Alphabet Inc, have laid off thousands of employees this year.
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The layoffs at Yahoo were first reported by Axios.
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Yahoo is now owned by private equity firm Apollo Global Management since a $5 billion buyout in 2021.
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The restructuring is intended to help the company survive the downturn in demand caused by high inflation and rising interest rates.
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The layoffs are a significant step in Yahoo's effort to streamline its operations and focus on its core business.