In 2001, Terry Semel arrived from the kindergarten that is Hollywood at Yahoo!. In the aftermath of the dot-com bust, his job was to provide some “adult supervision”. And, in those early days, before the rise of Google, he was feted as a visionary. Television executives hung on the former Warner Bros producer’s declarations that the future of the internet belonged to producers of content.

His downfall seems to confirm that the web will swallow Hollywood – and not the other way around.

Mr Semel’s mistakes were legion: Yahoo! the content house fell flat; glitches dogged Panama, the key technological plank behind its advertising business; his failure to see social networking coming turned “My Yahoo!” into “My uncool uncle’s Yahoo!”.

The gripe inside Yahoo! was that Mr Semel did not understand the internet. Mr Semel’s perennial frustration was that Yahoo!’s IT department did not deliver on promises to upgrade technology.

Background

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Background

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• Microsoft weighs $50bn tilt at Yahoo!

• Microsoft in merger talks with Yahoo!

• Yahoo! eyes $1bn bid for Bebo

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Yet it is the apocryphal tale of how he failed to snap up Google that has done for his reputation. Mr Semel is said to have balked at a price approaching $2 billion. The company is now worth $160 billion – more than four times Yahoo!.

And any boast that Yahoo! shares quadrupled during Mr Semel’s tenure – a feat that earned him some $450 million – misses the point. Yahoo! lost a third of its value last year. Google – a company that has religiously eschewed making content for finding content – has gained about 30 per cent in the past year.

The question now is whether Jerry Yang, the co-founder and Chief Yahoo! who returns as chief executive, can deliver a blockbuster sequel. Wall Street has become fond of former founders returning to the top job. Michael Dell has already made an impact at his computer group since returning last year. Apple’s Steve Jobs, still basking in the glow of the iPod, is the ultimate prodigal son.

Mr Yang has the charisma and technological nous to boost flagging morale and stem the frightening recent exodus of Yahoo!’s top talent. Susan Decker, the well-regarded former finance chief, now president, will deal with the weary investors. A new concentrated power base, Wall Street hopes, will hasten decision-making and stamp out Mr Semel’s record of never missing the opportunity to miss an opportunity.

But Mr Yang and Ms Decker have been Mr Semel’s most trusted advisers, They have been party to the decisions that prompted Yahoo!’s own senior staff to accuse the business of being, like “peanut butter”, spread too thin. While Panama looks to be delivering results in search-based advertising, Yahoo!’s core display business has just begun to flag. That is doubly ominous, since Google is about to barge into display, regulators willing, through its acquisition of DoubleClick, the sector’s biggest broker (another of Mr Semal’s missed deals).

And while it was showing Mr Semel the door, Yahoo! has quietly cut its forecasts for the rest of the year – hardly a Hollywood ending.

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