There is a moment in many a golf game when the ball is far enough from the
hole to be a challenge but close enough to make a miss embarrassing. It’s
called the “choke zone”. Recently Jerry Yang, co-founder of Yahoo, has seen
his company miss too many of those shots. An avid golfer, Yang has been
known to pace his Silicon Valley offices, putter in hand. He hit a
hole-in-one on the fifth hole of California’s famed Pebble Beach course, but
his luck has not transferred to the boardroom.
Yahoo is still the most visited website on the internet, but it has struggled
to maintain its lead in the rapidly changing online world. Financially the
internet firm has been eclipsed by arch rival Google; it has been left
behind in the acquisition race by rival media firms; and its angry
shareholders have been baying for blood. Last week Yang gave it to them.
Terry Semel, the veteran media executive who had led the company for six
years, stepped down as chief executive after a series of disappointing
results and a shareholder revolt. Yang, 38, whose involvement with the
company has fluctuated over the years, has come off the golf course to take
the mantle of chief executive. But does he have what it takes to put Yahoo
back on top? Yahoo traces its origins to 1994 when Yang put up a web page
containing his golf scores, his name in Chinese characters and a list of his
favourite internet sites. Six months later he and fellow Stanford University
PhD student David Filo had turned “Jerry’s Guide to the World Wide Web” into
Yahoo. Almost immediately Yang and Filo sought outside help to run the
company. Yang retained the title “chief Yahoo” but handed over
responsibility for running the company to more seasoned executives.
Yang isn’t the first company founder to take back control. But unlike Michael
Dell, Steve Jobs and other high-profile executives who returned to rescue
the companies they founded, he has no experience of running a company of
this size. Yahoo’s website is visited by more than 500m unique users each
month, and it has revenues of $6 billion (£3 billion). It offers everything
from search to mail to news, music and dating.
But websites rise and fall at an alarming rate. AOL was once the world’s
leading internet firm, with more than 30m subscribers on several continents.
A series of disastrous business choices and a failure to keep up with its
customers’ tastes have left the company a shadow of its former self.
“I am very excited to be leading our exceptional team of 12,000 Yahoos around
the world,” said Yang last week. “It’s an honour and a great responsibility,
and I look forward to the challenge. My immediate and overarching priorities
are to realise Yahoo’s strategic vision by accelerating execution, further
strengthening our leadership team and fostering an even stronger culture of
winning.”
It will be a tough job, said Standard & Poor’s analyst Scott Kessler:
“This is an area where you have winners and losers, and those labels can
change very quickly.”
TERRY SEMEL promised to bring Hollywood’s magic to Silicon Valley. The former
Warner Bros studio boss replaced Yahoo’s first chief executive, the
technocratic and aloof Tim Koogle, at a time of declining advertising
revenues and worries about Yahoo’s future. Over a 19-year career Semel had
helped to build Warner into a powerhouse by adding home video, beefing up
licensing agreements and moving into television and consumer products.
Yahoo and the internet sector had recently been rocked by AOL’s takeover of
Time Warner, Semel’s old parent company. Yahoo had decided not to follow AOL
and snap up an old world media company. Although that was a wise decision in
retrospect, its share price suffered and the company was left looking
flat-footed.
There were many in Silicon Valley who doubted Semel had what it took to turn
Yahoo around. For a while he proved them wrong. He pushed into broadband
services and lined up deals that sent Yahoo’s share price soaring again.
Recently, though, he seemed to lose his way. Yahoo’s fall has mirrored
Google’s rise. By 2006 Yahoo had become Pepsi to Google’s Coca-Cola.
In 2003 Yahoo bought the online advertising pioneer Overture Services but it
failed to keep the lead in matching online ads to search queries, enabling
Google to dominate the market.
There were a number of delays to “Panama”, a long-awaited technology aimed at
delivering better-targeted advertising and regaining that edge. Analysts
were disgruntled by the company’s seeming inability to deliver Panama and by
the way those delays were handled.
So called “social media” sites like MySpace and Facebook started taking a
greater percentage of online ads. News Corp, ultimate owner of The Sunday
Times, snapped up MySpace in 2005 for $580m. News Corp then did a deal with
Google to sell ads on the site that promised $900m. Yahoo has been in “on
again, off again” talks with Facebook at a price rumoured to be close to $1
billion but a deal has yet to be done.
Last year Google bought video-sharing website YouTube for $1.6 billion, adding
20m monthly visitors to its empire.
When Yahoo has bought companies they have often had to compete with its own
versions of similar services. Google was all about search, but what is
Yahoo?
“I don’t know that I have enough fingers to count all the mistakes this
company has made,” said Kessler.
Internally, too, staff seemed to be growing disillusioned. Yahoo started
losing executives at an alarming rate. A leaked memo from one staffer said
Yahoo had lost its focus and was spreading itself like “peanut butter across
the myriad opportunities that continue to evolve in the online world. The
result: a thin layer of investment spread across everything we do and thus
we focus on nothing in particular”.
The head of Yahoo’s technology group, Farzad Nazem, known as “Zod”, left last
month after 11 years with the company. Some 17 executives at the
vice-president level or higher have reportedly left Yahoo since last
December when Semel announced a shake-up of the company structure.
That shake-up was supposed to reorgan-ise Yahoo into three units – the
audience group (focusing on content to draw in users), advertising and
publishing, and technology.
Susan Decker, highly regarded and long seen as Semel’s heir-apparent, was to
head the advertising and publishing group. Earlier this month shareholders
blasted Semel at the company’s annual meeting for his reported $71m pay
deal. Now the trinity plan has been shelved and Decker has become No 2 to
Yang.
Some analysts said the new management structure was aimed in part at steadying
the ship. “Nobody is going to argue with putting Yang in charge, and it’s
not a demotion to make Decker his No 2. If they had brought someone in from
outside, she might have been tempted to leave.”
Allen Weiner, managing vice-president at Gartner, wrote on a blog: “While Yang
as CEO is a step in the right direction, he’s not a sorcerer who can wave
his wand and cure his company’s problems.” Kessler said he was impressed by
Decker. “But I don’t see how two people who have been at this company for
the best part of a decade are going to bring real change.”
TWO WEEKS AGO Google decided to throw a party in Boston to launch Google
Checkout, its online payment system and rival to PayPal, owned by eBay. The
party happened to coincide with eBay’s annual jamboree for thousands of its
biggest users. “Let Freedom Ring”, read the invitation. The party promised
“free food, free drinks, free live music – even free massages”. It proved to
be a very costly exercise for Google. The online auction firm is Google’s
largest advertiser and, angered by the party, chief executive Meg Whitman
pulled her ads.
The company said the ads were cancelled as part of a regular evaluation of its
marketing efforts; but most analysts saw the move as the latest in a series
of scraps between big media firms and Google. This time it was Google that
emerged bloodied. Monetarily it was small change for Google – eBay is
reckoned to spend $25m a quarter with Google, a fraction of the $3.7 billion
Google made in the last quarter.
More damagingly, eBay did not experience a dramatic drop in visitors after the
ads were pulled. Google, it seems, is not invincible.
With Yahoo now in flux, many analysts expect rivals to approach Yang in the
hope of creating a deal that will make a more robust rival to Google.
Microsoft has held discussions about a merger and News Corp has reportedly
suggested swapping MySpace for a stake in Yahoo; eBay too is another
rumoured partner.
Yang’s appointment was seen by many as a statement that the company intended
to keep its independence. But a strategic partnership would not mean the end
of Yahoo, and Yang would not be the only media executive cheered by the idea
of a stronger competitor to Google.
For Yang and Decker the next few months look likely to be filled with offers
of deals. Their shareholders will be hoping that this time they won’t choke.
YAHOO
Founded:1994
Founders:Jerry Yang and David Filo
Chief executive:Jerry Yang
President:Susan Decker
Market value:$37.1 billion
Sales:$6.4 billion
Profits:$751m
Employees:11,400
Percentage of US searches:26.8%
Services: Search, Marketplace, Information and entertainment,
Communications, communities and front doors, Connected life
Available in more than 20 languages
In 2006 Yahoo acquired Jumpcut, an online video-editing and sharing service
GOOGLE
Founded:1998
Founders and joint presidents: Larry Page and Sergey Brin
Chief executive:Eric Schmidt
Market value:$160.1 billion
Sales:$10.6 billion
Profits:$3 billion
Employees:10,600
Percentage of US searches:49.7%
Services: Search, Mail, News, Google books, Video, Google Earth,
Google talk
In 2006 Google acquired the online video company YouTube
In 2007 the company acquired Adscape Media
Sources: Reuters, Yahoo and Google
