Jerry Yang, after a tumultuous reign as the chief executive officer of Yahoo (s YHOO), the company he co-founded with David Filo, announced today that he is stepping down from the top slot. The news was first reported by Kara Swisher and later confirmed by Yahoo in a press release. He is going to make way for someone else, but will stay on the board of Yahoo and will be known as Chief Yahoo. More important, however, is the question of what Yahoo needs to do in order for Jerry to hang on to the title of Chief Yahoo!
Yang’s decision to move on isn’t a surprise – it was clear from his talk at a recent industry conference that he was tired and perhaps a little out of his depth. His choice to head the company that was looking down a deep abyss a while back was an ineffectual one, and a total and absolute failure on the part of Yahoo’s board of directors. In June 2008, I wrote about the systematic rot inside the company.
What hasn’t been discussed is that the company isn’t really facing up to the fact that its layers of management have resulted in a state of masterful inactivity, masked perhaps as a culture of consensus. This starts at the top – from the company’s board and senior management down to VP level where people are prone to organizing and attending twenty meetings before deciding the fate of a project. Some senior managers including the ones who are deserting the company are skillful players in this game of hiding ennui behind grandiose plans and a great future that never happens.
Yang was never able to address these core issues. He isn’t the inspirational tyrant (like Steve Jobs) who can save the company he co-founded. And because he’s a nice guy, he has failed to make the hard decisions needed in order to save the company. Even as an inspirational leader, he couldn’t bring a sense of single purpose to the company, which at times reminds me of the last days of the great Mughal empire.
With Yang gone, and the company actively seeking his replacement, the big question is what should Yahoo do next and whom should they hire to replace him? Kara Swisher has a lot of names on her short list, though I don’t think any one of them will prove to be Yahoo’s knight in shining armor. (You can play the Next Yahoo CEO game and leave your suggestions in the comments.) Regardless of the company’s final choice, here is what Yahoo shouldn’t do:
- Not Hire from within, for the current senior management has proven too ineffectual and shares the blame for Yahoo’s current misfortunes.
- Sell out to Microsoft at today’s prices. ($20 a share would be something the company should seriously consider.)
- Merge with AOL, for that would be like tying together two bricks with a spider web and hoping that they will float.
What it should do:
- Look outside for someone with spark.
- Replace the current senior team with executives.
- Refocus Yahoo on the very qualities that made it great – building technology products for the common people.
- Focus its energies on Yahoo News, Yahoo Sports, My Yahoo, Yahoo Mail, Flickr, Yahoo Messenger and Yahoo Search, as well as Yahoo’s e-commerce platform.
- Keep building on its Mobile offerings, for this is one area where its independence can help it win friends amongst operators who are worried about Google (s goog), Microsoft (s msft) and Apple (s aapl).
- Yahoo’s ad-serving platform needs to become more real-time, with a drastic improvement in customer service.
These are tough choices for Yahoo, but these are also desperate times. And while it might sound crazy, it is time for Yahoo to start entertaining the idea of going private — at today’s stock price that should cost about $15 billion, though it might take more than that to get the deal done. Technology-oriented guys like Roger McNamee could be good private investors because they would ensure that the dollars-and-cents approach doesn’t stall Yahoo’s innovation engine.
Hopefully they will bring on a no-nonsense, [HP CEO] Mark Hurd-style executive who can stabilize and revive the company by making it leaner, simpler and have it focus on its core competencies. For PE investors, there is also comfort in the fact that Yahoo can at anytime sell its Asian holdings for a ton of cash. They might be able to find some takers for their European properties as well.
Instead, Yahoo could take its roughly $6.36 billion in cash and focus solely on its core U.S. businesses, purging anything that isn’t core. This would mean job cuts for thousands of people, but unfortunately Yahoo doesn’t have much choice: It is either that or slow, lingering, painful irrelevance. Much as we laughed at the Peanut Butter manifesto when it was leaked to the media, the fact is that it still remains a blueprint for saving Yahoo. All someone has to do is read it.
Update: Just after I hit publish, I got a note from UBS Investment Research’s Internet analyst Ben Schachter, who writes ….
We expect the Board will ultimately opt for an external candidate as Decker would likely not be considered a significant enough change by investors. The news may also indicate the Board will push for a more meaningful restructuring of YHOO. Finally, the news will clearly reignite speculation around a potential deal w/MSFT (for a search-only deal or full acquisition) as well as potential other M&A activity. ….We still believe MSFT will eventually own YHOO. Jerry moving out of the CEO role may accelerate this. YHOO is a key strategic asset in the online space and given the scarcity of key players of size, we see value here not reflected in the stock’s current valuation.
Yahoo! needs a new leader that will Disrupt and use White Space to chart a new course. Someone who will compete with Google and improve the web for all of us. Certainly not Microsoft – a new leader wtih the moxie to compete. Read more at http://www.thephoenixprinciple.com
Yahoo should get rid of bozos like Marco Boerris and bring in real people who understand the internet
I think Yahoo should go out of the box and bring in Dick Cheney as CEO. The man is an organizational wizard, has the required dictatorial style, has previously been CEO of a Fortune 500 company (Halliburton) and would bring a totally fresh perspective to this spoiled and famously navel-gazing company.
One of the better analysis of the situation out there — yahoo needs focus, focus, focus.
Dan Rosensweig = would be great as CEO but I wonder if he has focus/discipline to make deep cuts.
Qi Lu = bring him back as Chief Technical Officer and put Ari as head of YOS.
CFO = somebody who is super tough and super disciplined.
Head of Ad/Sales = somebody who is a total operations guru. We don’t need a big personality — need somebody who can get stuff done and has real depth.
Yahoo needs to drop the “we are here to have fun” and get serious about building kick-ass products.
Om — Good post. One thing I think you left out is that Yahoo also has some very strong assets and capabilities in cloud computing, including the Hadoop guys and a lot of expertise in running scalable infrastructure. They also have very strong capabilities in building platform-as-a-service offerings and opening up their existing apps for people to create their own applications that access user data, a-la Facebook and Force.com. Yahoo could be a serious contender in cloud computing if they get their act together.
Regarding the comment by Mark Cassius above: You know your company is truly f@#$%d when someone suggests Dick Cheney can fix it 🙂
Geva
Blog: http://gevaperry.typepad.com
They should beg MSFT to buy them out.
The best option for everybody.
Mike
http://www.wannadevelop.com/
i assume that Yahoo should join hands with Google. That will push Yahoo forward in the competitive industry, benefiting both Yahoo and Google.
“Shouldn’t do:” … “NOT hire from within”? I think that’s an unintentional double negative, no?
How is Yahoo going to attract an outside CEO until it resolves the “Microsoft issue”? Would you come on board merely to supervise the gutting of the company and the sale of core assets to Microsoft? The Board has to resolve this key issue *before* deciding what kind of CEO they need to hire.
In a sign of how things are going at Yahoo, I’m betting his email to employees didn’t make it past the Yahoo spam filter and now sits in everyone’s junk mail folder along with ads for hair restoration cremes.
OK,
Here is what I don’t understand:
You say what they shouldn’t do is not hire from within. That being a double negative, is it your position that they SHOULD hire from within?
The other shouldn’t do’s are worded clearly.
Thanks
This change is long overdue, and I only wish it had come while I was still a shareholder. Yang and Decker have really made a mess of things, and hopefully the company will get some direction now that half of that team is gone. Lets hope they overhaul their search marketing/ppc division first thing!
@TheWord and @Ahuu
Yup that was a mistake and I fixed it — it was late at night and I didn’t read it over properly. Oops!
According to your list what they should do:
Sell to Apple :-).
What I have leaned is. If the top Management of a Valley company starts talking like the middle Management from IBM, take your Money and run. See Yahoo, Sun.
As a former shareholder and active Yahoo user I have watched the company erode starting with the ill fated billions it poured into Launch.com and Broadcast.com trying to capture an internet radio monopoly -which never came to fruition and with one simple acquisition Google took the entire online video landscape instead.
How about the current CA (Formerly Computer Associates) Chief John Swainson for the role? Hear me out…
He took over a very battered company the following characteristics:
– no direction
– a portfolio that was all over the place
– a poor balance sheet
– very low investor sentiment
– a mass flight of the most talented core employees
– a tech company with no ready identity (could anyone define what exactly they did??)
Do all these characteristics sound familiar in Yahoo’s case?
Within four years the company he acquired, now named CA has a much more focused portfolio, a very solid balance sheet, over eight quarters strait of beating the street, is getting upgrades from analysts and is making very targeted and solid acquisitions.
Sure Meg Whitman would rally the troops for a period of time, but didn’t they already so that when they replaced Terry with Jerry?
Please note for full disclosure I am currently and employee of CA
I actually think this a layup for any new CEO. Just focus the company on keyword search. No money for anything not directly beneficial to keyword search. Sell off the other assets in an orderly manner and use the cash to buy back stock.
And improve the keyword search process and interface — there are a ton of upgrades available there, in terms of functionality, timeliness and openness. Let Jerry Yang focus on that part and bring in someone up top to communicate the vision and do the hardnosed financial crap.
On the brownnosing front, Mr. Malik makes a great point: “resulted in a state of masterful inactivity, masked perhaps as a culture of consensus.” That has to stop. But again that is HR and something most competent executives are capable of (no, Decker is not a competent executive). Set Wang to work on the keyword feature set and hire someone else to do the mechanical stuff.
To declare not to hire from within is equivalent to saying (i) a new and correct vision can only be found with an outsider perspective and forced down the organization quickly and (ii) all the good and innovative people are already gone.
Yahoo is still making money. Its fantasy football property, for example, generates more eyeballs than Superbowl (which causes me to wonder why only has Coke Zero as sponsor throughout the whole season). It is just not growing search in the way Wall Street wants. Whereas Google knows more about us DURING each session of search, Yahoo! has one’s entire online portfolio if each of the business units can just work together. In Google, I have to type in a food genre and location to get results; couldn’t Yahoo! just automatically suggest three groups of location (work, home, and if different the current IP location) with just the food genre?
The peanut butter analogy is incorrect in this sense because it is applied and done. A more appropriate analogy in my opinion is that Yahoo management is the spreading knife — it decides in to which jars of condiments it will dip. Sometimes the toast will taste better with peanut butter and strawberry jam — say, Yahoo! Finance and Personal works together to give me a tailor-made health insurance quote.
Any thoughts on how sweeping changes at the top might impact the newspaper consortium?
Good old Silicon Valley Hubris got to Jerry – yes he is a nice guy, but not a smart executive.
Yahoo has outlived its usefulness and will go the way of Infoseek, Inktomi, and the others. It’s like retail: sites come and go with the times, nothing is forever. Today is about MySpace and Facebook, not Yahoo.
Only a fool would take the job promising a reversal. Sure you can manage Yahoo for years on end, but its best days are behind it.
Yahoo! must focus on its properties that perform and simplify the way it sells ads. A really drastic measure would be to spin off performing properties such as Mail, News, Sports, Flickr etc as separate companies, and structure parent company Yahoo! as a holding company for the spin-offs and for controlling stakes in foriegn companies. That would help to bring more leaders to the top who would be able to focus in their own verticals.
They should hire Sarah Palin as CEO…
Handing over Yahoo to an outsider that has nothing to do with Yahoo’s success (yes, Yahoo is a success) baffles me. Brad Garlinghouse who wrote the ‘Peanut butter memo’ seems to get it and perhaps should be a candidate.
Yahoo is a solid franchise, and one of the best placed players out there. It would be a huge asset for any media company (or media wannabes like MSFT). I think the most likely buyer is going to be News Corporation, and it would be a solid fit. Yahoo has never been a good technology company but it’s always been a great media company.
Since they can’t do search very well though they should sponsor an open source search engine project, which anybody can use, as long as they have the servers to handle it (or a P2P network). That would probably be more fruitful than relying on their engineers.
What does Yahoo need in a new CEO? They need someone who is a business and technology person. They also need someone with a strong background in mergers in case Yahoo’s board decides to sell.
The best executive I know with those skills is James Kennedy