Going, Going…Gone
Call it the rise and fall of an old media at the helm of new. Call it a sign that we have truly entered Web 2.0. Call it what you will, but the end of one reign and the beginning of a new took place on June 18th, 2007. That’s when Yahoo announced Terry Semel, its beleaguered CEO would step down from day to day leadership of the company, ceding power to its once and now future king, Jerry Yang. Not that this comes as a surprise to any following the rise but most recently just fall of Yahoo since Terry Semel took over in 2001. In fact, at the annual shareholders’ meeting a week ago Tuesday, a scant five days before the announcement, the proverbial writing was on the wall when more shareholder resolutions than had in the past, passed with near unanimous approval, and garnered in some cases just two-thirds of the vote. This comes after a wave of high level departures among some of Yahoo’s most tenured leadership. Much like Apple did when it brought back Steve Jobs, Yahoo has done by turning to the visionary who helped make the Internet’s number two, a number one.
In several ways, the current state and story of Yahoo reminds me of the world of golf. Like Google did in the Internet advertising world, Tiger did in golf, dominating in a way half expected but still shocking in its duration and scope. Others didn’t play worse (except perhaps when paired with Tiger), he simply played that much better than they did. No one, though, can remain on top forever. Tiger showed this a few years back when Vijay earned the number one spot. Even now, with Tiger back on top, and seemingly staying on top, that hasn’t ruled out others closing the gap and picking up wins. Phil Mickelson , who makes for a great Yahoo, has started to play better golf now than ever in his professional career. While Tiger has the numbers to back up his number one standing, the difference between Tiger and Phil no longer feels like the unfair match it once did. It’s hard to fathom Google ever losing the number one spot to Yahoo, but that doesn’t mean Yahoo can’t shape up and become a contending number two, closing the gap as Phil did, where even though one is better, it feels like the outcome could go either way when they go head to head.
As we look over Terry Semel’s tenure at Yahoo, the golf analogy only feels more accurate. Like Phil, he turned pro first, heading up Yahoo before Google became public (while the already good Tiger ruled over Junior Golf), and through his leadership the company had several victories, including recognizing the role of paid search in the future of Internet advertising by acquiring Overture. Many of his mistakes most likely only seem like mistakes in hindsight. Think of MySpace . Everyone knew it had that certain something, but very few would have found it worth $580 million at the time of acquisition. The same held true I suspect in Mr.Semel’s decision not to buy Google when he had the chance. It’s hard to fault him really, as he came during the Internet downturn and was, I imagine, trying to make sound economically justifiable decisions for the company. They simply weren’t aggressive enough, which cost them DoubleClick too, arguably a better fit for Yahoo. The time for conservative play has passed. We have entered a different era though, one where such practicality leads to lost opportunities, not necessarily financially, but strategically. Like the equivalent of Sergio Garcia redoing his swing and losing out on a whole year but knowing he’ll play better in the end. That could be what Terry missed by passing on YouTube or not doing whatever it took to grab Facebook.
Pro golfers though, earn their keep like direct marketers do, through their performance each time they play. Top CEO’s, though, don’t see their compensation tied to stock price, and it doesn’t lead to many issues, except in cases like Terry’s where he earned north of $450 million in his 6 years leading the company, including an estimated $71 million last year despite the decline in stock, among other things. The time for Terry might be over, but as the now ex-CEO pointed out in their annual shareholder meeting, things still look good for Yahoo. People now wonder whether the company will go at it alone or as part of another company. Yahoo has held talks in the past with Microsoft, eBay, and Time Warner. As one powerful shareholder put it in a recent WSJ article,
"Jerry Yang didn’t sound like he wants to sell, though that doesn’t necessarily mean the company won’t be sold," even though he did say "all the right things for someone who wants to run the business." When it comes to facing Google, it’s tempting to think of them as part of another entity. Imagine if Time Warner picked them up and combined Yahoo with another large portal with loyal users, AOL. Perhaps Advertising.com can lift Yahoo in a way similar to AOL. Or, maybe Yahoo will be picked up by AT&T, for whom it has in the past had a co-branded DSL offering. Then again, just two days ago, word came out of another potential option, an equally tantalizing one, Yahoo combined with MySpace.
Rupert Murdoch, who has made headlines over the years with his News Corp., made them again when the stories broke saying that he was considering swapping MySpace for a 25% stake in Yahoo. The talks began before the resignation, and no one knows whether they will continue, but besides that, pegging MySpace at a value of almost $10 billion, think of the combination the two together would yield. Both sites have loyal followings, and Yahoo plans on continuing to cater to ultra-repeat users as evidenced by the same day announcement of its purchase of sports site Rivals.com. More importantly than its size, MySpace represents the new generation of portal, of Internet usage. But it’s still more like Mail on steroids, missing that information component. From a business perspective, it could extend Yahoo’s display ad reach, while not completely shutting it out of search. I’m just not sure if Yahoo Search is a good fit for the $300 million per year worth of MySpace search. The trends that hurt Yahoo’s earnings will still persist even with Semel gone, but more important, Yahoo at least has some momentum. Whether that momentum translates into immediate results doesn’t matter. In the end, often the feeling of momentum can cause actual momentum. Now, that they look the part, people can put aside the griping and be the part. Speaking of looking to the part, Jerry Yang (still) has it, blogging about the role shortly after the departure of Terry Semel hit the wires.
