The fear and uncertainty that have nipped at the heels of Yahoo Inc. (Nasdaq: YHOO) for years finally caught up with the company this week. The board yesterday fired CEO Carol Bartz in the wake of a two-week review by the firm's independent directors, which revealed what we already knew: Yahoo is underperforming in a market it should be dominating.
It could be argued that firing Bartz wasn't necessary. But enterprise leaders would be justified in thinking that Yahoo's problems stem directly from the top. And that's where the force for real change must come for Yahoo if it indeed has any future as an independent company.
Despite a reputation as a tough cookie unafraid to lash out at critics, the 63-year-old Bartz has been shockingly out of touch with the realities of the market Yahoo plays in. Yesterday's Wall Street Journal gives the following critique:
Some people familiar with the situation at Yahoo contend she compounded long-term issues and frustrated fellow board members through missteps that included mismanaging Yahoo's U.S. ad-sales arm and failing to introduce innovative Web services, and at times didn't appear to have a solid grasp of parts of Yahoo's business. At a meeting with product managers in early 2010, according to one who was present, she said she didn't realize the majority of Yahoo's space for graphical ads resided in its communications services, namely, Yahoo Mail.
It's not the first time Bartz has been accused of being asleep at the switch. In a recent blog here, ThinkerNetter Ron Miller noted that Yahoo is the second most-visited site behind Google, and its failure to parlay its enormous traffic volume into ad dollars can be laid directly at management's door:
Yahoo continues to sell ads in the same way they were sold in the pre-digital age -- with ad sales people selling ads at a premium cost. If those ads don't sell -- and they haven't sold very much -- they go to an ad exchange where they are dumped at a much lower rate...
Does this sound familiar? It should, because it sounds to me like the print newspaper business... but Yahoo is not a print property and never has been. Why would it behave like one and continue to do so in the face of abject failure?
It's probably a question only CEO Carol Bartz can answer...
Bartz may have been out of touch with the revenue model for Yahoo, but there were other problems as well. Some accused her of focusing too much on the Asian markets, where Yahoo was buffeted by the actions of Chinese partner Alibaba, even as she seemed to ignore the threat posed to Yahoo by Facebook. (Notably, Bartz's departure may not help the ongoing stress in the Yahoo/Alibaba relationship.)
Other observers, such as CIMI Corp. CEO Tom Nolle, think Bartz failed to get Yahoo out of the "startup culture" that had dogged the company since ex-CEO Jerry Yang notoriously rebuffed a $5 billion acquisition offer from Microsoft in 2008. The company needed to reposition itself as a global player instead of a sassy and immature Silicon Valley upstart.
Firing Bartz may indicate that Yahoo is finally ready for the changes needed to make it in today's Internet environment. In a press release yesterday, the company's board describes the establishment of an Executive Leadership Council, which will work with interim CEO Timothy Morse (who was formerly EVP and CFO) until a permanent CEO is found. The board also will undertake a "comprehensive strategic review that the Board has initiated to position the Company for future growth."
It is commonly thought that Yahoo's strategic review could result in a merger or sale. But at least one writer thinks it unlikely that anyone will buy Yahoo outright. Shira Ovide of Deal Journal said it well in a blog today:
Yahoo is at least two different companies: A giant publisher of insanely popular websites such as Yahoo News, Yahoo Finance and Yahoo Sports. And a giant advertising company that sells those graphical display ads all over the Internet.
Can you tease out those two halves of Yahoo, sell those valuable stakes in Asian Internet companies, sell the publishing side to a media company and the advertising side to an ad or Internet company? Yeah, probably... None of it will make much sense. In short, good luck, Yahoo.
Please join us here for an Executive Clan chat to discuss this topic on Monday, September 12, at 1:00 p.m. ET.
— Mary Jander , ThinkerNet Editor, Internet Evolution