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.
Great observations, mhhfive. Yahoo fumbled on the big exit strategy. Big time. I agree with those who think the downward spiral began then. Yahoo had reached the zenith of its own capabilities and was proven unable to move to the next level under its own momentum.
I think it's strange that anyone says there's a "startup culture" at Yahoo... given that Silicon Valley generally thinks of Yahoo as a place where startups go to die. Whenever Yahoo has acquired a cool startup -- it's pretty rare for Yahoo to figure out what to do with it. Del.icio.us is dead. JumpCut is dead. Flickr isn't dead, but it's not exactly innovating much anymore.... Etc, etc. So Yahoo really doesn't have too much reasoning behind its "startup culture" excuse -- unless by "startup culture" critics are actually saying that Yahoo has an insane burn rate, no clear direction so that it's constantly pivoting, and that it's looking for some kind of big exit strategy. Okay, if that's the definition of a startup culture, then Yahoo has it in spades.
Dunno, Kim. Not saying that taking the helm of Yahoo was an easy job, but Bartz had some clear issues in terms of setting a cogent strategy for Yahoo. I suppose we'll see whether her absence produces any meaningful progress. If not, I guess you could be proven right.
Not a very classy situation at all. It's pretty clear the board ended up not liking Bartz, but it seems the reason given for firing her was a failure to meet targets it's not clear anyone else would have met.
Yesterday, amid all the noise around the abrupt firing of Yahoo CEO Carol Bartz: Enter the Jerry.
That would be Yahoo co-founder and director Jerry Yang, who appears to have emerged rather prominently again, after a long period of being mostly out of the limelight at the company.
After he - and not interim CEO Tim Morse - led both the meetings of top VPs and also its all-hands employee meeting, tongues were wagging all over the company and also outside it about whether Yang would be returning to run the company.
The article goes on to say that it doesn't look like he'll be returning to lead the company, but even the idea that he could still have much influence is frightening after he dropped the ball as hard as he did.
Some reporters and bloggers played up the fact that Bartz was fired not in person but on the phone. She subsequently wrote a quick email to the entire Yahoo organization to let them know this had happened.
The Yang story always gives me goose bumps. I can't imagine how Yang must have felt in the end, as he was forced to concede he'd overplayed his hand and in doing so lost the opportunity of a lifetime.
And Microsoft, some say, is "pleased as punch" that it didn't do the deal, since Yahoo's stock didn't rise very much over the last couple of years, justifying those who refused to reopen negotiations.
It seemed pretty clear back in 2008 when Jerry Yang took the stage at the Web 2.0 Summit that he regretted his decision re: Microsoft. He knew he screwed up.
On Microsoft, Yang said both sides were to blame for not coming together. "To this day, I'd say the best thing for Microsoft is to buy Yahoo. I don't think it's a bad idea at all at the right price... whatever the price is," said Yang.
"We were willing to sell the company... They walked away from a public offer. We were ready to negotiate. We wanted to negotiate a deal. We felt we weren't that far apart. At the end of the day they were through and since have been very clear that they don't want to buy the company."
Yang claims Yahoo went back to Microsoft, willing to take its offer, but at that point the company had lost interest. "We said, look, even at the price you were suggesting, do you want to do the deal? They said no."
Too little, too late, and the company is now worse off than ever.
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