News flash: Yahoo! is dead. But someone forgot to tell Jerry Yang. See how he plans to turn the company around and regain market share.
After shareholders staged an embarrassing protest at Yahoo!'s annual meeting, even the cafeteria workers at the company's Sunnyvale, Calif. headquarters had to know that former Hollywood mogul Terry Semel's six-year reign as CEO was coming to an end.
In truth, rumblings from Wall Street had signaled that Semel was not long for the top slot even before the June meeting. But less than a week after shareholders publicly expressed their displeasure with his leadership, a new CEO had been named.
For the third time, Jerry Yang returned to run the company he co-founded with David Filo in 1995, this time sidestepping Susan Decker, who was named president in the reorganization. Wall Street groaned upon hearing the news that Yang, ever the consumate engineer, would run the company, and The Los Angeles Times (among others) reported that he would likely be unable to manage such a large business. A number of pundits even went so far as to say that Yang was nothing more than an interim CEO -- window-dressing to appease shareholders -- while Decker got a little more seasoned, or a new chief could be found to replace Semel.
"The jury is still out on Yang," according to Eric Savitz, West Coast editor for Barron's Tech Trader Daily. "Certainly he knows the company well; but he is not exactly a fresh-faced outsider. Some on the Street might have liked it better if they simply made Decker the CEO; but she didn't quite have the experience. I would not be surprised if in the long run, Yang becomes chairman, and Decker takes the top job. Neither one, though, has any real experience running a company as big and complicated as Yahoo."
While Savitz speculates that a web-savvy outsider might have made more people happy, he admits he's hard-pressed to think of a candidate.
And so for now, the ball is in Yang's court, perhaps by default, perhaps by divine inspiration. The question is: What will Yang do with it?
The search for an identity
"It is going to be very, very difficult for Yahoo to maintain share against Google in search," Savitz says. "They are, at best, a second choice; they don't differentiate themselves in any obvious way. I think Google has already won here. Yahoo doesn't necessarily need to exit its search business, but it is going to have to be content being a distant second."
Whether or not the corporate ego of Yahoo (and of Yang, who holds a yearly sumo wrestling bout with Filo for bragging rights and the amusement of the company's employees) can handle playing second fiddle to Google may determine the company's strategy going forward in the search arena.
For better or worse, the mandate for Yahoo seems to be to regain search glory, with both Yang and Decker telling anyone who will listen that the company doesn't need a new strategy as much as it simply needs to do a better job of executing its existing one.
But a recent feature article in The New York Times profiling Decker, who got high marks from the sage of Omaha, Warren Buffet, questioned whether the former investment banker turned Yahoo president could do what needed to be done, namely remaking Yahoo in Google's image.
But while the article, "Can She Turn Yahoo Into, Well, Google?," took great pains to point out that Google earns more in a quarter than Yahoo does in a year, it failed to appreciate the fundamental difference between the two internet giants.
Google does not own content, but Yahoo does.
"Since Google does not own any content, Yahoo will always have a ready-made audience for search due to its visitor traffic; therefore, it can and should continue to monetize its destination properties using the most relevant advertising it can provide from its search, display and video ad inventory," according to Dema Zlotin, founder and vice president of strategic services for SEMDirector.
While Zlotin isn't so sure Yahoo will be able to unseat Google in traditional search, he says Yahoo could gain momentum in emerging categories such as local and mobile search.
"If Yahoo focuses on what Google has done better (i.e., user experience), it has a chance to dominate the smaller but higher growth segments of search," Dema says.
Next: Return of the geek