Several readers and Battelle have noted Fred Vogelstein's Wired story on how Yahoo! fumbled the search ball, as well as Yahoo's lengthy response. Battelle suggests that this story will mark the bottom. As a shareholder, I certainly hope so.
I still believe that it's time for Terry to step aside, if only to propel the company past the paralysis that comes with having open senior management positions (2), an impending CEO-succession power struggle between Sue Decker and whoever the company brings in to run the other major operating group, and thousands of employees justifiably worried about who their bosses will be and what the future will hold. And then, of course, it's time for Panama to not only start allegedly impressing customers but accelerating revenue growth. If both of those things happen, Fred's Wired story will, in fact, mark the bottom--and Yahoo!'s stock will significantly outperform Google's for the next two years. If not, get ready for more of the same.
Yahoo's response to the story, predictably, describes how much benefit the company has derived from the Overture acquisition, how hard it has been for the company to develop Panama on the fly, and how strong the company's position is in graphical advertising. What was left unsaid, however, and what demolishes the company's credibility every time it tries to defend itself, is the following:
Five years ago, despite troubles in the Internet advertising market, we were the dominant global Internet leader, and Google was a little-known pipsqueak. Despite our brand, reach, and market share, however, we failed to recognize the awesome power of the new search business. Whether this failure was the result of an obsession with more traditional forms of media, the distraction of trying to survive the first dotcom bust, or just poor execution is a topic for historians. Regardless, our failure opened the door for a major new competitor, and in five short years, we have gone from runaway No. 1 in our business to a distant No. 2. In the process, we have cost you, our shareholders, at least $100 billion.
Yes, I realize that no company would ever say anything like this (and that Yahoo has accomplished a lot). But I would welcome a bit more acknowledgement of "Yes, we blew that round--and hats off to the folks at Google, who cleaned our clocks."