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June 18, 2007

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Ken G.

While I realize that Jerry said on the CC that he envisions Yahoo being a "strong and INDEPENDENT" company in the future, I can't help but think that he is but a placeholder, and Sue Decker's financial acumen is more needed in the coming year than her day-to-day operational expertise. The rumors are flying already about News Corp. and Yahoo doing a deal involving MySpace.

How about AOL hooking up with Yahoo? That seems to make tremendous sense to me, but whatever the deal, I think it's fairly obvious that a deal of some sort is coming. To believe otherwise would be naive at this point.

Still Inside

On November 27, 2006, I wrote on this blog:

> Are there any major stockholders of YHOO that give a
> fuck anymore? The next 12 months are going to tell
> us.

Enter a major stockholder named Jerry. I don't know if he can do it, and he surely doesn't have jack when it comes to CEO experience, but I'll take somebody that gives a shit about his own asset ANY DAY OF THE WEEK over a paid manager that watches the clock for his golden parachute to open every day.

Now, come on Jerry, repeat after me: "YAHOO HAS ONE PRODUCT THAT MATTERS, WHICH IS SEARCH; EVERYTHING ELSE IS WINDOW-DRESSING TEENY-BOPPER BULLSHIT".


SI

Nagesh Belludi

Jerry has a tough job ahead. His taking over the CEO roll are unlikely to change the company's strategy quickly -- after all, he was part of the leadership during Terry's tenure and is unlikely to present fresh strategy ideas in the near-term.

Jerry could look at joining forces with eBay. As Wall Street has discussed this arrangement before, there is a bit of synergy for a broader alignment of various product offerings or a merger.

Stone

When you look at the top Internet/tech players, you often see folks with good product vision: Apple, Microsoft, Google, Facebook, etc.

Yahoo needs good product vision. Sue Decker isn't qualified for the CEO role because she doesn't have the product gene --- and few actually do. My guess is that Jerry Yang has it (at least a little bit) and they need some of it, now.

Peter White

What is going on? It's an awkward an vain attempt by Semel to manage his departure gracefully, while leaving the future cloudier for all that he leaves behind. I tend to think that Jerry should have been named Chairman and CEO, with Sue Decker as COO. Semel went out of his way to position Sue as Jerry's equal in the CC, which only added to the confusion, and which now makes it nearly impossible for Jerry to establish himself as the clear leader of the company - he is handcuffed from Day 1.

I tend to agree with the other comments that this is merely prelude to the sale of a once great business ...

stone

Why does everyone/anyone keep talking about Sue Decker as the "heir-apparent"?

May I remind everyone that she's had a ton of power for a very long time and, during this period of time, Yahoo has floundered.

She may be sharp, smart and financially gifted and she certainly draws attention because of her gender, but she's simply not qualified for the top post of a hard core Internet company.

Victor

They should use this as an opportunity to ditch their own ad efforts and use Google's technology. Then they could focus on building their website. This would be better for everyone, because Google monetizes pages much much better than Yahoo does (I think it's like a factor of 3 per page). Panama should obviously be given a chance, but things aren't looking so good for it at the moment.

Royal

Jerry will do what he does best, and that is technical things -- innovating, spec'ing, delivering, quality, etc.

Sue will do what she does best, making sure the business side of the pump is primed.

Since Jerry and Sue don't strike me as "workplace political monsters", this could be a near perfect situation *if* Jerry holds up his end.

Note, Sue Decker is wonderfully capable but is not a technologist... letting her run a technology company would not have worked... ask HP (Hurd vs. Carly) or Apple (Jobs vs. everyone else that botched that job).

Or, said another way, do you really think Google lets the business people get in the way of driving the business?


P.S. Given the earnings call "whiff", it looks like YHOO will miss by a penny or two? So, again I ask, how many pennies of earnings does Semel's comp package burn up? Sounds like they may need those pennies *again* this quarter. This would be a great analysis to do... not sure why you haven't responded... ?

beastlet

koogle was replaced by semel, since the board thought that future lay in yahoo being a media company. turned out to be not quite so, and the diversion towards media a costly detour. yahoo needs a technologist at the helm. not decker and not semel. yang is a fine bet only if he fires decker. otherwise its more of the same crap.

Henry Blodget

Royal...apologies. Just haven't had time to run the numbers. Maybe someone else has?

Glad to see most others initially more comfortable w/ Jerry as CEO than I was. I still don't understand the tech/business bifurcation because I don't see how the two can be extricated. Yahoo doesn't sell technology, it uses technology.

The Semel boosting up Sue and undermining Jerry already is an interesting insight--certainly quite plausible. Especially if Jerry was the one who showed him the door.

Agree wholeheartedly with the passion thing...boy is the company in need of a major injection of that.

beastlet

henry blodget writes:
"I still don't understand the tech/business bifurcation because I don't see how the two can be extricated. Yahoo doesn't sell technology, it uses technology."

apple uses technology. so does walmart. the difference between them lies in the value offered by each of these companies to the customer. apple enables joe blow to use complex technology without pain. walmart enables joe blow to buy goods at the lowest retail price.

CEO's need to make bets year or more in advance. so a technology company needs a CEO who can bet on technology years in advance. jobs bet apple on the ipod. walmart bet on china. these are two very different bets on the surface, yet very similar in their strategic relevance to their respective companies and customers.

what did semel bet on during his tenure at yahoo? nothing. he cut costs. he charged for yahoo personals. these are "housekeeping" items not strategic bets.

Royal

Both GOOG and YHOO make technology that they use to sell things with.

GOOG has been more technologically innovative than YHOO... which is why GOOG sells more... a lot more.

That's why YHOO desperately needed a technologist driving the business.


P.S. Nothing subversive was contemplated by pairing Jerry and Sue... on the contrary, I think a productive partnership was envisioned... they are a good complement.


P.P.S. Henry, the numbers I ran suggested a 2 cent swing last quarter... a miss to a beat. Not sure if I did calculation correctly, though: $39.4 million in G&A option related expenses last quarter. If past awards are an indication, bulk of these go to Semel. Adding $39.4 million back into net income figure... and assuming the total dilution doesn't change (which of course it would somewhat)... and adjusting for the tax consequence... then it's a 12 cent gain instead of a 10 cent gain... ? Consensus was 11 cents. $5.4 billion in marcap potentially saved... ?

Stone

Henry,

How does Sue Decker decide which products to build? How does she make the tough calls when there's a difference of opinion around their product roadmap? Someone wants to build a behavioral ad targeting platform and someone has an incredible idea for a new semantic search engine. Both hold great promise. For a variety of reasons only ONE can be built in 2008.

How does she decide which to build? Both hold great promise and both have financial projections that look terrific.

Gut feeling needs to come into play. Does she have the right gut feeling? I wonder.

Ken G.

Good points about Sue Decker. For us who used to work on Wall St., we knew Sue as an extremely smart and competent financial mind as a publishing analyst at DLJ, and then as Director of Research for that firm. People with those skill-sets are generally "staff" rather than "line" talents.

By that, I mean that Sue may know the business upside-down and backwards, but doesn't necessarily have the skills to properly RUN the business or make tough decisions on strategic direction. And when you think about it, there is no discernable evidence that she has been a "difference-maker" in terms of the WAY in which Yahoo has been run during the years that she has been there. She is respected by financial people, but is she respected (or even believed) by the folks in the trenches in Sunnyvale? Do they even speak the same "language"? I wish I knew.

TallTroll

>> How does she decide which to build?

The answer should be "Ask Jerry".

>> They should use this as an opportunity to ditch their own ad efforts and use Google's technology.

I strongly disagree with that. Going back to using G would be strategic suicide, even if it would help them paper over some cracks right now. What they need to do is two-fold

1) Stop making it hard for people to work with them. They miss out on millions simply because it's harder to work with them - big agencies with many millions under management find it more efficient to use Googles platform, even though the returns are generally lower

2) Improve distribution - Getting the YPN product fully rolled out is CRUCIAL. Yes, yes, I know that the AdSense (and YPN, by extension) product provides a lower contribution to Googles bottom line etc, but it drives volume and reach, which advertisers care about.

If Yahoo could replace AdSense with YPN in just 10% of the AdSense base, that's a swing of about 5% of TOTAL search volume, which would be a good start to closing the gap between the 2, especially since the effective swing would be 10% (-5% to G, directly added to Ys' share)

Hitwises May 2007 figures for the US market show G at 65%, and Y at 20%, giving G over triple the traffic, or 45% of the total. A reversal to 60% / 25% makes Y look a lot more viable, and may well drive another wave of "defections" - 55% / 30% would actually start to look like a competition....

Those numbers are perfectly reasonable, BTW. There's a LOT of pent-up demand from publishers who would move from AdSense in a second, if there was a viable alternative. Get some buzz about a revitalised YPN program, and you could see a mass defection, with LOTS of "little guy" webmasters trying them out.

Obviously, Google would pull out some stops to try and woo them back, but at least they'd be reacting to someone else for a change

Hmm, rambling a bit, I think... Anyway, between improved communications with advertisers, and increased distribution, there's no reason Yahoo couldn't make up a LOT of ground (and revenue) very quickly. An actual reversal will take a while, and G will have the opportunity to respond, but I see no reason that Y couldn't achieve parity, or near-parity inside of 6 months of getting everything together

stone

I think you're right "talltroll" but yahoo doesn't have the right product to gain the marketshare. They need to acquire Quigo and Adbrite in order to get back in the game. Both companies do roughly the smae things but with different market focus.

CornFutures.net

Eeeeayahhhhh, meet the new stock price! same as the old stock price......

TallTroll

>> but yahoo doesn't have the right product to gain the marketshare

At this very moment, that's irrelevant. The "right product" is simply not-AdSense, provided that there's enough inventory in the system to make it pay on a broad traffic base. That won't be true forever, but it's true today, because there's a LOT of pent-up demand for it.

Of course, someone else could claim that niche, but neither Quigo nor AdBrite are capable of it yet, whereas YPN would be. I hear whispers that it may be rolled out in additional territories "soon", but what they NEED is a full-scale worldwide, open-to-all launch.

walker

First you ought to know that typing in internetoutsider.com without a 'www' suffix results in an "under construction" page-- this is highly inconvenient. Second is your post re: myspace and yahoo forthcoming? I'd like to hear your thoughts.

P TRADES

well, i guess we'll be seeing some bold moves now, right???

Victor

Henry, what's your take on the apple/google/youtube tie-up? Do you think this a harbinger of more big partnerships between the two?

N. Venkatraman

Who will acquire Yahoo at what price? That's the billion dollar question now. The management team structure is more about preserving value (with minimal bleeding of the core business) than about growth and innovation that we would expect from Yahoo as a serious player against Microsoft and Google. It looks like MSFT-YHOO combination has gotten cold. So, the real question is will Whitman or Murdock or Bezos be interested in Yahoo? Of course, it will depend on the price at the 'fire sale'. What price, I wonder.

Patrick Kerr from P TRADES

looks like the biz is headed for some fun times right now, shake-ups, shake-downs, it'll be fun to see who rises and who bites it over next several months, i just keep think FACEBOOK is really going to be stepping up and kicking some players aside---any thoughts????

stone

Yahoo/Google suffer serious earthquake and first MAJOR loss to ad upstart. This reminds one of the first Google/AOL deal way back when.

http://biz.yahoo.com/prnews/070625/nym021.html?.v=86

stone

Henry,

How could you not talk about this elephant?

http://sev.prnewswire.com/advertising/20070625/NYM02125062007-1.html

Quigo just got HUGE and Yahoo just got smaller.

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