During my time writing nonfiction books for the YA school library market, I did books on the great and the near great, including Jerry Yang (2010) for Chelsea House’s “Asian Americas of Achievement” series. That’s right, 22,000 words on a computer geek. Someone else grabbed Bruce Lee before I could. Yang_cover1Yahoo!

Asian Americans of Achievement: Jerry Yang

Chapter 1: November 17, 2008

The headline on the November 17, 2008 New York Times article read simply, “Jerry Yang, Yahoo Chief, Plans to Step Down.” Less than a year and a half earlier, the 40-year old co-founder of one of the world’s most successful internet companies had replaced Terry Semel, the former long-time co-head of Warner Bros Studios in Hollywood he had selected to run Yahoo in 2001, as Chief Executive Officer, or C.E.O. The seven years that followed were to be a mixed bag of success and failure, with phenomenal growth and a presence on the internet that made Yahoo! one of these most popular internet portals and surfing destinations on the World Wide Web.

At that time, Yahoo! had grown from an online list of favorite websites compiled by two graduate student roommates to one of the busiest websites in the world. Under its banner, Yahoo! offered internet users a powerful search engine, email, chat groups and chat rooms, bulletin boards, maps and directions, help wanted and for sale ads, ads for homes and cars, dating and music, weather, shopping, sites to store your photographs, and more.

More people visit Yahoo! to take advantage of all these services than use Google, the next larges search engine (500 million visitors a month versus Google’s 380 million), but Google offers, in the opinion of many, a superior search engine and the site generates significantly more income through advertising, which is the chief source of making money on the internet, than does Yahoo!.

Yahoo was, according to the article “How Yahoo! Aims To Reboot “ in the February 2, 2007 edition of the New York Times, “a company that has divided its attention among dozens of products and services,” and quoted Drew Neisser, C.E.O. of the Renegade Marketing Group advertising agency, “Yahoo! is many things to so many people, whereas the beauty of Google is that at the end of the day, it’s search done well.”

In December 2006, according to the same article, Myspace.com and YouTube.com together had 32 million unique visitors (or individual visitors, each counted once no matter how often they visited the site during the month), while Yahoo! alone had 39 million unique visitors, as well as 250 million users of its email service.

Peanut Butter

The problem most people saw with Yahoo was that it had grown too large and, unlike rival Google, was not focused on doing one thing and doing that well, but Semel was working hard at changing that perception. In the February 2 New York Times article Stewart Butterfield, co-founder of the online image storage site Flickr, which Yahoo bought in March 2005 and then director of product management Yahoo’s said, “There’s always been some ambiguity about whether it’s a tech company or a media company. But there’s been a shift in the internal messaging. I never hear execs refer to Yahoo! as a media company. A year and a half ago, there wasn’t a satisfying articulation of what the mission of the company was. That has changed.”

But it was Semel’s efforts, which included reducing the company’s 44 business departments down to four (a later reorganization would reduce the company to three distinct business units: Web communities, advertisers and infrastructure) that helped Butterfield decide to sell his website to there instead of to Google. Yahoo was also in the process of changing the way the site handled ads. This change would allow the advertisers to take control of the way their ads were displayed. The new advertising platform, called Panama, also allowed Yahoo! to show ads relevant to user’s search, so if a user were to do a search for “plumbing,” the ads for plumbing goods and services would pop up highlighted and at the top of the list. Before that, advertisers simply paid a premium to have their ads come first regardless of what the user was searching. With Panama, ads would be displayed more efficiently and be aimed at users who had shown an interest in the subject.

According to the Times, “Google bought YouTube, which has generated a mountain of buzz, but Yahoo! has quietly leveraged Flickr, Answers and Del.icio.us, among other recent acquisitions and launches, to get its audience–which includes nearly half of the world’s Web users–to spend more time on its network of sites. Yahoo!’s new ad system will capitalize on their presence–and on data it collects from their interactions–more efficiently, with more carefully targeted ads.”

Under Semel, Yahoo was trying, in the minds of many, to decide what it wanted to be when it grew up. Was it a search engine? An advertising platform? A content provider? An online community? Some felt these efforts to decide the direction the company should take had caused it to lose even more focus. In a company memo that was leaked to the public, Yahoo senior vice president Brad Garlinghouse likened the situation to trying to spread a finite amount of peanut butter onto an ever-growing slice of bread. “The result,” he wrote, was “a thin layer of investment spread across everything we do and thus we focus on nothing in particular. I hate peanut butter. We all should.” He went on to note that, “We lack decisiveness (and) we are held hostage by our analysis paralysis.” In other words, he wanted the company to make up its mind.

By early-2007, analysts were looking at Yahoo and beginning to predict that unless the company found a way to catch up with or overtake Google, both it and Terry Semel were in trouble. Some suggested the way to do this would be through a merger with AOL, a division of Time-Warner, or forming a business alliance with Microsoft. The inability to catch Google kept Yahoo in second place and had a disastrous effect on its stock price. For all that Semel had accomplished during his six years, including increasing Yahoo’s annual revenues by 900 percent and adding $30 billion to the company’s net work, the stock market and Yahoo investors would only stand watching the company’s stock prices slide for so long before they wanted change.

The Chief Yahoo Takes Charge

Company co-founder Jerry Yang stepped in to fill the void left by Semel’s departure. Like his predecessor in the executive hot seat, Yang’s first order of business was to come up with a plan to take on and beat Google at what it did best: search and online advertising. In October of 2007, Yahoo announced that, though still profitable, its third quarter (or the three month period of time from July through September) had made two-thirds less money than it had in the previous three month period. In October, Yang was forced to lay off ten percent of the company’s 15,000 employees in order to save money.

Earlier, in February of that year, Microsoft, the software giant founded by Bill Gates, made an offer to buy Yahoo for an amount almost three times higher than the current stock price, or $33 a share while Yahoo stock was trading at between $10 – $11. Yang refused the $44.6 billion deal. By May, Microsoft withdrew its offer.

Next, Yang made a deal with rival Google to share advertising revenues across the two sites. The deal could have been worth anywhere from $250 million to $450 million a year to Yahoo. The government, however, worried that the combined power of these two internet giants would give them an unfair advantage over smaller companies competing for the same advertising dollars. The fear was that they could use their vastly superior size and financial resources to offer advertisers rates that the smaller websites could not afford to match, eventually driving its smaller rivals out of business. Under pressure from government regulators, Google decided not to go through with the deal

By late 2008 Yahoo was still announcing disappointing lower than expected revenues, or profits, and shareholders were beginning to question whether Yang should even be running the company he helped create. Jerry, apparently agreed, as the November 17 announcement was, according to the New York Times article, “…’mutual” and ‘in progress for a while.” Jerry’s own statement on the change in corporate leadership said, “Having set Yahoo on a new, more open path, the time is right for me to transition the C.E.O. role and our global talent to a new leader.”

Jerry wasn’t going far, however. As he wrote in a memo explaining this move to his staff, “All of you know that I have always, and will always bleed purple,” a reference to Yahoo’s corporate color and his dedication to the company. Jerry was to remain on Yahoo’s Board of Directors, or the people elected by stockholders to set corporate policies and make management decisions. He would also help in the search for the person who would replace him as C.E.O. And, more importantly, he would be returning to his earlier position as “Chief Yahoo,” a corporate guru and visionary role.

If the present path is any indication of the road that lies ahead, whoever takes over guiding Yahoo’s future from Jerry Yang is facing a challenge almost as formidable as the one Jerry and his former grad school roommate and company co-founder David Filo did in creating the company in the first place.

Tags: , , , , ,

Leave a Reply