Last week’s news that Yahoo CEO Terry Semel resigned and was replaced by company co-founder Jerry Yang left many wondering where the Internet giant is headed.
Although Mr. Semel will stay on at Yahoo as non-executive chairman, increasing pressure on the company to compete against main rival Google leaves Mr. Yang with his work cut out for him.
“I think this is a sign that the content-centric strategy being managed by a non-technologist is probably not the way to go,” said Kevin Lee, executive chairman at Did-it.com. “They need somebody more technology-centered in there.”
Yahoo, well known for its news and entertainment media, continues to trail well behind the more tech-savvy Google as No. 2 in search. Just last week, Hitwise reported that Google accounted for about 65 percent of all searches in the United States, with Yahoo accounting for just 21 percent.
Russ Mann, CEO of SEMDirector, a search-marketing services firm, said Yahoo needs to buy a third-party ad server with market share and make the serving costs free to publishers.
What’s more, Mr. Mann argues that Yahoo should get more innovative – and fast. He said it could, for instance, buy Facebook, strike a deal with Baidu or extend Panama to mobile search.
Mr. Lee attributes Yahoo’s problem to its fuzzy focus.
“Microsoft and Google both act like technology companies in the publishing business, whereas Yahoo acts like a publisher that has to rely on technology to do what they do,” he said. “They need much more of a focus on technological innovation.”
While the exact motives of the move remains undisclosed, Mr. Semel said in a statement, “this is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential – it is the right thing to do, and the right time is now.”
Jerry Yang as CEO
“The real question everyone is asking is: Will [Mr. Yang] be willing to make those difficult decisions and difficult changes?” Mr. Lee said. “The good thing about it is that Jerry understands Yahoo and the good and the bad that is Yahoo.”
Mr. Lee believes it would have been difficult to take somebody from outside the company on short notice. Another advantage is Mr. Yang is a technologist. Mr. Semel, who has been with Yahoo six years, has a media and entertainment background, including 24 years at Warner Bros.
When Mr. Yang was named CEO, Sue Decker, head of advertiser and publisher relations, was named president. Ms. Decker will run Yahoo’s business operations.
During her time with Yahoo she helped develop the company’s recent reorganization plan and strategy and also played a leading role in two of the company’s strategic initiatives announced in 2006: partnership with eBay and partnership with a consortium of more than 150 daily U.S. newspapers.
Mr. Yang’s focus at Yahoo has included corporate strategy, Yahoo’s technology vision, strategic business partnerships and international joint ventures and recruiting key talent.
Some industry experts believe Mr. Yang’s appointment as CEO is merely an interim move, according to Mr. Lee.
Time to trim the sales force?
Yahoo will need to do more to stay ahead of near rivals MSN and Ask.com and invest significantly to make up ground on search leader Google.
“A lot of people I speak to in the industry think that there is a lot of fat in the sales force,” said Mr. Lee. “There are currently two parallel sales forces: There’s a search marketing sales force and a display sales force. That shouldn’t be. There should be one sales force.”
Yahoo could cut a third or half of its sales force with little effect on sales, according to Mr. Lee.
“If they’re not the right person where Yahoo needs to be they should be replaced or let go,” Mr. Lee said. “And I’ve heard a lot of people say there’s a lot of arrogance in the sales force.”
The Google problem
To compete against search leader Google, Yahoo will need to innovate technologically, especially in the area of search. Mr. Lee said search is still the core of Yahoo’s business and a huge source of its revenue, even though as a publisher it does sell a lot of display advertising.
Mr. Mann agreed, saying Yahoo should truly integrate search and display and thereby allow companies to purchase both without having to deal with multiple groups in the process.
“Yahoo is in an almost unique position to do some interesting things with behavioral search, meaning they could target people who are reading their Yahoo e-mail based on searches they had done earlier,” Mr. Lee said. “That level of targeting improvement is great. Everyone is at this point where they’d be happy to see ads they are much more interested in.
“Google just bought DoubleClick and could now, after integrating DoubleClick, assuming the deal goes through, be able to start doing that,” Mr. Lee added. “But Yahoo could do it sooner because it’s already got both pieces.”