After revamping the board of directors, suing Facebook for patent infringement (Facebook has countersued Yahoo) and eliminating 2,000 jobs (14 percent of its global work force and the sixth downsizing in four years), Yahoo's new CEO Scott Thompson laid out his plan for reviving the Yahoo brand and its flagging bottom line.
Echoing former Yahoo CEOs Carol Bartz and Jerry Yang, Thompson said in his memo Tuesday, "For Yahoo! to win in our core business, every one of us must put our customers first. Specifically, we must focus all we do on the users who trust us to give them personalized content and communications, and the advertisers who want to connect with our users. To be very clear, our highest priority is winning in our core business and that will earn us the right to pursue new growth opportunities."
Every CEO wants to make consumers and advertisers happy, so no new direction there.
When Bartz took the helm at Yahoo in 2009, she said the goal was "simple." The idea being "to consistently deliver awesome consumer and advertiser experiences, everywhere in the world we do business. Delivering great customer experiences is everyone's job at Yahoo!--and each part of our organization will have a clear role in making that happen every day."
At the beginning of 2008, company co-founder Yang, then also CEO, made an appearance at the Consumer Electronics Show, and outlined how he planned make Yahoo an indispensable starting point for consumers' Web experience. "We call this life with an exclamation point," Yang said. "At Yahoo we want to be most essential starting point for your life," and "take the complexity of the Web and simplify your life through very powerful technologies."
That was the rhetoric. Let's take a closer look at the numbers. Over the last four years Yahoo has been unable to get back on a growth path, and Google, Facebook and others have eclipsed the iconic Web brand with more innovation and revenue growth. Despite that downward slide, Yahoo has grown to 700 million monthly users and has a dozen leading sites in its portfolio. The company generated $1 billion in net income on $5 billion in revenue for 2011. However, Facebook, with less than one quarter the number of employees, generated $1 billion in profit against $3.7 billion in revenue for the same year. Yahoo's market cap is around $18 billion, and post-IPO Facebook will be above $100 billion.
Yahoo CEO Scott Thompson
Like those who came before him, Thompson is drafting his organization to wring more revenue from its base of users and advertisers via more innovative, compelling products. Based on his reorganization memo, Thompson isn't doing much different structurally from his predecessors. As in past regimes, Yahoo will have sales, technology and product groups.
Bartz, who spent years as CEO of computer-aided design software maker Autodesk combined technology and products into a single group in her reorganization to "deliver global products that enable extraordinary consumer and advertiser experiences."
Thompson, a big company CIO before becoming President of eBay's PayPal division, carved out technology as a separate group but in his reorganization memo also said that he would "deploy top design and engineering talent into our Consumer business units....to ensure we move much faster and meet customer needs with every product we deliver."
Shashi Seth is leading a group that includes search, communications and social properties, such as Flickr and Mail. Thompson wrote. "The highest priority for Shashi and his team will be to think well beyond how users search, communicate and share online today. The Connections team is charged with fundamentally re-imagining how we design and deliver the next generation of these foundational Yahoo! Experiences." In other words, Yahoo hopes to leapfrog Google, Facebook, Twitter and others who they have fallen behind.
Leapfrogging the competition requires great vision and leadership, as Steve Jobs demonstrated in the last decade in reviving Apple. But it also takes talent and a culture of rapid innovation, which Yahoo has not exhibited lately. In its absence, Yahoo has suffered a grand exodus of talent in the last few years. Turning that trend around will not be easy given the intense competition for the best engineering, design, marketing and sales talent in Silicon Valley and other environs.
Thompson, who will have a year to prove that his administration is having a positive impact on Yahoo's business, faces some major challenges.
Upon taking the Yahoo job, Thompson said he wanted to get Yahoo's business "back to innovation and disruptive concepts." "Innovation" and "disruption" are code for having major wins versus the competition. Put in a more straightforward manner, he needs to figure out what Bartz couldn't--how to a extract a dollar or two more per Yahoo user in the next 12 months.
Thompson also needs to further refine Yahoo's focus, which could make it an even smaller company. Competing in search is not a winning strategy. Search revenue is in steady decline, and Yahoo has a lot of resource focused against it. The social networking train has left the station, and Yahoo is in the caboose. Selling its 40 percent stake in Alibaba and its 35 percent stake Yahoo Japan would bring a huge amount of cash for acquisitions.
Thompson is no stranger to managing large organizations, but he is a stranger to managing what is fundamentally an advertising media and content business. At least he understands that Yahoo is a media, not a technology, company.
"Our success is determined by how well we engage consumers and give them fun and informative experiences that they feel were designed just for them, on all screens," Thompson wrote in his memo.
It's the tune every Yahoo CEO has sung. In the coming months we'll see if his version of the tune can get Yahoo to rise in the charts.
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