Yahoo's on Life Support: Here's Why

Exactly one year ago to the day, I wrote about Yahoo (YHOO) being a casualty in the search war. The war has taken its toll and Yahoo is on life support today.

It all began when Jerry Yang made the catastrophic mistake of hiring Terry Semel in 2001. Terry had a backward view of the world. His experience was in Hollywood where everything was packaged. The internet business, however, is like a "live play" where you have to think on your feet. And thus, he was not equipped to move Yahoo forward as he was lost himself. He did not even know what email was when he came to Yahoo and he was baffled when employees would send email. He thought they should just pick up the phone and call or walk over to their desks to talk to each other.

Terry's lack of insight lead Yahoo down a path of portalization, where information was pushed to the user. He failed to see that the next generation of internet technology was changing the balance of power on multiple fronts such as electronic publishing, digital marketing, storage and retrieval - all areas suited to search - which Google packages and delivers today using a simple interface.

He ended up turning Yahoo from a technology company to a media company with marginal economies of scale. In fact, Farzeed Nazem, CTO, spent more time filing papers with the SEC over stock options purchases and sales than doing his job, as there was no need for him. It was an internal joke that he was in hibernation.

Susan Decker would routinely tell the press that "Yahoo's goal is not to be number one in search" as Terry had convinced them that a company driven on celebrity power would overcome anything.

They only thing Yahoo had left was eyeballs. I was not convinced Yahoo could continue on this path and I asked Terry if a Microsoft (MSFT) takeover of Yahoo was inevitable. Terry was puzzled. He was absolutely clueless about what was going on. He was more worried about where Brad Pitt might be next so that he could be there and splash some Yahoo money and impress his Hollywood buddies. Terry knew Hollywood was all show and no cash; but with Yahoo money, he could rule Hollywood.

By this time last year, Jerry realized that things were in free fall and he took the helm to avoid a crash landing. Two weeks prior to the Microsoft takeover, I informed Jerry and company that a takeover was imminent. Jerry did not even realize how low they were to the ground. Microsoft offered Yahoo $44 billion and in the end, Yahoo surrendered to Google for pennies.

I believe Jerry Yang is resilient and he might still be able to turn the company around if he remains at its helm after the shareholders meeting on August 1.

As for Terry Semel, he has left behind a trail of destruction. He has made Silicon Valley brainiacs the butt of jokes in Hollywood and he made 500 times more money sinking Yahoo into the ground than he did doing his best work. Today, Terry is still busy selling Yahoo stock and he has sold over $600 million to date.

Comments

[bato sa bato:]

It's very difficult to stomach that a former CEO could still be rewarded monetarily after the company losing millions on his watch !! He is still collecting from the the very company trying to survive that he has caused.It's so appauling and mind boggling that this can be allowed.

2008 Jun 20 12:16 PM

[sweetreveng...:]

I consider Yahoo's downfall a real tragedy, there are so many yahoo employees that are doing their very best to help turn their company around and then there are a small few that are doing whatever they can to bring their own company down as quickly as possible. Perhaps Ms Decker should start looking internal at some of the problems with their own employees, maybe she should start reading some of the comments posted on this site to figure out exactly what is going on inside yahoo, and take the necessary action to correct these employee problems NOW, before it gets too late.

If she doesn't put a stop to these bad employees behavior, then Yahoo will be up against the federal government for allowing their employees to post illegal content to the internet, and we all know what happens when the fed get involved in a company, don't we?

I don't have an axe to grind with Yahoo per say, I do have an axe to grind with a few of the yahoo employees that are disrupting my entire computer navigation and ruining my experiences using the computer and the internet, and because of this, I am prepared to take this fight to the next level, the federal investigators who will investigate the yahoo employees illegal behavior and illegal crimes.

Fair warning Yahoo

2008 Jun 20 12:50 PM

[TheyKnowNot...:]

I cannot stop but wonder that these so call internet giants; google, yahoo...are actually cooking their numbers so that they have advertisers pay them a lot of $$ - did advertisers using google even correlate their real online sales to the so call 'clicks' claimed by these online internet search giants.

Web users want to search for free....we do not start buying something just bcos the online advertisement keep flashing at us...we do our research (any search engines will do), check the price and may not necessary buy online.

Some day these big corporate customers of google or yahoo will realise that it isnt what it seems online advertsing is not really that effective,,,, are google /yahoo the next Enron in the making?

2008 Jun 20 02:24 PM

[williambanzai7:]

It seems like all of these businesses are living off the carcass of the old media advertising industry. Other than the search technology, none of these geniuses has been able to come up with viable monetisation strategy. All the hype about Web 2.0, show me the money! Apple is going to wipe up the pavement with the new I phone, wait and see.

2008 Jun 22 01:02 AM

[tyneham:]

114 Yahoo Executives gone since January 2007, and counting... The question is, do the out going or former directors have the guts to expose Yahoo and/or Google in a way that would help stop defrauding online advertisers every day?

According to a new report from Citigroup analyst Mark Mahaney, there is a huge opportunity ... to capitalize on the growing trend towards online display advertising in the US and abroad. He said display advertising in the US is expected to reach US $8.5-billion or 35% of total Internet advertising in 2008. By 2010, he said display, ads are expected to hit $11.2-billion in the US and $22-billion worldwide.

A decade is too long in digital technology. Citigroup analyst Mark Mahaney failed failed to assess the negative impact of Internet click fraud. Mahaney also overlooed the impact of regulatory scrutiny.

Daya Baran is right. "Yahoo is on life support". It may be too little, too late to avert crash landing, leaving "behind a trail of destruction. Microsoft offered Yahoo $44 billion and in the end, Yahoo surrendered to Google for pennies," in a pending deal that is being analysed by the US lawmakers and Justice Department.

Internet click fraud is underestimated by web-traffic auditors. The fraud is deceptively downplayed by major financial beneficiaries and their small time accomplices or affiliates. Big or not, no online advertiser is immune from growing the fraud. There is mounting unease and concerns over the fraud on all websites that have affiliate programs. These serious, legal issues are not being addressed by the law makers in most countries.

By some logical estimates, click fraud could be over sixty percent. However, even one percent of $90 billion of global 2008-2009 Internet ad spend is too high, mainly because advertisers, big or small, are still deceived, overcharged by millions and thus defrauded every day.

Read how, for example, "Yahoo protects online fraudsters, locks out legal ethical experts," web links here tyneham.wordpress.com , del.icio.us/tyneham?se... where some cases are cited, www.networkworld.com/c... , tyneham.blogspot.com , tyneham.newsvine.com

2008 Jun 26 08:45 PM