Yahoo!’s Struggles Continue

Implications: Yahoo! and its co-founder-turned-CEO are facing a tough time putting the company back on track.

Analysis: Jerry Yang, Yahoo’s co-founder, is a reluctant CEO who took over the post when Terry Semel left the company.  Semel, a long-time media executive who headed Warner Brothers motion picture studio, was supposed to bring Yahoo into the new millennium with an increased focus on media and content.  Semel took over in 2001 when Yahoo was in poor shape with the Internet bubble bursting, online advertising slowing dramatically and Yahoo!’s market capitalization dropping from over $120 billion to roughly $12 billion.  He and his team had a good run, doubling the company’s registered users to well over 400 million, and boasting the most-used e-mail, instant messaging and music sites.  He also led the company into profitable and growing search business in 2003 with the acquisitions of Inkotomi and Overture.  

Where the company never quite hit full stride is in striking the right balance between content (generation and aggregation), monetizing their communities, networking, advertising and search.  In the lucrative and important search business, Yahoo! consistently ranks a distant second to Google in with a 20-25% market share.  Last year, Yahoo! unveiled Panama, its updated search platform, in an effort to generate more relevant ads and close the search gap.  The results were not good enough to keep Semel in place, and Jerry Yang took over and promised significant change.  

Jerry Yang is well respected at Yahoo!, and in the technology community.  He took over a company in need of sharper strategic vision and a management shake-up.  One company executive published a piece called the “peanut butter manifesto,” in which he claimed that Yahoo! spread itself too thin with various underperforming initiatives.  Jerry Yang will eventually turn the CEO reigns over to someone else but finding the right candidate is quite difficult.  Yahoo! sits at a critical juncture between media, technology and advertising, and through Terry Semel’s experiences one can see that striking the proper balance within each of those fields is a complex task.  Suffice it to say that if Yang steps down as CEO, he will not be far from the decision making at the company he co-founded in 1994 as a PhD student.