Yahoo!’s Jerry Yang to quit

Jerry Yang to quit as Yahoo boss

Maggie Shiels Technology reporter, BBC News, Silicon Valley

Mr Yang made the decision to quit as CEO last month, the BBC was told

Jerry Yang, the co-founder of Yahoo, is to stand down as the internet portal's chief executive officer.

His departure follows lengthy criticism of his stewardship of the company, which has seen its share price collapse to about $10.

Earlier in the year he fought off a hostile takeover bid from Microsoft which offered $33 a share.

Mr Yang also told the workforce that he would be participating in the search for his successor.

"I will always do what is right for this great company," Mr Yang wrote in an e-mail to employees.

The BBC was told that Mr Yang made the decision to leave as chief executive officer last month. No names were given as to who will succeed him.

The company, based in Sunnyvale, California, said it is interviewing candidates inside and outside Yahoo in a search led by chairman Roy Bostock.

"Jerry and the board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level," said Mr Bostock.

low shares

Earlier this month at the recent Web 2.0 Summit in San Francisco, Mr Yang surprised the industry when he told conference attendees that Microsoft should still buy the company.

"I don't think it's a bad idea at all, at the right price whatever that price is. We're willing to sell the company," he told a packed audience.

The declaration came hours after Google had pulled out of an internet advertising deal with Yahoo amid increasing scrutiny from the Department of Justice.

Mr Yang said he was "disappointed" Google had pulled out of the partnership.

Mr Yang's e-mail to employees ended with the words: "All of you know that I have always and will always bleed purple" - in reference to the predominant colour on the company's logo.

Yahoo's shares closed on Monday at $10.63, giving the company a valuation of only $14.7bn.

Face value

Portal of doom

Nov 13th 2008
From The Economist print edition

Yahoo!’s Jerry Yang, a nice person and a pioneer of the web, must go

AFP

NOBODY would have been surprised if he had pulled out. Hours before Jerry Yang of Yahoo!, one of the world’s largest internet companies, was due to appear on the stage at an industry conference in San Francisco on November 5th, a big part of his firm’s strategy disintegrated. But Mr Yang gamely turned up at the Web 2.0 Summit nevertheless, and in his gentle and polite way tried to explain how it had all gone so wrong. This has been a “pretty amazing year”, he said with understatement. But he couldn’t quite bring himself to admit that he had made a mistake in June 2007 by taking over as chief executive of the firm that he and his friend David Filo had founded in 1994, at which they had since held only the tongue-in-cheek titles of “chief Yahoos”. Yet a mistake it clearly was, and it is time for Mr Yang and Yahoo!’s shareholders to say so.

At the time Mr Yang thought that he could, through sheer passion for his creation, revive the ailing company. He had been one of those who, during the dotcom depression, invited a Hollywood mogul, Terry Semel, to run Yahoo! and turn it into a media company. Both Mr Semel and Mr Yang, however, missed the significance of a new rival, Google, even though Messrs Yang and Filo had helped Google’s two founders—all four had been graduate students at Stanford—to get started only a few years earlier.

Whereas Yahoo! saw itself as a “portal”, or gateway, to media content on the web, Google gave web surfers a simple search box as their starting point. Whereas Yahoo! still thought of advertising as the equivalent of neon signs flashing on a web page, Google placed tiny text snippets in the margins of its search results, targeted precisely at the keywords of the search and charging advertisers only when people clicked. In time, Yahoo! understood that Google’s way was the future and tried to catch up—first by hiring Google to supply search, then by firing Google and buying and building its own equivalent. But it was too late to catch up.

Mr Yang, who by nature is a non-confrontational sort of person, loyally supported Mr Semel until the very last moment, telling The Economist in May 2007 that he and the rest of the board were “in lockstep” behind their leader. One month later Mr Semel was out and, to some surprise, Mr Yang took his place. But things then began to go even more wrong.

The man whose big and lovable smile had once greeted millions of newcomers to the internet with “Jerry and David’s Guide to the World Wide Web” soon found himself testifying before Congress, with a grieving Chinese mother sitting behind him, about exactly what information Yahoo! had shared that had led to the jailing of two dissidents in China. Back at the office, Mr Yang had to deal with warring fiefs and bitter personal rivalries. Executives kept leaving, engineers were demoralised and innovative projects were put on hold.

Then, in February this year, Microsoft offered to buy Yahoo! for $33 a share. This could have put Mr Yang out of his misery. Microsoft, which owns a portal similar to Yahoo!’s and a search engine even further behind Google’s, wanted to combine forces to put up a better fight. Mr Yang said no. Several big shareholders revolted, but Mr Yang insisted that the price was too low. In the end, Microsoft gave up in frustration. “A lot of people have replayed that in their minds; I’m no exception,” Mr Yang said ruefully at the conference. With Yahoo!’s share price now at $12, he is eager to prove that he negotiated in good faith. At the right price, “we were willing to sell the company,” he said at the conference, but “they walked away.” He said that “I don’t have an ego about remaining independent” and that “both sides are to blame.” Perhaps.

But Mr Yang never offered a clear alternative to Microsoft’s proposal. He went back to his friends at Google, who obliged by offering an advertising alliance that might have given Yahoo! some extra cashflow to tide it over a restructuring. The drawback was that the deal would have had Google, already the dominant power in search advertising, placing its ads next to Yahoo!’s searches in America. Trustbusters were suspicious, even when Google offered to make concessions. That is why Google, thinking of its long-term antitrust strategy, abandoned the deal on November 5th, shortly before Mr Yang took to the stage. With a sad shrug, Mr Yang admitted that he was “disappointed”.

Now what? For years, there has been talk that Yahoo! and AOL, a portal owned by Time Warner, a media giant, should merge. They are similar, but it is hard to see how combining two long-in-the-tooth portals could somehow create an innovative Google killer. Both rely heavily on branded “display” advertising, which is suffering far more in the recession than the more precise search-related ads that are Google’s mainstay.

Annus horribilis

Mr Yang does not deserve the blame for all of this year’s woe. Bad things can happen to nice people. But he has never even given a convincing answer to the question of what Yahoo!’s strategy should be in an ideal world. To be a “starting point” for half a billion web surfers, Mr Yang likes to say. But how is that different from the old “portal” idea which stopped working long ago, or the search box that Google in effect controls?

Mr Yang told the conference audience that he wants Yahoo! to become a “platform company”, suggesting that outside developers should build applications to make Yahoo!’s services more useful. But Microsoft, Google, Facebook, Amazon, Salesforce.com and all other self-respecting technology firms nowadays want to become platforms, too. Why should Yahoo!, which has been less innovative, be the one to succeed? This argument is the one that pains Mr Yang the most. There is a “perception that we’re following,” he admitted, but “we do believe we’re innovating.” The audience of web entrepreneurs, many of them once inspired by Mr Yang’s example, let the matter drop. It is a bit sad to tell this old web hero to go. He must decide to do so himself.