'Pathetic' Yahoo! Fights For Credibility

Jerry Yang ... Under Pressure

By Martin Kelly, Editor, Search Engine Room

ANOTHER day, another negative headline about Yahoo! – the company which once defined Search and the Internet but is now under attack on all sides after rejecting various approaches from Microsoft. The latest broadside comes from billionaire investor T. Boone Pickens who yesterday dumped his Yahoo! stock and told the San Francisco Chronicle that management is “pathetic”. Other investors will get a chance to have their say at the company’s annual meeting this Friday.

The past six months have been a nightmare for Yahoo!, which runs one of Australia’s most popular Internet portals plus a search network struggling to maintain its already anorexic market share. Not much news of out the Aussie bunker recently, but non-stop chatter from the US where there have been a slew of senior staff departures, while its search monetisation deal with Google has gone down like a lead balloon with sections of the search marketing and advertising community.

Meanwhile, the decision by Yahoo! senior management to rebuff the Microsoft takeover bid looks … wrong. MSN was offering US$33 for shares now worth US$22.50 give or take, which goes a long way to explaining investor ire, though key agitator Carl Icahn appears to have been placated for now. Yahoo! also rejected a couple of more complex approaches for its Search business.

Since then, lots of senior executives have left, among them Search honchos Jeff Weiner, Vish Makhanji and Qi Lu. Other departures include Bard Garlinghouse (author of the infamous Peanut Butter manifesto), its best-known blogger, Jeremy Zawodny and Flickr founders Caterina Fake and Stewart Butterfield.

As for Search, Yahoo! has signed a 10-year agreement with its former arch-enemy to run Google paid ads on its US and Canadian sites. These ads will be mixed in with Yahoo’s own paid advertising. This means Yahoo! Search is no longer competing with Google. The enemies have become partners in a deal that Yahoo! – so desperately craving stock market credibility – claims will generate an extra US$800m in revenue in the first year. Yahoo! President Sue Decker says Google content will be used to backfill paid search inventory for less popular and lucrative terms.

That may be the case, but there’s little doubt which company benefits most in the long term from the deal. And it doesn’t start with a Y.

Search Engine Room July 30, 2008