As Yahoo’s board flails about trying to figure out a way to please angry shareholders, we decided to reach out to a former executive from Yahoo’s last great era – back when Terry Semel was still hailed as a comeback CEO and Yahoo had a stock price above $40.
What this old-timer told us was interesting and it surprised us. He said that those good old days weren’t so great.
He says that Yahoo’s success was built on a false premise. He says that executives backed then milked this lucky success for all it was worth in the short term, and that mistake is the real reason Yahoo is in such bad shape today.
Here’s the conversation…
BUSINESS INSIDER: When were you at Yahoo?
YAHOO OLD-TIMER: I got there towards the end of the boom times, when Jeff Mallett and Tim Koogle were running the show, before the bubble burst. Then I left [around the time] when Yahoo peaked at $43 per share.
BUSINESS INSIDER: People forget that Terry Semel led a revitalization, right?
YAHOO OLD-TIMER: The internet blew up and people were paying ridiculous sums of money to advertise on Yahoo. I remember doing this deal with Barnes and Noble, we did this 30 million dollar deal over 3 years, and they just thought they had to be there. The reality is everybody was paying too much money to be a part of Yahoo back in the go-go days. We were generating revenues that were built on false premises.
When Semel came in, he didn’t really change anything. We did re-tool and re-focus, and the advertising business came back, and Terry looked like a genius. [But] He didn’t really do fundamentally anything that different, except, I think brilliantly took out half a billion dollars and managed for the short term.
BUSINESS INSIDER: He did get paid didn’t he?
YAHOO OLD-TIMER: He did. He and the crew did a really good job of hitting quarterly numbers and showing great growth. But they weren’t strategically building for the long term. He’s no Jeff Bezos or Mark Zuckerberg. There was no focus on what they should be, and having a lack of what they should be, they never really invested in the right things. That was a problem.
BUSINESS INSIDER: Then Google comes out and Wall Street wants Yahoo to be Google, and without its own strategy, it couldn’t find the comparison, right?
YAHOO OLD-TIMER: Yeah, they’re fighting Google’s war. Hindsight is 20/20 but If Yahoo had decided to become the graphical media network for the internet, that would have been a much sounder strategy, they probably would have succeeded. That’s where Yahoo was the greatest, the best sales people, the best sales force, the best selling machine that existed on the interment. They thought they could fight Google at search and they just couldn’t. Impossible.
BUSINESS INSIDER: There was a lot of talent at Yahoo back then.
YAHOO OLD-TIMER: I’d argue in some ways,Yahoo was a little bit like the GE of the Internet. If you look around at Accel and Greylock, Jeff Weiner running LinkedIn, Qi Lu at Microsoft. Yahoo had a lot of really good people who are now doing a lot of great things all over the place. They never really gave those people the investment and the resources they needed to really go for it in any of their respective areas We all had great 90% margin businesses that were good but not great (except Yahoo Finance was probably the best property on the web, for that category).
BUSINESS INSIDER: Sounds like the problem was was running the business quarter by quarter.
YAHOO OLD-TIMER: Yeah, exactly. We were really proud of running these business that had the best margins in the world but none of us were investing that deeply. It wass very profitable, but they weren’t investing in anything that would have allowed us to win in the grand scheme of things.