When Yahoo’s stock hit $12, we said it was ridiculously cheap. Now it’s below $9. Given that no one else seems to want to buy and fix this once-great and still amazingly valuable company, we’re now offering to do it ourselves.
We have the privilege of being a co-host of Yahoo’s “TechTicker” financial show. So that makes this an employee-led turnaround plan. To execute the plan, we’re going to need the support of many other Yahoo employees, including Jerry Yang, David Filo, and the Board, so we’re just going to call this a management buyout. Cool?
We’ve structured our proposal to be as simple and easy as possible: No need for shareholder votes. No need to raise billions of dollars of capital (who has time for that?). No need for interminable, angst-ridden negotiations. We’re also making the proposal completely transparent, so our fellow Yahoos and shareholders know what’s coming.
Here’s the plan:
- Yahoo will acquire our parent company, Silicon Alley Media, for stock. We already own some YHOO, and we’re willing to put more money where our mouth is: Specifically, we’re willing to bet our entire company on our YHOO turnaround plan.
- Yahoo will appoint us as acting CEO. No worries: We will not become yet another fat CEO pig at the trough. In fact, we’re so excited about this opportunity that we’ll do it for Jerry’s salary: $1 a year (OK, maybe we could add some zeroes. But not six. Or, god forbid, eight). We also have no ambition to hold this post indefinitely. Several folks in the business world are more qualified to run a global Fortune 500 company than we are, and when the time is right, we will gladly hand the reins to one of them. Unlike many incoming Yahoo CEO candidates, however, we know what Yahoo needs right now, and there’s no sense wasting time CEO-hunting when we can start the process today.
- We will immediately resize the company, cutting approximately one-quarter to one-third of the cost base. Even now, with its bloated cost structure, Yahoo is still making money. Our cuts will ensure that Yahoo is positioned to survive a major online ad downturn and still have plenty of cash flow to reinvest in the business. One big reduction instead of several small ones will also ensure that Yahoo doesn’t go down the road it is heading down now, which is the demoralizing death by a thousand cuts.
- We will do a search deal with Microsoft. Yahoo has lost the search game, and it is senseless for the company to throw more good money after bad. Yahoo will continue to maintain a significant if declining share of search queries for the next few years, but these can be monetized better with economies of scale, and the company can avoid mindless and expensive duplication of effort. Microsoft is great at engineering and desperately wants to show Google who’s boss. We’ll sell Yahoo’s search technology to Microsoft and do a multi-year revenue deal with them. And when it comes up for renewal, we will play Microsoft and Google off one another.
- We’ll step up Yahoo’s focus on content aggregation. Algorithms cannot create the best user experience for every application. Yahoo highest and best opportunity is to do what Tim Koogle used to talk about in the 1990s and Jerry has been suggesting over the past year: Become the first stop for anyone looking for an intelligent, organised view of the world. The company has made great strides in this effort over the past 14 years, but it has gotten distracted of late. We’ll fix that.
- We’ll increase Yahoo’s production of lightweight, high-velocity online content, through programs like TechTicker, blogs, fantasy sports leagues, etc. With a distribution platform that reaches 500 million global users a month, Yahoo can make a killing on low-cost content production. We will not turn Yahoo into the New York Times (which is a dying print business.) Instead, we will hire a few more folks from the New York Times and other excellent content-production companies (people who get the Internet). These folks will help edit, curate, and organise all the great content that’s already out there and produce some good original stuff. (But not TV shows or magazine articles. TechTicker works because it takes advantage of what the Internet can do better than other media, not because it tries to clone CNBC or a newspaper).
- We will buy or build small consumer subscription businesses that produce content that people will pay for…and then we will plug them into Yahoo’s massive global distribution engine. In several years, we will build subscriptions into a major contributor to revenue, not the afterthought they are today.
- We will fix Yahoo’s communications platform, in part by buying and integrating AOL (and, if we can help Steve Ballmer see the light, MSN). As long-term Yahoo Mail users, we are appalled that Yahoo has fallen behind in this area. We don’t want to switch to Gmail, but if nothing changes, we may have to. Once we’ve integrated AIM and the AOL mail user base, we will once again have a dominant share of online communications. We’ll probably buy Skype, too, just to round out the package.
- Most importantly, we will finally revolutionise online display advertising, which hasn’t innovated since 1995. We can’t tell you how tired we are of hearing advertisers complain that their display ads aren’t “performing” because people aren’t clicking on them. The same advertisers still line up around the block to buy unclickable ads in newspapers that get tossed on the back stoop without even being glanced at. It is time for the online ad industry to start developing better BRAND and STORYTELLING solutions. These ads can be big. They can be beautiful. They can be fun. They DO NOT need to be clicked on. If we do this intelligently, users should even come to value and/or enjoy them. No company is in a better position to lead this online ad revolution than Yahoo, and we can’t wait to drive this initiative forward.
Sound good? We think so. We’re not guaranteeing much of a turnaround in the stock price until the global economy recovers, but we’re going to position the company to coin money when it does. We’re going to stop Yahoo from trying to boil the ocean and compete in businesses it has already lost (search engineering). We’re going to take advantage of what Yahoo does better than anyone: content organisation and display advertising. We’re going to inspire what used to be one of the industry’s most passionate and competitive teams.
Despite its demolishied stock price and demoralized staff, Yahoo remains a one-of-a-kind global media platform. With the right turnaround plan, we think the company’s best days (and possibly even best stock prices) are ahead of it. We would be honored and privileged to lead this revolution from within!
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