For the past year, Jerry Yang and Sue Decker have been the primary piñatas for Yahoo’s (YHOO) frustrated employees and shareholders. Much of this criticism is deserved: Yahoo’s problems were clear 18 months ago when Jerry took over and, since then, things have only gotten worse.
But Jerry and Sue aren’t the only problem here. Yahoo’s board of directors has presided over every lousy decision that has been made in the past five years, including the bloat, the complacency, the strategy, and the decision that may go down as one of the worst in business history: To refuse Microsoft’s pre-emptive half-cash offer of $33 a share.
Now that Jerry has agreed to step aside and fall on his sword, Yahoo’s Board has been granted another reprieve. As they search for the next CEO, they can nod at each other and agree: It was all Jerry’s fault.
But it wasn’t, of course. It was the Board that hired Jerry in the first place. Along with Terry Semel, who made some of the mistakes that set up the current mess.
Today’s Wall Street Journal interview with Microsoft’s Steve Ballmer and the latest senior executive to abandon Yahoo–Qi Lu, the new head of Microsoft’s Internet business–makes it clear that at least part of the Board still doesn’t understand some of the strategic issues facing the company. This suggests that the board may well hire a CEO who doesn’t, either.
Steve Ballmer: I think a search deal makes great sense for Microsoft, and Yahoo, and I think I’ve been very open about that…. We’re fully prepared to compete without any partnership with Yahoo. We don’t need to act. Would it be advantageous for both of us to make a deal? Look, the fundamental basis for doing the search deal with Yahoo has to do with critical mass in the advertising marketplace. It doesn’t have to do with technology, or any of these other things, it really is a market phenomenon. Together we would have more advertisers….which means we’d have more relevant ads on our page. We’d have higher monetization levels possible in front of us because there would be more people bidding on more key words. Most importantly, Google would have perhaps a real credible competitor sooner.
I think good ideas are usually better done quickly than slowly, so it would probably be better for both us, and certainly for Yahoo, if we were to do it sooner than later. But at the end of the day, that would have be something Yahoo would be as interested in as I have expressed our interest.
Steve’s right. Yahoo and Microsoft desperately need to combine their search operations to have any chance of not losing more share to Google. Yahoo’s newest board member, the relatively-low-tech Carl Icahn, understands this. Some other folks on Yahoo’s board apparently don’t. This despite Yahoo’s concession last summer that a search partnership with someone made a ton of sense (when it rushed off to do the ill-fated search deal with Google).
Yahoo’s choice of a new CEO may well be the most important decision in its history. If the board makes the right decision, we firmly believe that the company will turn itself around, restore luster to its brand and site, and begin to revolutionise digital advertising and marketing again. If the board makes the wrong decision, however, we think Yahoo will just begin to disintegrate.
As the Yahoo CEO derby continues, therefore, let us not forget the inconvenient truth: The problem starts with the board.