Yahoo!’s Glass Is Half-Full

Posted Jun 22, 2008

Yahoo Inc. (NASDAQ:YHOO) is taking an unnecessary beating in the media.  Between TechCrunch, ValleyWag, The New York Times, and The Wall Street Journal, there is an emphasis on all the executives that are leaving.  While this seems like interesting material, there is another side to the story.  These parting executives are now a part of Yahoo!’s past, not the future.  I’m anticipating a brighter future for Yahoo!

On November 18, 2006, Brad Garlinghouse, a senior VP at Yahoo! wrote an internal memo to the company entitled, “The Peanut Butter Manifesto.”  Essentially this memo was stating that Yahoo! was becoming too bloated with vice presidents responsible for managing products that compete with each other within the company.

In 1985, Apple Inc. had a similar crisis.  Steve Jobs created a rivalry within his own employees and deliberately favored certain teams over others.  Around 1985, Apple was developing two GUI-driven computers: one called the “Lisa” and one called the Macintosh.  The employees of both divisions became hypercompetitive to the point where they physically fought each other.

Yahoo! is similar in the sense where the company literally bought companies that would compete with the divisions that they already had going for them.  Below is a list of Yahoo! divisions that directly competed with other divisions within the company:

We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company mentioned by Garlinghouse.
YME vs. Musicmatch
â?¢ Flickr vs. Photos
â?¢ YMG video vs. Search video
â?¢ vs. myweb
â?¢ Messenger and plug-ins vs. Sidebar and widgets
â?¢ Social media vs. 360 and Groups
â?¢ Front page vs. YMG
â?¢ Global strategy from BU’vs. Global strategy from Int’l

In that same memo, Garlinghouse gave a three pillar plan for how Yahoo! can get back on track.  The three pillars were:
1. Focus the vision – Declare who the company is and what they’re not, eliminate duplicate businesses,
2. Restore accountability and clarity of ownership – Redesign performance and incentive systems.
3. Execute a radical reorganization – Decentralize and eliminate as much of the matrix as possible, kill redundancies.

If Garlinghouse’s memo wasn’t enough, in September 2007 Steve Jobs gave over 300 Yahoo! vice presidents a pep talk about how to stay focused and run their businesses.  Many of these VPs have stepped down from these companies.  Currently TechCrunch is counting over 114 executives leaving the company since January 2007.

With all of these leaders leaving the company, Yahoo! can use this as an opportunity to assess which divisions are bringing in the most money and ramp up the talent in that area.  For example, Heads Of Music Dave Goldberg and Bob Roback left the company so this leaves the door open for Yahoo! to determine whether it is feasible to even keep Yahoo! Music open.

Another example is Andy Baio, founder of left Yahoo! recently too.  This also leaves the door open for Yahoo! to assess whether it makes to keep open.  Why are all of these executives leaving?  Perhaps they’re receiving a lot of pressure to perform.  And perhaps they’re receiving a lot of pressure because their divisions are not raking in enough money.

In May 2005, Google bought a mobile social network company called Dodgeball.  Two years later the founders left because Google wasn’t convinced that they needed addititional engineering resources.  After the founders left, Google shut it down. And it was probably for the best.

A few founders of companies that Yahoo! acquired have left the company.  The Flickr founders and the founder are among those that have quit recently.  Now Yahoo! should even consider whether to keep these properties running themselves or sell them off for a good price?

Ford Motor Company is selling off the brands that are causing the company to lose money like Jaguar, Aston Martin, Land Rover, etc.  Yahoo! needs to figure out which of their properties are like the Jaguar, Aston Martin, and Land Rover and figure out what to do with them.

Once they figure that out and put their main businesses back into focus and harness talent in those specific divisions, Yahoo!’s glass will become half-full once again.  Yahoo! deserves to remain at the top.  They were the first to enter the search market and deserve to be as big as Microsoft.