Sorry about that, Mr Townsend… it really is a great song.
Yahoo‘s current crisis is not Carol Bartz‘s fault — not entirely, anyway. Okay, so she used some salty language, and she kept her plans a little close to the vest, but it was entirely reasonable that she would have been the kind of person the Yahoo board of directors would hire. She was also the kind of person who would fail to change Yahoo to the degree necessary to save it from what
will now be one of two things: A wholesale bloodletting the likes of which haven’t been seen in Silicon Valley since Steve Jobs returned to Apple, or a slow descent into footnote-ism a la MySpace. It is also perfectly reasonable that she would get acclaim for making progress and fired for not making enough progress fast enough to suit a board of directors under fire from everyone for having sat on its hands making other bad decisions while the world passed it by.
All of this seems way too familiar to me, and I have to admit that it makes me more forgiving about some things I’ve seen around Experts Exchange. But since everyone else in the world is offering the Yahoo board advice, and since I’m a long-time sort-of insider at a website that’s made its share of boneheaded mistakes and not only lived to tell about it but is on the verge of becoming what an information resource site should be, all using its own staff and no outside money, I figured I might as well chime in. After all, I’ve lived it, but because I wasn’t on the inside, I think there’s a perspective there that allows me to see where Yahoo has really dropped the ball.
First piece of advice to the Yahoo board: Quit. All of you (except maybe the newbies brought on in 2010) including you, Jerry; you’re an anchor around the neck of the company you founded and love. No one begrudges your passion; but the fact is that while Rome was burning, you were fiddling. You know what you envisioned for the company in 1994, but you let technology and the Internet pass you buy. You acquired relentlessly with no idea of what you were going to do with those properties (thanks for making Mark Cuban rich, though; he’s done wonders for the NBA even though they won’t admit it). Even if you had a vision, you couldn’t communicate that to anyone else — not your employees, not your customers. You’re done; be a cheerleader, go to conferences, but please — step away from the decision-making.
Speaking of Mr Cuban, he should be one of the new board members — maybe even the chairman. The last thing you need to do is stock the board with a bunch of retreads from other boards who will continue to play it safe with a stock that can charitably be called stagnant. Why? Because you’ve sent the Titanic headed for an iceberg, and even if you don’t know it, everyone else does. Playing it safe is just going to prolong the agony; taking a few risks might just save the company.
Second, get a CEO like Tony Hsieh. What separates him from the usual suspects mentioned for the job? You need someone who is unconventional, articulate and fearless. It wouldn’t hurt if he came in with some defined goals; you should start by asking that person to draft the six-word mission statement all those know-it-alls talk about, and then your interviews with prospective CEOs should be a conversation about that. You’ll know the right person when you find her/him; s/he will know where s/he is going to start — not where s/he is going to wind up.
Third, go ahead and listen to all the advice people are going to give you, and then ignore most of it. Let’s start with Jason Calacanis. You remember him; he’s the guy who started a magazine (actually two) that failed, started a blogging company (with someone else’s money) that he sold to AOL, got a job at Netscape that he quit, and now has a search site that is tanking because of Panda. In other words, he’s the prototype idea guy. His solution: buy your way out of trouble — including buying his company for anywhere from $75 million to $150 million — at a total cost of $1 billion with no guarantees you’ll be able to close any of the deals. Now, in fairness to Mr Calacanis, he also suggests concentrating on video, social features and the mobile user, banking on holding on to Yahoo’s existing base rather than doing anything innovative. Since those are the biggest markets out there, one can congratulate him on his firm grasp of the obvious.
On the other end of the spectrum is Erica Naone of MIT’s Technology Review. She makes the case that Yahoo’s problem is that it doesn’t maximize technologies it already has. That makes a lot more sense; one of Yahoo’s problems has always been that it doesn’t seem to have any direction or purpose. If a new CEO is going to re-purpose the company, it would be a lot more effective (in terms of morale, if nothing else) to give employees something to work on that Yahoo already owns, rather than go out and buy a whole bunch of things that need to be retrofitted into an existing system. Retrofitting gets you the Winchester Mystery House; even if it works, it’s still a stairway going nowhere.
Somewhere in the middle is Ashkan Karbasfrooshan, the CEO of WatchMojo. He offers a number of options including buying, selling, doing something at the corporate governance level, doing nothing at the corporate governance level, and selling out completely (or merging, which is — for most people — the same thing). Ultimately, his take is to unload the assets it can’t effectively manage (notably Alibaba) and use the money to buy Hulu, and then go after YouTube. Unfortunately, that ship might have sailed already.
AllThingsDigital’s Kara Swisher ran a story about possible buyers, and there’s the rub; it doesn’t matter what Yahoo’s balance sheet looks like when the perception is that the ship is sinking. That becomes the reality, and while the existing board of directors may not be the sharpest knives in the drawer, they still have a legal responsibility to do their best for their shareholders — all of them — including the ones who are looking for a bargain. Let’s be very clear: private equity firms and such didn’t become very wealthy by making bad multi-billion dollar decisions. Even if their plan is to sell off Yahoo in pieces and then let it quietly go the way of MySpace, they’re not looking to take a loss.
What to do, what to do. First, since Yahoo is attracting attention, forget its stock price. Listen to the offers, because that will give you a much better idea of what the company is really worth. If Joe P. E. Investor offers twice your stock price — currently sitting at $15 and change a share (it’s value has gone up by half a billion dollars in just the last couple of days, in part because of all the stories about how it’s thinking of selling itself) — then Yahoo, with the right management in place, should be able to figure out what it wants to be and head in that direction.
So here’s the plan (after taking steps one and two above — which are conditional for success):
- Clean house. Some things at Yahoo work very well — mail, messaging, some sections of their media — so those stay. Others don’t; either unload them or bite the bullet and let them sit there unusued — but don’t waste another dime on them.
- Dump the Asia properties for a lot of cash; play hardball and force Alilbaba to make it worth Yahoo’s while to go away. It’s going to hurt Yahoo to do that, but your best way out is to make it hurt Alibaba even more. But you don’t need the distraction.
- Clarify who you are. There’s the mission statement thing, but more importantly, start thinking in terms of being a start-up. Ask yourself: “What’s the point of Yahoo?” — then build THAT. People will like it or they won’t, but at least you’ll be halfway relevant.
- Stop the BS. You’re NOT a highly respected company, so having a “Chief Yahoo” makes you a joke.
- Connect with your users. You have the technology to interact with them, to respond to them, and to measure them down to which brand of toothpaste they use — so do it.
It should take you about a year or so, but at least then, people won’t be thinking of you in terms of getting something for nothing.