On predictions

It’s that time of year, here’s mine:

1. Kiva will break $100m in loans
2. Microsoft will buy Facebook
3. Google will buy Delicious
4. Microsoft will buy what’s left of Yahoo
5. Jerry Yang will leave Yahoo for good
6. Steve Jobs will step down as Apple CEO
7. Social networking will crack its business model
8. Google’s share of online advertising dollars will fall

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On Carol Bartz

Carol Bartz is Yahoo’s new CEO, and its last. To remain as an independent company Yahoo needs not only a great leader but a great innovator. By appointing Bartz the Yahoo board has signaled it is getting ready for a sale once the market picks back up. I can’t see a 60-year old wanting to hang around too long so Bartz will whip Y into shape, sell it and retire.

To my mind Bartz comes into the ‘manage decline more efficiently’ category of CEO. There is no suggestion in her background that she is a great innovator, her qualification for the job seems to be that she whipped a chaotic Autodesk into shape. Yahoo is certainly chaotic but I suspect Bartz’s job is to bring order in readiness for a sale rather than put it back on its feet, a task which is close to impossible. Charles Arthur picked up on the key phrase in her remarks “I believe there is now an extraordinary opportunity to create value for our shareholders”.

Fairly early on she will start to rationalise the business, getting in cash for valuable yet peripheral assets and selling off a lot of Yahoo’s startup acquisitions. Flickr could go and it would not surprise me to see Yahoo lose Delicious in this fire sale and with Joshua Schachter now at Google that is its most likely destination. She is certainly decisive to carry this off in short order, Bartz was not shy in applying the boot to Sue Decker’s behind. Despite Jerry Yang’s protestations I expect he will formally depart as ‘Chief Yahoo’ once he realises Bartz’s objective is to gut the company ready to be sold.

Arthur points out that Yahoo made “$660m on revenues of $6.97bn”. I wonder how many of its 15,000 contribute to that seven billion dollars. Bartz will not take long to find out and it would not surprise me to see that number cut in half inside a year. That should deliver a short term boost to profits enough to attract a buyer. Once that process is complete Yahoo will go looking for a buyer. The most likely candidate is still Microsoft and they will be attracted by a lower price and willing suitor this time round. An additional benefit to MS is that that can sit back while Bartz does all the dirty work then be seen as the benign saviour rather than moustache twirling villain.

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On the end of Yang

Despite my hiatus I could not let this news pass. Jerry Yang has finally resigned as CEO of Yahoo bringing an end to a disasterous tenure in which he spurned a $33 per share offer to acquire the company only to see it sink to $10. Now this is not all Jerry’s fault, every stock has taken a battering since the summer, but it is mostly his fault. Every move he has made has been hedged around with vacillation and uncertainty because, in short, he is not a leader.

The real reason Yahoo is doomed is that it hasn’t really changed since 1994. Admittedly Google hasn’t really changed since 1996 but Google was built around a genuinely brilliant insight from Larry Page which spelled the end for the portal strategy of which Yahoo was the prime exponent. They may not have set out to do it like MS did with Netscape but make no mistake Google killed Yahoo.

The bottom line is Jerry Yang was never cut out to be a CEO. And like anyone stuck in a job they are not suited to the best thing to do is pack it in. I bet Jerry never felt so relieved as he did yesterday, what Yahoo needs now is someone who thrives in adversity.

On neglect

I’m neglecting the blog. We’re getting to the point where more of my time is being spent on the company plus I have been following the US elections so I haven’t been looking at the tech press so much. I was going to write another post about Jerry Yang’s plaintive cry for a Microsoft takeover but it is getting tedious. He should just quit but nobody else would do much better with Y! They need a Steve Jobs – Yahoo version and that person does not exist.

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On Yahoo coming apart

We are entering the endgame for Yahoo. The company will start to come apart and I think that is the right thing to happen. In a sense Yang’s leadership has been the best thing, if not for the company than for the broader tech industry. Yahoo always struck me as incoherent. Its Asian business is doing well independently of the US and would probably be much better off set free.

The US business has accumulated a lot of different sites which would perform better as tighter, more focused independent units. Delicious is one obvious example I have written about many times in the past. Flickr was another I initially dismissed as ‘money losing fluff’ but I now admit I was wrong. I saw the light when I started to use it and when the did the Getty deal. At the moment these and others are trapped inside Yahoo’s bureaucracy and being dragged down by it.

People talk about the benefits of size but all these really boil down to is common accounting, payroll and other back office functions. I have been reading a lot about organisation and the one I find most appealing is WL Gore. No unit in the company can exceed 250 people as that is the limit for an effective organisation. When the limit is reached a plant is split in two. It seems to me that this is the only way to run large organisations – as a federation of smaller ones all of which have maximum autonomy. Yahoo’s main problem at the moment is that its best companies are being crushed by its own size. It is the corporate equivalent of the Soviet Union and we all know how that ended.

Pic: Chen Yang

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On how not to manage

Image via Wikipedia

The latest episode in the Jerry Yang series ‘How not to manage’ is airing. Tonight’s installment? How not to fire people. Kara Swisher reports:

these sorry souls have not been officially selected yet and true departures will not start immediately

What I like about Jerry Yang is that you can learn how to be a successful CEO just by doing the opposite of what he does. He is the George Costanza of management. It is a classic case of someone doing a job they are simply not suited to. Jerry’s just too nice to fire people so he agonises over it and by doing so makes it 100 times worse. Somebody please put him out of his misery.

On Yahoo dying

I haven’t written about Yahoo for a while because there is nothing to write about. Yahoo is dying.

Mike Arrington reported the latest stock drop, it now stands at $13 after turning down $31 from Microsoft. With the markets in turmoil everything is down good and bad. But while most tech stocks will come back stronger Yahoo will not make it.

The basic problem is management. As CEO the buck stops with Jerry Yang. He is not a leader and it shows. He is constantly looking over his shoulder and conducting reviews. In this position a leader should know what needs to be done, have a plan and get on with it.

You can get away with muddled management in a truly great company. I don’t have that much more faith in Eric Schmidt, the money machine was in place when he got on board and he has done not much except ride it. Google has such a great business that it doesn’t matter that the rest of their plans go off half cock. You can’t get away with it in a company that is in trouble. Great leaders can turn around ailing companies. Look at Steve Jobs, Apple was on the floor when he went back, arguably in a worse position than Yahoo was in when Yang took back the reins, and it skyrocketed after he went back. Say what you like about him but Steve Jobs knows where he is going, when he went back to Apple he didn’t need 100 days to sort it out. He knew what to do before he arrived.

On convergence

The NY Times scoffs at Jerry Yang’s future plans for Yahoo as the much maligned CEO has cried wolf too often to be taken seriously. Many people have decided he is a dilettante with no idea other than to fend off Microsoft and gently ride Yahoo into the ground. I had a similar view but Yang’s insight that Yahoo should become a gateway to the Internet shows a glimmer of potential.

Now some will say this is nothing new, Yahoo is already a homepage and this is true. However it misses the importance of the gateway as the web shifts from text to video and from the desktop to the TV. This will also change the fortunes of the big tech companies. First of all Google. At the moment they reign supreme because they control text search. Google knows that video is its weakness and it is what led to the mistake of buying YouTube. Ironically the purchase they should have made is Digg as Kevin Rose seems the person who understands social search best.

Because there are no links between videos PageRank’s magic doesn’t work and Google is reduced to a keyword search of the title or tags. And this is where another of Yahoo’s properties will come into its own: delicious. Where Google is weak delicious is strong. The beauty of using delicious for video search is that it can search by analysing links between users as it already knows who tagged what.

Whether or not Yahoo manages this remains to be seen. Further on in the NY Times article there is a reference to ‘300 vice presidents’ which neatly encapsulates Yahoo’s problem. The problem is not that Yang doesn’t have good ideas, just that he can’t decide between what’s worth pursuing and what isn’t.

Pic: zemistor

On Breaking up Yahoo

Kara Swisher raises the spectre of a private equity takeover as Yahoo’s price slides below $20. This would put its market cap at around $27bn and put the company at the mercy of corporate raiders who would make Yahoo execs pine fondly for a Microsoft takeover.

The underlying message is that if a private equity group got hold of Yahoo they would gut it of its profitable businesses then mercilessly dispatch money losing fluff like Flickr. I don’t think this would be any bad thing, in fact I think it is probably the best way to get value from Yahoo and it would also set diamonds like delicious free or at least to a company that truly understands them.

Reality bites

If you read Glassdoor the complaints about any of the large tech firms is that they are overly bureaucratic. If there is a money machine attached to the bureaucracy then the markets pretty much let executives get away with their mad, pet schemes. However when the cash stops gushing in then the fun stops. Carl Ichann got tired of it with Yahoo and I suspect as each day passes facebook investors are getting tired of spray painted offices and beer pong competitions. When private equity firms see this stuff they don’t mess around, it all goes. And this is exactly what Yahoo needs: a dose of reality.

If that means the company being broken up then fine. Jerry may shed purple tears but he has only himself to blame.

Read more:
On Yahoo’s problems
On the return of Microhoo

Pic: Fake Steve

On Yahoo’s problems

Nobody currently employed by Yahoo has the answer to Yahoo’s problems. Sue Decker just announced a reorganisation of the few remaining executives she has but with people like Qi Lu and Joshua Schachter gone it boils down to rearranging (rickety) deckchairs on the Titanic. I doubt if they can actually agree what Yahoo’s problems even are, let alone solve them. Brad Garlinghouse came closest with his peanut butter manifesto, but he left too. That document boiled down to the observation that Yahoo is unfocused and bureaucratic.

The result was that in the good times Yahoo went on a totally random spending spree with no idea how all the acquisitions fitted together. As I have said before this approach has meant they lucked out and got hold of delicious and Schachter for an absolute bargain $30m. Unfortunately they then proceeded to do nothing with the only tool which could make any meaningful impact on search with the result that the man who created it subsequently left the company.

Sculley’s ghost

When they hit trouble their first instinct was to kick out Terry Semel and reinstall Jerry Yang as CEO. Presumably the idea was some kind of John Sculley/Steve Jobs mojo but the plan had one minor flaw: Yang is not Jobs. To a large extent companies reflect their leaders’ personality. So Microsoft likes to overcomplicate and have fifty different versions of everything, Apple is ultra secretive and design focused and Yahoo can’t make a decision on anything. After a year of fudging all Jerry’s fudge has caught up with him and it looks like the fudgathon is likely to end with a much deserved boot up his backside.

There is no doubt that Yahoo has a lot of good properties which make decent money. They have almost nothing to do with each other so why not spin them all out as separate companies and set them free from Yahoo’s bureaucracy? Then at least they would be smaller and freer to innovate. It may not be the whole answer but with Yahoo going down they need some radical action not endless reorganisations.

Read more:
On Yahoo
On Microhoo
On Microsoft’s biggest mistake
On Joshua Schachter

Pic: Forbes