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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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.

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Pic: Forbes

Of all the people to come up with a search engine capable of catching Google I would not have bet on Kevin Rose. My money was on Joshua Schachter but he sold to soon and it now looks like delicious is doomed.

Rose gets what most other tech founders don’t: people matter more than machines. I think this comes from the fact that Rose is not a mathematician nor even a coder. Digg came from an insight he had into what people wanted – to see what other people liked and who was like them.

Algorithms are all well and good but all they can do is analyse what people have already done. Google does this by analysing the hierarchies created by website owners when they link to other pages. Digg can take this a step further by analysing the opinions of the people who read websites, not those who create them. In doing so you would create a better search engine than Google because the number of people who tag pages is greater than the number of people who create them.

People power

Here’s what it boils down to: is Digg’s army of users better than Google’s spider? I think the answer is yes. Rose explains:

We’re creating algorithms that take a look at what you’ve dug and compare it to other people, inside the system, in real time. We have this working on our staging servers right now – it’s not something that we’ve launched publicly – but essentially, when you Digg an item you’re agreeing with that item and all those other people who dug it. So let’s say you’re Digg number 4,000 on something: who are those other 3,999 people you agreed with? What we’re doing with the math behind the scenes is we’re saying ‘OK, you agree with all these other people, what else are they finding out there that you might like? That you might also find interesting? So we’re working on ways to surface those stories – to find quality content before it becomes popular – but also introduce you to new people based on what you’ve been Digging.

Yes! Thank you Kevin! This is what I wanted delicious to do, here’s what I said in my first post on this blog:

The beauty of delicious is that it can look into the mind of other people with similar interests to me, see what they have tagged and return more relevant results. Another advantage it has over Google is that delicious can also assess the strength of a link between me and another user by seeing how many times we have tagged the same page with the same tag.

All Yahoo has to do is analyse these links between users in the same way Google analyses links between pages and it will have a search engine which thinks differently and gives people a real reason to use Yahoo search over Google.

It doesn’t actually make much difference whether it is delicious or Digg. I think delicious is better because its easier to submit links but as it is stuck in Yahoo’s belly the chances of anything original happening with it are close to zero. So if Digg cracks it good luck to them. I don’t think they’ll end up with a social network but they might just crack a brilliant new search engine.

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Pic: Laughing Squid