Bleeding Purple: Yahoo CEO Jerry Yang and President Sue Decker

Jerry Yang is one of the best-known of the Web’s early Internet entrepreneurs. A Taiwan native, Mr. Yang was raised in the Silicon Valley area. He created Yahoo (YHOO) with David Filo in 1994 as a graduate student at Stanford University. Since then, it has become one of the most important brands on the Internet and one of the most highly trafficked sites on the Web. But the company has also fallen on tougher times of late, with challenges from more powerful companies like Google (GOOG) and a spate of Web 2.0 innovations. After former CEO Terry Semel stepped down, Mr. Yang was appointed CEO in mid-2007. While he has struggled to make changes at Yahoo quickly, his tenure was threatened in February with an unsolicited takeover bid by Microsoft.

Sue Decker has also been in the hot seat over the last year, as the No. 2 exec at Yahoo, playing a critical role in its business strategy and vision, as the company has sought to reinvigorate itself. She is responsible for all of the global business operations of Yahoo, including sales, product marketing, product and distribution across the three major customer groups of audience, advertisers and publishers.

• Walt arrives on the D stage to introduce Yahoo CEO Jerry Yang and President Sue Decker. The conversation is prefaced by a short video. Wow, Yang’s trademark deadpan is an extraordinarily effective comedic device ….
• Yang takes the stage to that wistful Charlie Brown music (… kidding), “Purple Haze,” followed by Sue Decker …
• I see the bits with Bill and Steve didn’t make it into the video, quips Yang.
• It’s been an interesting few months, eh? says Walt. Then, cutting right to the chase: where do you stand with regards to Microsoft?
• Yang says it’s been fairly well documented that Microsoft is no longer interested in buying the company. He notes that Microsoft has other interests in Yahoo and Yahoo is doing its best to “understand” them. Yang then repeats the company’s party line on the merger talks, saying that Yahoo is open to an acquisition, but only under the right circumstances. “It has been a very interesting process..we read more about it than we should. It seems Journal seems to know more about what we’re doing than we know. Microsoftis no longer interested in buying the company, and we are talking about other things. We definitely have to understand what they’re proposing…they clearly have an interest in Yahoo and we need to understand more.”
• So you couldn’t come to an agreement on price? asks Walt. Yang says there was more to the failed negotiations than that: “It’s like when you break up with your girlfriend in high school. It very quickly becomes he-said/she-said. I don’t want to look back. But I think we both understand that there is a tremendous amount of power in a combination like the one Microsoft proposed.”

• Yang stresses again that it was Microsoft that walked away from the table.
• What’s going on with Google? Walt queries. Why would you want to outsource your search business? Yang says the company feels very strongly about the way it monetizes search. That said, Yahoo feels there are sources of untapped value — IE: GOOGLE — that could provide new revenues.
• Yang insists Yahoo is very well positioned competitively, but notes that no one ever talks about that aspect of the company. Walt invites him to do so. Yang: I’ll get to that later …

• Walt circles back to the Google issue: The facts are that you and Microsoft as well are both losing market share to Google. So while you may have a principal position in search, it’s slipping.
• Yang says Yahoo is closing the Google gap with Panama, its search-ad business. The company is experiencing good query growth, he adds. And Yahoo is planning some aggressive/disruptive moves in the query game. What those moves are remains to be seen. “We’re just starting to innovate,” concludes Yang.
• Walt asks about employee attrition and how that’s affecting the company’s plans to innovate. Listing the broad spectrum of horrors confronting Yahoo–Google, Microsoft, not to mention Carl Icahn–Walt asks, essentially: How can you innovate when you’re under siege? Decker: “We have had turnover over the years, but our attrition rate hasn’t changed during this process. It has been a little hard to hire, but we have hired more than 600 people in the first quarter. Decker adds Yahoo has a great product roadmap. “We have lots of seeds. …. It’s really a very galvanizing time for our people … Naturally, there are questions and concerns, but it’s also a very uniting time for employees, a time to narrow our focus, and change the game in display advertising.”
• Yang recalls walking into a recent board meeting–not Yahoo’s–and feeling like “I was walking into my own wake. Everyone was like, ‘My God, Jerry, are you all right?'” Yang understands that view, but says the Microsoft/Icahn debacle is a great exercise in crisis management.
• In summary, what does not kill us makes us stronger …
• Walt: I’m not exactly sure you even know what Yahoo is. What is Yahoo’s business? Are you a search company? An application company? An aggregator? And don’t say all of the above …
• Yang says Yahoo is a starting point. We want people to come to Yahoo first thing in the day and throughout the day. “That’s consistent with our roots and right for innovation…. our consumer goal is to be a consumer starting point on the Web–Homepage, News, Mail and Mobile. … The essence of Yahoo is being defined today … We have to be incredibly relevant to the consumer. We want you to start your day at Yahoo.”
• Yang notes that Yahoo touches half a billion people a month. If you look at that base of people, we need to remain relevant to them as they grow up and embrace new modalities–mobile, for example. Yang says Yahoo’s doing this through things like Open Yahoo, which allows developers to use Yahoo’s platform as a canvas. Walt notes that this is very similar to what Facebook has done. “Are you going to have Scrabulous too?”
• Yang says Yahoo’s version of this open API strategy is much richer than those offered by other companies.
• Decker notes that the economics of the social graph accrue at the starting points of the Web. By embracing this open strategy, she says Yahoo can create relevance and social connectivity and, presumably, revenue.
• We’re rewiring Yahoo, she adds.
• Walt introduces the first video question.. and it’s from Kara …
• Kara: You didn’t think you could escape me did you, Jerry Yang? I have two questions for you. The first: When will you have lunch with me?
• Yang says he’ll have lunch with Kara if she donates $500 to Donors Choose. Kara: done.
• Kara: You’re talking about all these wonderful new strategies that will save Yahoo. But you’ve presided over the company’s decline; you are not a new team. Why are you the right leaders to take Yahoo forward? (Damn.)
• Decker meanders around the question for a while and then admits that Yahoo lost sight of the consumer. But now Yahoo is reorganizing and rethinking itself with a renewed focus on the consumer. (That’s great, but why are you the right person to help lead Yahoo?)
• Yang: I’m the best person to run Yahoo, not just because I bleed purple, but because I see great potential in the company. It’s my time to take Yahoo to the next level. Yang says Yahoo has some new idea that’s going to take search advertising to the next level (Could it be Google’s?). Yang says Yahoo needs to make some investment to make this happen. We’re seeing some results already, but there’s a lot more work to be done. Apparently, the way in which Yang plans to transform the Yahoo experience will make it very powerful and successful. (Sadly, he doesn’t really offer any details. Again, he notes that no one is writing about these plans, because they’re all too focused on the Microsoft debacle. Yet, he offers nothing to write about. “Yahoo’s got a lot of potential” ain’t a business model–unless all that purple blood you claim to bleed is rushing to your head.) It wasn’t lightly that I came to the decision to be CEO. I don’t necessarily have all the experience. … I will probably never be a CEO again (!) … but I also felt it’s my time to really take Yahoo to the next level.”
• “Strategically, I want to position Yahoo to be successful in the long term,” Yang says. (Well, that’s reassuring.) .. I know people want to see results. But I think we’re starting to show Yahoo can be on this path to being a different entity.”
• Decker jumps in, noting that the Web’s inventory is undervalued: We’re about to launch a system that monetizes display advertising more effectively, she says. (Oh? What sort of system? … nevermind … )
• On to the Q&A: As Web 2.0 takes hold and people become more social online, how do you see your display advertising strategy changing? Decker: Fundamentally, we see advertising becoming more relevant because we have a better understanding of the user.
• Q: Beyond search and display, is Yahoo looking into advertising on television, radio? Yang says Yahoo’s been working on online video advertising that can be ported to any IP structure, including digital TV. (Guess you’re be letting Google handle TV and radio advertising too, huh, Jerry.)
• Q: Noting Yahoo’s “deplorable customer service for premium products” a write-in questioner asks how serious the company is about premium services. Yang says the company is serious about premium services, but notes that the company sometimes needs to phase out or de-emphasize a product and that that can be frustrating for those who use it. Walt jumps back in, noting that the questioner claims to have canceled all his Yahoo Premium services. What does that say about Yahoo’s customer service? Decker acknowledges that the company has had customer-service problems, but says it takes that facet of its business seriously and plans to nourish it.
• Q: What is the value of Yahoo beyond search? Yang says that’s tough to quantify because Yahoo is a company in the process of reinventing its business. That said, he personally thinks the value is huge. The potential for Yahoo’s display business is enormous, says Yang. Decker seconds that assertion, noting that Yahoo is reducing the friction and adding the targetability of search to display advertising at a time when the display ad market is becoming increasingly fragmented.
• Interview ends. Yang and Decker’s performance tonight offers what may be the single best explanation to date of why Yahoo is in the dire straits it’s in these days.

For more coverage, see The Wall Street Journal.

A note about our coverage: This live blog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations expeditiously written and posted to the Web as quickly as we were able. It was not intended as a transcript and should not be interpreted as one.

Jerry Yang and Sue Decker Session Photos

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