Terry in Turnaround

Published on April 25, 2007
by Kara Swisher

Please see this disclosure related to me and Google.

To: Terry Semel
From: Kara Swisher
Re: Some unsolicited advice on being under fire as the Chairman and CEO of Yahoo! Inc.

Terry baby,

Has it actually been six years since I last shot you a memo offering some thoughts on getting the top-dog spot at Yahoo? Back then, I wanted to be among the first to congratulate you, as I wrote:

“on getting the green light on one of Silicon Valley’s most boffo projects. Or as we say here, on deploying a major multi-platform operating system with a simplified user interface and innovative support services using a world-wide network that focuses on standards-based security, manageability and reliability.”

I hope by now you know what all that means and, if not, that you sound like you do. It’s hard to live in one of those tiny cubicles at Yahoo all this time (memories of that swanky Warner Bros. office you once luxuriated in must seem like a dream) without absorbing some of the jargon that techies like to throw around to make you feel stupid. (I know you still don’t know what SOAP is, nor should you.)

semel feet

But it’s not your geek learning curve I am concerned with right now. It’s these persistent rumors that you might soon be ankling your way out of Yahoo’s HQ in Sunnyvale or even get the big heave-ho from Chief Yahoo (I will bet that even on his craziest day Ted Turner never asked you to call him Chief Yahoo) Jerry Yang and the board or perhaps a passel of irritated investors.

Ingrates! When you arrived at the company, it was gasping for air after the Internet bubble it rode to the top had popped. You cleaned up that place like your good pal Clint Eastwood might take out all the baddies in a troubled Western town, except without a lot of shooting. Your Hollywood reputation as a world-class schmoozer and soother was true–all sweetness and light, but investors loved it.

It was a good plot, but, I think we can agree, not enough for today’s fickle audience. Now, you seem to be box-office poison with a lackluster stock, disgruntled employees and questions about your vision. In other words, you appear to be in “turnaround” in that bad Hollywood way (meaning a film project that has been in development for ages so that it is not likely to see the light of day, let alone a theater). But let’s change the story and make it the kind of turnaround the whole family will enjoy.

First, the big surprise: Rethink your whole approach to search. You have certainly put a lot of powder behind this new online advertising system called “Panama” and have promised big results in upcoming quarters. Maybe it will deliver, but the fact of the matter is that it is likely you will be running behind search leader Google for the foreseeable future. It’s not that they have such much-bigger brains over there (they don’t, except for that one guy they hide in the back) or that the food is better (well, it is), but that Google is and always will be a technology company that dabbles in media. Yahoo is almost the exact opposite, starting out as a directory and not as a technology superstar. All this wrangling with Google in a nerd version of “Highlander” is only going to get you to the reality: “There can be only one!”

While some have been suggesting you get out of search, selling off Overture and doing a big money deal with Microsoft or even, yes, Google, to handle the algorithmic heavy-lifting, I think a better approach might be to spin off the search part of the company, perhaps combining it with a spin-off of Microsoft’s search assets. Thus, you create a separate company that could focus only on making Larry Page and Sergey Brin sweat a little bit. Put it in the hands of a real techie star (think the Brad Pitt of servers), and I will bet top engineers will find a tech-focused outfit more attractive to work for.

Most important, it will free you up to focus Yahoo on what it does best: Media and consumer products. While Google gets all the hip glory, the fact of the matter is your email is much better, as are your mobile doodads, as are all your news and entertainment offerings (pitting scrawny Google Finance next to Yahoo’s mighty site is a fine illustration of what you do best). And when I say media, I don’t mean you have to spend all your time creating stuff–in fact, you might consider throwing in the towel on your Santa Monica satellite–but that you could be the best friend Hollywood ever had. The news business, book publishing industry and most of Hollywood (from television to movies to music) is justifiably scared out of their wits by Google and only more so after the YouTube and DoubleClick acquisitions. It is true that the enemy of my enemy is my friend, which I think is a line in some Mel Gibson flick you helmed.

Speaking of acquisitions, go back and give that Mark Zuckerberg the love and $1 billion he wants. Facebook needs to hook up with a big player and fast, because despite its hypergrowth, its advertising ambitions are still hard to reach (even though a few ex-Yahoos are running the show in that department). They need help. Unlike the messy and looks-like-the-wheels-could-come-off-anytime MySpace, it is a really useful, well-made and sticky social network and seems to have a pretty defensible and young audience. As long as you keep things hopping, of course. Even us old folks are looking for a useful and relevant way to stay in touch, and Facebook can easily handle a lot of different communities, unlike many others where it’s hard to feel like you belong without a tattoo. I know it is a lot of money, but you know hiring a star is probably the best way to produce a hit, since a series of indie hits is not going to get you there.

Closely related is a more defined approach to marketing and rewarding customer loyalty. You can’t be a catchall anymore, as it is no longer a reach game. You must try to keep your best customers engaged. Let’s practice this one word: Relevance! What do I mean by that? I mean not turning into the soulless, ad-choked, spamfest that AOL became as it grew. Yahoo has to be relevant to each and every one of its users and that means letting them pick and choose any Yahoo product, even if it is not branded that way. Think Flickr (that was a terrific move) and you have the right idea.

tom cruise

Speaking of Flickr, I got this one off it. One personal aside: I love the loyalty, but can you possibly stop inviting Tom Cruise to Yahoo? It seems a bit goofy, and you’d be better off having some tech legend in from time to time.

There is a lot more to say, but let’s just end with the vision of your friend, Gov. Arnold Schwarzenegger, who, in the third “Terminator,” always kept to his task of protecting the leader of the resistance. Last time I wrote you, I advised you to use that old Hollywood technique of blaming the last studio boss if things went south after you arrived. Clearly, you can’t do that now, given your long tenure. So you have to stick to the course and say loudly you are doing that. After all, it’s not likely, even with the recent troubles, that the Yahoo board has the kind of guts it would take to oust you and there are no angry shareholders massing at the gates (and the last time I checked, even the obstreperous Carl Icahn couldn’t get rid of Dick Parsons at Time Warner).

And if you are going to go, then do it sooner rather than later. Unlike Burbank, Silicon Valley loves failure and even embraces it. In other words, even if you leave, you will eat lunch in this town again.

Tom Cruise/Terry Semel photo by Mitchell Aidelbaum.

Return to: Terry in Turnaround