In a move that AllThingsD had previously reported was coming, Yahoo said it had laid off 2,000 employees, or 14 percent of the workforce.

“Today’s actions are an important next step toward a bold, new Yahoo! — smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require,” said Yahoo CEO Scott Thompson in a statement. “Unfortunately, reaching that goal requires the tough decision to eliminate positions.”

While Yahoo has had periodic layoffs over the years, this one is its most significant in its history, and will also result in another large-scale restructuring of the management organization. More cuts are also likely to follow in the months ahead, due to the reshaping of Yahoo.

The latest employee action is being pushed by Thompson, who joined the Silicon Valley Internet giant in January from eBay’s PayPal unit.

“Change is never easy,” he wrote in an internal email to Yahoo employees (it is below in its entirety), in a well-worn cliché I am dead certain few appreciated hearing today from the top leader.

At an internal meeting with top staff last night, Thompson — who has gotten what seems to be a well-deserved reputation for chewing folks out at Yahoo — was more direct with the execs gathered, berating them extensively for not delivering and getting the company to this sorry point.

Ouch, Scott! It’s Easter, so it might be time for some forgiveness. (And no more ranting about my reporting to those inside Yahoo, since I have been 100 percent accurate so far. FYI, will aim for 110 percent next week!)

Yahoo said it will save about $375 million with the cuts, incurring a $125 to $145 million pretax cash charge for employee severance in its second quarter. Before the cuts, Yahoo had 14,000 staffers and has many thousands more hired as contractors.

The layoffs touch all units of the company, but the hardest hit is the product division, which is headed by Blake Irving, as well as its marketing, research and international units. Yahoo gave no details on the layoffs other than the number.

But the fate of two key parts of the soon-to-be-blown-apart unit — Yahoo’s advertising technology businesses, Right Media and APT, and its search business — is still being contemplated, as I have previously reported. Possible scenarios include a sale or a joint venture transaction for both, which employ thousands of Yahoo staffers.

The layoffs tomorrow are not the end of the road in cutting costs. Along with the likely shedding of its ad tech and search businesses, Yahoo leadership is also looking at future cuts as it evaluates current businesses, which could lop even more employees off its roster.

That said, Yahoo will be doubling down in some older and new arenas, so there would also be simultaneous hiring in the months ahead.

As wrenching as they will be today at Yahoo, the layoffs come as no surprise. Thompson had told employees in memos and also in recent meetings that “real change” was coming to the company.

Along with the trauma of the layoffs, Yahoo is also facing two other tense face-offs externally. In one, activist shareholder Third Point is waging a proxy fight for board seats and stepped up the public pressure this week; and Facebook struck back hard at Yahoo’s patent lawsuit with a counterclaim of its own.

After the layoffs tomorrow, sources say Yahoo will be announcing a new organization by next week. Thompson, along with outside consultants he has hired from the Boston Consulting Group, are making what appear to be profound changes.

Sources said that Yahoo will most likely be comprised of a global media division, one that encompasses Yahoo’s consumer products businesses and one focused on global and regional sales. There could also be a small organization of about 50 employees aimed at future innovation.

Americas head Ross Levinsohn is pegged to run the media arm, which will also include its leads/commerce businesses, such as autos; Shashi Seth — who now heads search and marketplaces — is likely to run consumer products, which will include Yahoo’s communications and search businesses.

Yahoo has already been conducting a search for a new worldwide sales head, who will also be boss of the U.S., Asia and Europe, Middle East and Africa sales regions. Rich Riley, who was recently running EMEA, is reportedly the pick for U.S. sales; Rose Tsou, who is running Asia, would presumably stay put; Yahoo is looking for an EMEA sales lead.

Some current operational execs — such as service engineering and ops head David Dibble, CFO Tim Morse, and top lawyer Mike Callahan — are likely to continue to operate as before.

One big question mark is how Chief Product Officer Irving fits in the possible new org, in which the new units get control of their product development. Irving has reportedly had several incoming job offers, although it is not clear if he has responded to that interest.

But today, the focus is on the layoffs and letting go all those employees, many of whom have worked at Yahoo for years. Even if it will result in a stronger Yahoo, as Thompson promises, it is still a very sad day in Sunnyvale.

Here is a video on the topic that I did with the WSJ.com “Digits” show today, after the cuts were announced early this morning:

Here’s the entire terse statement from Yahoo:

Yahoo! Statement

SUNNYVALE, Calif. — (BUSINESS WIRE) — Yahoo! today confirmed that it is taking important next steps to reshape the company for the future.

“Today’s actions are an important next step toward a bold, new Yahoo! — smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require. We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose — putting our users and advertisers first — and we are moving aggressively to achieve that goal,” said Scott Thompson, CEO of Yahoo!. “Unfortunately, reaching that goal requires the tough decision to eliminate positions. We deeply value our people and all they’ve contributed to Yahoo!.”

Yahoo! has a solid foundation — nearly 700 million users and thousands of advertisers that engage with Yahoo! properties regularly and trust the company with their data and their business. Through its restructuring efforts, Yahoo! intends to grow by responding more quickly to customer needs and competing more effectively in areas where it can win. Yahoo! has identified key parts of the business — a select group of core businesses, the platforms that support those core businesses, and the data that drives deep personalization for users and ROI for advertisers — where the company will intensify efforts and redeploy resources globally, all focused on increasing shareholder value. With a clear focus on profitability and growth, the company will be disciplined in its investments and radically simplify how it builds, launches and maintains many of its properties and products.

Today, the company will begin the process of informing employees about these changes. As part of that effort, approximately 2,000 people will be notified of job elimination or phased transition.

Yahoo! expects to realize approximately $375 million of annualized savings upon completion of all employee transitions. The company currently expects to recognize the majority of an estimated $125 to $145 million pretax cash charge relating to employee severance in its second quarter financial results. The company may incur additional charges in connection with this action. More information will be provided about Yahoo!’s future direction in conjunction with the release of its first quarter financial results on April 17, 2012.

And here is Thompson’s memo to employees, stating the obvious and with nothing new from previous statements and internal memos:

Yahoos –-

Today we are restructuring Yahoo! to give ourselves the opportunity to compete and win in our core business. The changes we’re announcing today will put our customers first, allow us to move fast, and to get stuff done. The outcome of these changes will be a smaller, nimbler, more profitable Yahoo! better equipped to innovate as fast as our customers and our industry require.

Over the last 60 days, we’ve fundamentally re-thought every part of our business and we will continue to actively consider all options that allow Yahoo! to put maximum effort where we can succeed. As part of this process, I believe we have to focus to win in a select group of core businesses globally:

Core Media and Communications: Our content, media, and communications experiences must be best in class. That includes getting today’s core properties right and innovating on a next generation of great product experiences across all screens.∙

Platforms: We must make our core platforms and systems a genuine strength for Yahoo! — platforms that we can really leverage to support our massive scale, drive the deepest personalization, and boost speed to market.∙

Data: Our massive data sets must become a genuine competitive advantage for Yahoo!. We have to unlock the value in our data to allow us to really understand our 700 million users, encourage and win their engagement and trust, leverage everything they do with us to more fully personalize their experiences, and to give our advertisers the immediate insights they are rightfully demanding.

We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. Our goal is to get back to our core purpose — putting our users and advertisers first -– and we are moving aggressively to achieve that goal.

Unfortunately, reaching that goal requires the tough decision to eliminate jobs, which means losing colleagues and parting with friends. Today, we will begin the process of informing employees about these changes. As part of that effort, approximately 2,000 people will be notified of job elimination or a phased transition. We value our people and for those who will be leaving, we thank you for all you have contributed to Yahoo!. We will treat all of our people with dignity and respect, providing resources to help manage through their transition.

Change is never easy. But the time has come to move Yahoo! forward aggressively with increased focus and accountability. Our values have always been about treating all Yahoos with dignity and respect, and today is a day to embrace those values. This is an amazing company with exceptionally talented people and I know we will all do our best to encourage each other through this difficult period of transition.

Scott

According to sources close to the situation, Yahoo’s massive round of layoffs — which is likely to impact up to 2,000 employees — is just the tip of the proverbial iceberg that will hit the storied Silicon Valley Internet giant in the months to come.

Sources said Yahoo is currently planning to announce the cuts in staff in the early morning, just as the markets open. That could change, of course, but the cuts will definitely occur within the next two days.

The layoffs, which will touch all units of the company, are expected to hit hardest in the product division, which is headed by Blake Irving.

But the fate of two key parts of the soon-to-be-blown-apart unit — Yahoo’s advertising technology businesses, Right Media and APT, and its search business — is still being contemplated, as I have previously reported. Possible scenarios include a sale or a joint venture transaction for both, which employ thousands of Yahoo staffers.

Also set to be hard hit are Yahoo’s local businesses, as well as its marketing and research divisions. While still sustaining losses, its media units will not be as badly impacted. And it’s not clear how many employee terminations will be aimed at the company’s general and administrative staff.

The layoffs tomorrow are not the end of the road in cutting costs. Along with the likely shedding of its ad tech and search businesses, Yahoo leadership is also looking at future cuts as it evaluates current businesses, which could lop even more employees off its roster.

That said, Yahoo will be “doubling down” in some older and new arenas, so there would also be simultaneous hiring in the months ahead.

But not tomorrow, which will be one of the tougher days in Yahoo’s long history of periodic layoffs. Newly installed CEO Scott Thompson had told employees in memos and also in recent meetings that “real change” was coming to the company.

That is indeed the case, which is causing massive strain throughout the company, which now employs over 14,000 and has many thousands more hired as contractors.

Along with the trauma of the layoffs, Yahoo is also facing two other tense face-offs externally. In one, activist shareholder Third Point is waging a proxy fight for board seats and stepped up the public pressure this week; and Facebook struck back hard at Yahoo’s patent lawsuit with a counter-claim of its own.

After the layoffs tomorrow, sources say Yahoo will be announcing a new organization by next week, which will create several major, soup-to-nuts units at the company. Thompson, along with consultants he has hired from the Boston Consulting Group, are making what appear to be profound changes.

Sources said Yahoo will most likely be comprised of a global media division, one that encompasses Yahoo’s consumer products businesses and one focused on global and regional sales. There could also be a small organization of about 50 employees aimed at future innovation.

Americas head Ross Levinsohn is pegged to run the media arm, which will also include its leads/commerce businesses, such as autos; Shashi Seth — who now heads search and marketplaces — is likely to run consumer products, which will include Yahoo’s communications and search businesses.

Yahoo has already been conducting a search for a new worldwide sales head, who will also be boss of the U.S., Asia and Europe, Middle East and Africa sales regions. Rich Riley, who was recently running EMEA, is reportedly the pick for U.S. sales; Rose Tsou, who is running Asia, would presumably stay put; Yahoo is looking for an EMEA sales lead.

Some current operational execs — such as service engineering and ops head David Dibble, CFO Tim Morse, and top lawyer Mike Callahan — are likely to continue to operate as before.

One big question mark is how Chief Product Officer Irving fits in the possible new org, in which the new units get control of their product development. Irving has reportedly had several incoming job offers, although it is not clear if he has responded to that interest.

Let’s hope that Yahoos who will be let go tomorrow find themselves with many new employment choices after the ax falls.

In an effort to minimize the impact of massive layoffs that Yahoo’s top management has been planning, according to sources close to the situation, one of the latest ideas to save costs and presumably jobs by new CEO Scott Thompson is to sell off much of its advertising technology platform, including Right Media.

And among the possible buyers Thompson has been targeting in recent visits: Google and Microsoft, as well as Silver Lake, the private equity firm that had once been talking to the Silicon Valley Internet giant about making a large investment in the company.

(That particular deal has gone south, but there is always yet another scheme on the horizon at Yahoo!)

The concept behind such a sale, according to several sources inside and outside the company, is to turn a cost center into a revenue source, with Yahoo essentially outsourcing a business that was a cornerstone of its strategy. A negotiable number of employees affiliated with those units would then move over to the new owner.

The most ideal plan, said sources, would be to sell Yahoo’s whole advertising technology “stack,” including the Right Media Exchange, a marketplace for advertisers, publishers and ad networks to trade online ads. Yahoo bought it for $700 million in 2007.

According to info on the company’s site, it has “300,000 active global buyers and sellers and more than 11 billion daily transactions.”

Also part of the possible package is APT, a system Yahoo has built to make buying and selling online advertising easier. In addition, Yahoo’s technologies for display-ad serving have been mentioned as a possibility for sale.

It’s unclear what the potential sale means for the new ad strategy that U.S. boss Ross Levinsohn and his lieutenant Jim Heckman have been pursuing since last summer. That plan included its own acquisition of ad network Interclick and an attempt to sync up with rivals AOL and Microsoft in an effort to fend off Google and some third-party players, like ad networks.

But the reason for contemplating much a major move — which has been considered before, but never has been seriously offered — are obvious: While Yahoo once dominated this arena, it has steadily lost ground, especially to Google. The search giant has made almost all of its money in search-related ads, but has been moving aggressively via its DoubleClick and other ad-serving entities into higher-level ads.

Microsoft has also been trying to compete, as has AOL, but it’s getting to be an expensive race, and one where Yahoo would have to make major investments to once again gain momentum. Building up this business again had been the aim of co-founder Jerry Yang, who wanted to go big in the arena in a number of ways before he left the company earlier this year.

But those days seem to be over at Yahoo.

“A lot of what has happened so far under Scott [Thompson] has been trying to find more revenue anywhere it can be generated, and get out of businesses that are not growing,” said one person. “Right now, it’s a lot about what we shouldn’t do rather than what we should.”

That has meant visits to see both Google and Microsoft about possible deals by Thompson, with the involvement of CFO Tim Morse and Chief Product Officer Blake Irving.

Thompson (pictured here) has also recently been talking to Silver Lake about the ad-platform sale, in a deal that might include the Andreessen Horowitz venture fund. This would be a different kind of transaction, said sources, in which a separate company would be formed, with Yahoo owning a piece and contracting with the new entity to provide ad technology.

All this activity is related to the layoffs in the works of perhaps thousands of employees, which were to have been communicated to the company this week.

Sources said those have been delayed for some weeks for several reasons, including whether to consider more deeply if certain larger business units can be spun off, sold or somehow transformed. (To be clear: Major layoffs are still being planned, but now might take place in two parts, said sources, in what is a quickly changing and volatile atmosphere at Yahoo.)

Another area being looked at, said sources, is Yahoo’s search advertising partnership with Microsoft, which has not been as successful as had been expected. While Yahoo has been working with the software giant about improving the results, Thompson has apparently been contemplating other possibilities, including working with Google (calling all regulators!) and/or laying off up to 900 employees who work on the company’s search offering.

Any of these moves could, of course, cause a firestorm of controversy, which Thompson appears to not worry much about. He was the driving force in Yahoo’s patent lawsuit against Facebook earlier this week, which is largely attracting a negative reaction across the tech landscape.

A number of prominent voices have spoken out against the legal action, including well-known VC Fred Wilson, who yesterday penned a poisonous blog post, titled “Yahoo Crosses the Line.”

It ends thusly: “I am not writing this in defense of Facebook. They can and will defend themselves. I am writing this in outrage at Yahoo! I used to care about that company for some reason. No more. They are dead to me. Dead and gone. I hate them now.”

Ouch!

Also weighing in publicly via Twitter was former Yahoo director Eric Hippeau, who was one of the company’s first investors, which is embedded below:

Pathetic and heartbreaking last stand for Yahoo bit.ly/yirCcj It’s all over. I loved you very much.

— Eric Hippeau (@erichippeau) March 13, 2012

Double ouch!

All I can say is that Thompson certainly has a lot of gumption. That has actually been his M.O. from the start, said several sources, with the former president of eBay’s PayPal payments unit and dark horse cold-emailing his way into the Yahoo CEO job.

True story: He had not been among its list of possible candidates — largely because he had been placed in his job at eBay many moons ago by Heidrick & Struggles, which was conducting the Yahoo CEO search, and that’s a talent acquisition no-no to poach someone you placed.

That did not stop Thompson, who thought he might be good for the job and reached out directly to board members at the end of the selection effort, which then led to the search committee and soon enough to the job in what was a very quick vetting and secretive (although not secretive enough!) hiring process.

Since then, Thompson has been on a tear, from working on a restructuring to trying to assuage activist shareholder Dan Loeb to helping put the kibosh on its Asian stake sale talks to suing Facebook. And now this sale effort, too.

If the peripatetic Thompson — who might need a dose of Ritalin before this thing is over — wanted to get noticed by the tech powers that be: Mission accomplished!

“He’s definitely someone who appears to have decided on shooting the moon with a lot of these actions,” said one person close to the situation, referring to the move in the card game of Hearts, which is a risky gambit to capture every penalty card worth 26 points in order to win. “I just hope no one loses an eye in the process.”

(That would be triple ouch, by the way.)

No comments all around, but everyone was certainly cordial on this rainy morning.

“Advertising is based on one thing: Happiness. And you know what happiness is? Happiness is the smell of a new car. It’s freedom from fear. It’s a billboard on the side of the road that screams with reassurance that whatever you’re doing … It’s okay. You are okay.”

Don Draper, “Mad Men,” Season 1, “Smoke Gets In Your Eyes”

I wonder what Don Draper would think today when the 23-year-old digital media buying whiz quips back, “Maybe, but let’s load it up into the system, along with 5,000 other versions of copy, and measure how many Facebook ‘Likes’ it drives within our target demo.”

I love the “Mad Men” version of the ad business. The storytelling. The simplicity. The glasses of scotch at 10 am. But these days in digital, it feels like the Math Men media buyers (with their terabytes of data) are taking over for the Mad Men creatives. It may not make for great TV drama, but they’ve got the performance data to prove that it’s their turn in the driver’s seat.

For years, digital ads were bought and sold by young media buyers from ad agencies and smooth salesmen from online publishers and networks, sealed over the modern version of the “three-martini lunch.” But with the steady advancement in online advertising technology over the last ten years, the geeks — I mean the Math Men — have gained the upper hand in determining how to spend these digital marketing dollars. Today, ad buying and selling is automated across nearly every digital channel, driven by complex algorithms crunching terabytes of data, all employed to meet rigorous ROI objectives — typically measured by new customer acquisition, profit margin, or revenues.

It all started in search, where Overture introduced (and Google perfected) a keyword ad marketplace for search pages. We take that marketer proposition for granted now, but it was heretical at the time — only pay us when a user clicks on your ad (versus every time we show your ad), and you decide how much to pay for that click (versus the same price for every advertiser). And sophisticated marketers took full advantage by leveraging technology platforms from Math Men companies like Efficient Frontier to maximize the efficiency of their search ad spend across millions of keywords, bids and text ad copy.

Since then, several major advances in advertising technology have further enabled the Math Men:

• Six years ago, Right Media introduced the first ad exchange for display ads, enabling the Math Men and their algorithms to buy and sell banner ads and skyscrapers across the Web. Google subsequently perfected the display exchange via their DoubleClick acquisition as well.
• Three years ago, Blue Kai introduced the first ad targeting-data marketplace, enabling the Math Men to leverage anonymous audience targeting data to further enhance marketers’ campaign performance.
• A year ago, Facebook launched its own ad platform API to enable Math Men and their algorithms to bid for Facebook ads based on user attributes. It seems likely that Facebook will eventually extend its monetization platform to third-party publishers, similar to what Google did with AdSense, as Facebook already has a strong distribution foothold via Facebook Connect.

It feels like we are witnessing the tipping point in digital media buying. Measured by dollars or by impressions, greater than 50 percent of online advertising is bought via APIs today (granted, most of this is still search). In a few years, I believe that 90 percent of all digital ad impressions, and more than 75 percent of digital ad dollars, will be bought and sold programmatically.

As we witnessed with search marketing, once a) marketers get a taste of the increased spend efficiency offered by these emerging platforms, and b) these platforms (and the associated marketer tools) become sufficiently easy to use, the dollars will flow, and quickly. The Math Men at Efficient Frontier are leveraging these display, data and social platforms to deliver superior ad spend performance for marketers across all digital channels today. It’s no longer just about search.

And the Mad Men are taking note. In the last few years, the ad agency holding companies have rolled out their own technology-driven digital ad “trading desks” to help their clients take advantage of these ad trading platforms. I wonder if they’ve replaced the scotch in the mini bars with the Math Men’s drink of choice, Red Bull.

Chris Moore is a partner with Redpoint Ventures and has been enabling the digital Math Men with investments in Efficient Frontier, Right Media, Blue Kai, Auditude, Inadco, Extole, Intent Media and eBureau. Follow him on Twitter @Redpointvc and @Moorski.

MicroHoo is funky!

At least according to Yahoo CEO Carol Bartz on the Silicon Valley search giant’s first-quarter earnings conference call about its recent financial performance.

Yahoo’s results showed a continued worrisome revenue growth stall, due in large part to a search advertising fall-off, and a still-turning turnaround.

Yahoo reported revenues of $1.06 billion, down six percent from a year ago, on net earnings of 17 cents a share, down 28 percent.

The results were essentially in line with Wall Street expectations.

2:03 pm PT: The call started right on time, as per usual. Maybe they can’t get search right anymore, but Yahoo execs sure know how to start an analysts’ confab.

Bartz started off the call, noting “overall, our turnaround is proceeding on schedule.”

Well, the schedule of a three-toed sloth, I suppose, but it’s on schedule!

Bartz is too smart, though, and quickly noted the problems with search revenue declines, related to its search and online advertising partnership with Microsoft.

Still, she then used the unusual term “funky comparisons” to dismiss the key issue.

But isn’t she the one who struck the funky deal with Microsoft that has resulted in these funky comparisons and these even funkier search advertising revenues?

Just askin’!

Bartz proceeded quickly to noting Yahoo’s advances due to technology improvements, which showed a doubling of impressions to big events such as the Super Bowl and the Oscars.

It’s a good point, since Yahoo–for all its troubles–is still a huge traffic driver, including serving up 1.3 billion page views for the Oscars.

Bartz talked about monetization and said a lot of other stuff, but got to the finances quickly.

“Search was a mixed bag,” she said flatly. You can say that again–but not in a good way.

Bartz tried to put a good-news spin on it, but had to admit that “on the downside [Microsoft's] adCenter is not seeing strong RPS,” she said.

That’s revenue per search and a key number that Yahoo had thought would be better by now.

Bartz noted that the paid search markets internationally will be delayed until MicroHoo gets its act together.

Good idea!

2:16 pm: CFO Tim Morse took over to go through the numbers.

“We had good display momentum around the globe,” he said.

But search was, um, bad. It underperformed, but Yahoo had that guarantee from Microsoft to pay out, which Morse called a “financial floor.”

Morse pretty much read the press release from here on out.

2:24 pm: Bartz was back talking up the huge audience Yahoo has abroad. And it is true–the Yahoo brand is a golden one globally.

Also video consumption is up too, as it is across the Web, in terms of views and time spent. Yahoo’s “Primetime in No Time” got 500 million streams in the quarter.

Bartz turned to mobile, which is weak no matter what she said about the laudable Livestand. It’s one of many in a very competitive market.

Same for social, which Yahoo has essentially abdicated to Facebook. That said, Yahoo has tried to weave social within its myriad of sites and it gets it, especially compared to the socially awkward Google.

Bartz summed up that she hoped everyone gets that profitability and revenue growth were on track to get better, promising more at the investor day in May.

2:30 pm: Q&A time!

The first question is about display growth. It’s a softball, since display was up.

The next is about other revenue growth areas to come.

Bartz–who seemed not so prepped for such an obvious question–ticked off shopping, travel and uuuuuh….

Morse jumped in and talked about making internal connections, which I also did not understand.

An analyst then wanted to “dig into” search problems. I’d say it’s time to call in Mike Mulligan and his steam shovel!

Relative to RPS, Bartz acknowledged it was low and everyone was studying the issue. There is a plan, apparently. Again, Bartz was maddeningly vague.

I missed the next question and then it was back to search.

Bartz was not getting too specific about search, but would say video advertising was going to do well.

She did note that Yahoo expected a dip in Q1 related to search revenue, “but the dip went a little lower than we expected and lasted a little longer than expected.”

Bartz said she had recently sat down with Microsoft execs to go over the problems. How much would I have liked to have been a fly on that wall!

The next question was about video and it turns out Bartz loves the babbling babies too! I knew we had something cool in common.

The next question is about Japan and the possible deal to sell off Yahoo’s ownership of Yahoo Japan!

Morse said diddly, except “we continue to make progress.”

A question about display and possible content verticals.

Verticals Yahoo is interested in, according to Bartz: Entertainment, lifestyle, women, gossip.

“The things people really want to do, they want to disappear,” said Bartz, which was an interesting way of putting it.

Yet another question in what was beginning to feel like an endless call.

It was about Right Media, Yahoo’s advertising exchange. Cleaning it up, etc.

The next question is about communications, as in email.

Bartz even sounded bored and messed up a few words. “I’ve had too many Diet Cokes,” she joked.

Personally, I am considering disappearing into some content, since there is yet another question.

It’s–no surprise–an RPS question!

Funky!

Search guarantee payments from Microsoft are in place for another four quarters. Thank goodness.

Bartz got more detailed about the problems. There is some kind of prediction issue, which she said Microsoft is working on.

Now a local advertising question and its relationship with Facebook.

Bartz grabbed this one by the horns, noting you don’t have to run to the social networking powerhouse to get you a social ad!

It’s about branding with a social component. Which would be, um, Facebook, which was part of Yahoo’s Chrysler campaign referenced by Bartz.

A question about daily deals.

It’s growing, but more at Groupon and LivingSocial, which Morse does not mention.

Finally, the last question.

Another gigantic softball on engagement and Yahoo’s new content platform and some mobile deets query about whether Yahoo can make it there.

Bartz said she was working on it. As to content, Bartz said stats show big lifts.

“The good news is that it’s all in the right direction,” she said.

Up would certainly be good.

Or, alternately, it’s premised on the idea that Google is going to spend more of its billions on ad technology start-ups. Same thing, sorta.

Either way, banker Terry Kawaja, whose Luma Partners makes money navigating the ad tech landscape, does a nice job of parodying it here.

This is definitely inside baseball: If you don’t know what AdExchanger* is or don’t know who Mike Walrath** is, this may not do much for you.

Then again, if you’re familiar with any other overhyped industry jammed full of money and buzzwords, you can probably follow along just fine. (Couple of f-bombs here, so figure out on your own if this is work-safe or not):

*It’s a really good ad tech trade site.
**An ad tech pioneer who founded Right Media and sold it to Yahoo in 2007.

[Image credit: AMagill]

UPDATE: Google has now confirmed the deal.
————
Google has indeed bought ad technology start-up Invite Media, I’ve confirmed with multiple sources.

As I wrote last month, Invite is a three-year-old “demand-side platform” designed to help buyers navigate high-volume display-advertising exchanges–like the one Google launched last year.

I don’t have  a price for the deal nailed down, but I believe it’s in the $70 million range. Google (GOOG) declined to comment; I haven’t heard back from Invite Media CEO Nat Turner.

People familiar with the transaction say Google’s plan is to leave Invite running as a standalone unit, which will work at arm’s length with exchange’s like Google’s AdX, as well as competitors like OpenX, Yahoo’s (YHOO) Right Media and Microsoft’s (MSFT) AdECN.

That makes sense, because ad buyers who use Invite, like Publicis’s Vivaki, expect to be able to buy inventory from multiple exchanges.

But over time, Google does plan on investing in Invite and integrating it with DoubleClick for Advertisers, its ad-serving technology. Invite users wouldn’t be required to use DFA, but the two would be designed to match up seamlessly, sources said.

It will be interesting to see what becomes of Invite’s competitors, like MediaMath, Turn and X+1, in the wake of this deal. Venture capitalists have poured money into demand-side platforms in recent years, but I’ve heard increasing skepticism about valuations those investors are seeking. And now the most obvious buyer, with the deepest pockets, is off the table.

Turner and his co-founders started Invite Media when they were still undergraduates at the University of Pennsylvania; the company has offices in Philadelphia and New York City. Investors include Comcast’s (CMCSA) venture arm and First Round Capital.

Invite had previously considered selling to Omniture last summer, but that deal went away after Adobe (ADBE) purchased the analytics company.

Wise is still technically a Yahoo employee, but says he’ll be at his new job “in weeks.” He replaces Brad Keywell, who co-founded Groupon, the crazily hot online shopping/coupon start-up.

Wise joined Yahoo (YHOO) in 2007, when it bought Right Media, the ad exchange he was running. So it makes perfect sense for him to land at another ad tech play. The difference between MediaBank and other ad tech start-ups is that until now, MediaBank has specialized in analog media, not digital: It sells technology that helps buyers of TV, print and other media plan and track their purchases.

That industry is dominated by Donovan Data Systems, and Wise’s first priority is to try eating into his competitor’s market share.

But MediaBank also works with digital media, though it’s a much smaller part of its business. The thinking behind Wise’s hire is that he can merge all of that together and help create a sort of mega-media marketplace: Think of Google’s (GOOG) AdX exchange, but with TV spots, magazine pages, etc., in addition to buying and selling Web display ads.

Wise, who lives in New York City, will stay there and open up a MediaBank outpost.

CBS (CBS) says it will stop doing business with the ad networks, which are ubiquitous on the Web, and will offer access to its audience of 60 million unique visitors solely via its own salesforce.

AdAge’s Michael Learmonth says CBS, bolstered by its 2008 purchase of CNET, is the biggest publisher on the Web to cut off the hundreds of networks that try to match publishers and ad buyers.

Sounds right to me. Because while lots of people like to complain about ad networks, almost everyone uses them.

Other big publishers that have cut off ad networks entirely include Time Warner’s (TWX) Turner Networks, the Gawker Media blog network and…not many others.

The ad network debate in a nutshell: Anti-ad network types argue that handing over inventory to the networks gives publishers a short-term boost because it allows them to sell ads they wouldn’t move on their own. But doing so trains buyers to avoid buying higher-priced inventory from the publishers themselves, which means that stuff gets harder to sell in the long run.

The counterargument: What are you people smoking? Ad buyers should be trying to reach their target audience at the lowest possible price. And trying to fight that impulse is like fighting gravity.

Still, there is a larger movement afoot to try to at least sell some inventory at higher prices, even if that means leaving dollars (or pennies) on the table.

That’s one of the cornerstones of Aol CEO Tim Armstrong’s strategy, and it’s what Yahoo (YHOO) is trying to do as it reshapes its Right Media platform. See also: Firms like 5to1, which say they can turn publishers’ low-rent “remnant” ads into more valuable stuff.

The countermovement, though, is at least as strong, as ad buyers and brokers use technology to move more and more inventory at ever-more “efficient”–i.e., cheap–prices. See: Google’s (GOOG) relaunched DoubleClick exchange and the one that Microsoft (MSFT) intends to roll out next month.

Yahoo CEO Carol Bartz is making the most substantive changes in her exec ranks since she did a massive restructuring of its staff in late February, according to sources close to the situation.

“She is continuing to clean the place up,” said one top exec about the moves, which are likely to be announced internally tomorrow.

Among the shifts in management will be filling the slot left by the departure of North American Audience head Jeff Dossett in May.

UPDATE: Sources say Yahoo’s head of mobile, David Ko, will get the job of top Audience exec, although it is not clear if he will have the same portfolio has former media heads at Yahoo.

Since Dossett left, his job has been split between Jimmy Pitaro, who runs Vertical Audience Experiences, and Tim Mayer, who is in charge of Search & Social Applications. They both currently report to U.S. EVP Hilary Schneider.

The job of Audience head is a key role, given that Yahoo’s powerful media properties are among its most valuable assets. In recent months, Yahoo has made some major changes in the way it creates its juggernaut News property.

Also to be filled is the job being done by Corporate Partnership SVP Jim Schinella, who, as BoomTown previously reported, is set to leave at the end of the year.

I could not determine who will take Schinella’s job, inside or out.

Interestingly, Yahoo has yet to name an international head.

Sources said the company had filled the position, using a headhunter, but the London-based media exec candidate backed out at the last minute. That meant Yahoo had to restart its search.

There might also be other top exec changes, all part of Bartz’s consolidation of power at Yahoo. She has named a spate of new top execs from outside, but has also kept some from the regime of former CEO and co-founder Jerry Yang.

These staffing moves have come even as a stream of execs continued to depart the Silicon Valley Internet giant, including, most recently, Mike Walrath, who was SVP of advertising strategy. Walrath had led Right Media, the online ad exchange Yahoo bought for $680 million in 2007.

Walrath was widely expected to leave Yahoo in July, at the completion of his earnout from the acquisition, sources said, so the move was more sudden than expected internally.

Sources noted that Bartz moved Walrath’s departure forward in order to announce a new strategy for Right Media focused on premium publishers and to dump those ad networks and publishers of lesser ilk.

Whether this will stop the competitive onslaught in the ad exchange space is an open question given that Google has entered the fray significantly and that Facebook is widely expected to bolster its efforts.

Lastly, several sources said that there are also likely to be more changes on Yahoo’s board, which has seen the departure of two members recently.

In September, Maggie Wilderotter said she would leave the board by year’s end. And former Yahoo nemesis and investor Carl Icahn left the board in late October.

Whether Yahoo will replace them or keep its current size of 10 directors is not clear.

Also possible, several sources said, would be Bartz taking the chairman title, which is currently held by Roy Bostock. Bostock, along with Yang, played a key role in its botched takeover battle with Microsoft (MSFT).

Bartz finally successfully struck a sweeping search and advertising partnership with the software giant this summer, which is moving closer to being launched.

The funding is an “inside round”–only existing investors participated in the funding–which sometimes, but not always, raises a red flag. In this case, AppNexus says the funding is also an “up round”–its existing investors now think the start-up is worth more than they did the last time they bought in–but didn’t disclose a valuation.

There’s also a bit of fuzziness, still, about what exactly AppNexus does. The company says it provides a “gateway” to ad buyers who want access to ad exchanges like the ones operated by Google (GOOG) and Yahoo (YHOO)–Microsoft (MSFT) will launch its exchange next year–though many industry types think that AppNexus is itself an ad exchange.

The company certainly boasts lots of ad exchange bona fides. Co-founders Brian O’Kelley and Mike Nolet are both veterans of Right Media, the ad exchange Yahoo bought in 2007. And in September, the company brought on Michael Rubenstein, who had been running Google’s exchange.

This should finally change next year. People familiar with Microsoft’s (MSFT) plans say the company intends to open the exchange, which will allow online ad buyers and sellers to match up in real time, in January. That will put it several months behind Google (GOOG), which turned on its real-time ad exchange in September.

But on the plus side, AdECN will offer lots of intriguing inventory from the get-go: It will sell space on Microsoft’s giant MSN network, as well as inventory on sites the company reps, like Facebook, Digg and News Corp.’s (NWS) Fox Sports.

Here’s Microsoft’s formal statement about AdECN’s the timeline:

AdECN and Microsoft remain fully committed to the AdECN Exchange and exchange business.  AdECN has been running a Pilot of its Federated, real-time bidding technology within Microsoft for the past several months and will be rolling that product out to a select group of participants in the coming months.

Real-time ad exchanges are a big deal for people trying to automate advertising buying and selling. They differ from older ad exchanges, like Yahoo’s (YHOO) Right Media, in that they’re supposed to let buyers and sellers negotiate a price within milliseconds on specific pieces of inventory.

But it’s not clear that buyers and sellers will embrace real-time exchanges. In order to use them, for instance, they’ll have to build, buy or rent technology that allows them to make and process orders at lightning speed.

AdECN manager Jeff Green left Microsoft earlier this month without explaining what he intended to do next. Jed Nahum, Microsoft’s director of network strategy and planning, is running the unit in the interim.

(Disclosure: News Corp. owns Dow Jones, which owns this site.)

[Image credit: rednuht]

Unless I’m told otherwise, I’m only going to do this once. But for the record, Yahoo is going with the following spelling for its new slogan: “It Starts With Y!ou.” I don’t think that’s going to fly with consumers or copy editors, but we’ll see.

Also undetermined: Whether there will be any news unveiled at Yahoo’s press conference to roll out said slogan. But I’ll be here for you just in case. And in the meantime, you can find glimpses of the coming campaign at the bottom of this post.

The event begins: Boilerplate intro remarks from Yahoo (YHOO) CEO Carol Bartz, followed by CMO Elisa Steele. Steele shows off a Venn diagram that shows the intersection of “my world” and “the world.” Yahoo, apparently, is that intersection. “That’s where the yodel is.”

Steele reminds us that this is Yahoo’s first global marketing campaign. That’s old hat for Microsoft (MSFT) and something Google (GOOG) has never done. Ad campaigns will roll out in 10 countries, branding campaign will be in all territories.

Steele runs through some imagery that will be used in campaign. Yahoo users, apparently, comprise many races and creeds. But all of them are buff and/or skinny. Unless they’re pregnant. A video ad, meanwhile features an upgraded yodel.

OK. Time for Q&A:

Onstage: Bartz; Steele; EVP Hilary Schneider; Tapan Bhat, SVP Integrated Consumer Experiences; Penny Baldwin, SVP Global Integrated Marketing and Brand Management.

What’s the budget for the campaign?

Steele: “Over $100 million.”

Status of ad market? Also, what won’t you sell?

Schneider: Starting to see a stabilization. “Wouldn’t go so far as to say as we’re seeing a full recovery.”

Bartz: We’re still “bumping along the bottom.” Regarding sales, she dodges/reframes the question, talking about “focus” instead. “We’re just revisiting everything.” Is there anything you won’t sell? “Of course.” But no specifics. Will improve photo, video, “much, much better email.”

Please talk about the launch of Google Ad Exchange and its threat to you.

Schneider: “The reality is that the display marketplace is fragmented.” Our exchange (Right Media) is biggest, but it’s intuitive that there will be other exchanges. “We welcome Google.”

Why do a relaunch at all? Are consumers actually unhappy, or is it just advertisers and press and investors carping?

Bartz: “Advertisers follow consumers” and we need to “build circulation.” By doing this approach, “we get really good micro-insights for our advertisers.” She doesn’t explain how this will happen, though.

Steele: “Consumers want more from online advertising.” They’re asking for it.

What about video plans?

Bartz: “Video snacks” are crucial to consumers and advertisers. “A big emphasis” inside Yahoo. A “big cornerstone of our strategy.”

How long will campaign run? How will you measure success?

Steele: It’s funded for 15 months, and I expect it will run longer than that. Vague answers about management.

Some chat about search, which formally debuts today.

Will there be product-specific ads?

Steele: Launch of the campaign in each market will start with brand, and over time you’ll see more product ads, as “people get familiar with Yahoo again.”

One more time: Is Zimbra being shopped?

Bartz: No comment. But “what I will tell you is that Zimbra technology is very, very important to our mail system, and that’s one of the prime reasons that Yahoo bought Zimbra when it did…[but] the technology is already integrated into our system.”

How is this campaign different than other campaigns? You’ve had a lot of campaigns in the last 15 years.

Steele: I haven’t been here in past, but I’ve reviewed every campaign that has been done and this is radically different because it’s more than a campaign. Carol and Carol’s staff are all behind the concept of “you.” Everyone’s on board. “If this was just a marketing campaign or a slogan, then we’ve really failed.”

Bartz: This should remind you of the past, actually. That’s not a bad thing. On search: Search has evolved from the “10 blue links” days. She views background of search much like an Intel (INTC) chip, which everyone uses. But Dell’s (DELL) experience with that chip is different than HP’s (HPQ) experience, etc. Yahoo is stable at 19 percent of search business because users are on Yahoo and they like Yahoo search. “Yahoo search is great. It’s not Bing, it’s Yahoo search….What’s most important is that we drive upstream and provide a great experience, even though the plumbing is down here.”

Do users really like to customize their search (premise behind overhauled homepage)?

Bhat: Core group of 15 percent of users really into customization. Most other people say they want that but aren’t willing to do the work. So we’re doing incremental customization on the homepage. “This will be something that keeps growing over time.”

Will you be integrating text-messaging and other short messaging services into the homepage?

Bhat: Yes.

How is the antitrust scrutiny going (with regard to Microsoft search deal)?

Bartz: Just as we predicted. We stand by our original prediction that the deal will close early 2010.

Are we too obsessed about what’s new here?

Bartz: Yes. “People just decided to put a cloud over Yahoo’s head”…and decided that if we’re going to remove the cloud we had to show off something shiny and new. “If you get out of New York and Silicon Valley, everybody loves Yahoo.” I travel a lot and everyone loves it. “I just want to transport you guys out of this cynicism you’re in….Why are you so cynical? Why not be cynical about fricking Google? See…you got me…you got me pissed off.”

[Note. Some debate about whether Bartz used "fricking" instead of an actual curse. We'll go to tape later. Update: Apologies (and thanks to Business Insider's Nicholas Carlson, who shared his video with me). Bartz appears to have said "fricking" or "frigging" Google.]

[Sorry about interregnum there. Cursing got me wound up. Back to real-time.]

Where do you want to be in two years?

Bartz: Yahoo is the only site where you when you wake up in the morning and you want to know what’s going on everywhere about everything, you can find it one place. The company is unified around that spirit, “not about technology for technology’s sake, but about what that delivers.”

Why doesn’t Wall Street buy the Yahoo turnaround story even though Google has fared okay during this recession? 

Bartz: “Yahoo and Google are different companies. They are in different businesses…investors are somewhat like you guys, where they’re saying ‘let’s wait and see.’” About this direct comparison with Google: “We aren’t a comparable company. They aren’t us and we aren’t them.”

So whom would you like to be compared to?

Bartz: “Yahoo.” But the closest analog is AOL, actually. Google is a white page with a search box. We’re very personal. When you go to our page in India, it feels like India. Relevance is important. Personalization is important. That’s not Facebook’s strategy. That’s not Twitter. “Not to say we’re not part of the greater tech sector, and you’ve got to find some compares.” But Yahoo is unique. We’re doing okay with the world side; we have to work on the easy personalization that is the core of our product focus.

Please address the stock sale, Carol.

Bartz: “I didn’t sell anything.” I got restricted stock throughout the year; when it vests, it gets recorded as a sale. “I haven’t sold one penny of Yahoo stock. Thanks for asking, because it pissed me off when they said I sold. I wouldn’t do that.”

Q&A ends. More in a bit.

The search giant will reportedly open up its AdX service, which is supposed to bring together ad buyers and sellers the same way a stock market does, within the next two weeks. ClickZ says the exchange is supposed to open in conjunction with next week’s AdWeek festivities in New York.

That timeline sounds right to me. Google (GOOG) has already been inviting selected clients to try out the system, which is based on the one DoubleClick ran before Google acquired the firm last year. Google told potential buyers via email that it will begin integrating their ads into the exchange this week.

None of this will have any impact on Google’s search users, but it’s potentially important for online advertisers and publishers.

Until now, the online exchange market has been dominated by Yahoo’s (YHOO) Right Media, but Google will become an instant rival as soon as it opens its doors. Meanwhile, Microsoft’s (MSFT) offering, AdECN, seems stuck in the starting gate.

Google’s exchange will open shortly after the departure of its manager, Michael Rubenstein, who is now president of ad tech start-up AppNexus.

To date, the company–which makes the leading open-source ad serving software, catering to about 30,000 Web publishers on 100,000 Web sites–has raised $30.8 million. “We raised $15.5 million at the end of 2007 and still had a chunk of that left, so we didn’t have to raise money,” OpenX CEO (and former Yahoo Senior VP) Tim Cadogan told The Deal. “But if it’s generally true that it makes sense to raise money when you don’t need it, in this environment, it is triply true.”

Quadruply true when you’re competing with the likes of Google’s (GOOG) Double Click and Yahoo’s (YHOO) Right Media, which dominate the Internet advertising market in which OpenX plays.

The departure of Dave Karnstedt, who took over last year when longtime Yahoo ad sales exec Wenda Millard left Yahoo in the first of many controversial partings, has been long rumored internally.

(In fact, I have driven one of Yahoo’s PR people crazy in recent months trying to verify a persistent tip I had been getting that he was headed out the door.)

Karnstedt will be joining Redpoint Ventures, a Silicon Valley venture firm, as an executive-in-residence.

And, in a rejiggering and addition of duties at Yahoo (YHOO), Karnstedt’s job and more is going to Joanne Bradford (pictured here), a longtime and well-known Microsoft (MSFT) exec who decamped from the software giant to helm national ad sales at trendy ad services start-up Spot Runner just six months ago.

There have been rumors swirling that Bradford was unhappy at the smaller company after working at the giant Microsoft.

She was EVP of National Marketing Services, focused on national advertisers, for Spot Runner, joining in a high-profile move in March. Previous to Spot Runner, Bradford was a VP and chief media officer of MSN Media Network, and had worked at BusinessWeek before that.

In any case, the move will be seen as a blow to Spot Runner, which recently did some unusual layoffs, despite receiving a large slug of cash from investors.

(Here is a post and video I did on a recent trip to Spot Runner, including an interview with its CEO Nick Grouf.)

“I am going back to my entrepreneurial, build-something roots,” Bradford told me at the time she joined Spot Runner. “There is such inefficiency in buying and selling of advertising and someone has to solve that, both for big companies and small ones.”

Well, welcome to Yahoo, Joanne, which could use a little efficiency in its buying and selling of ad sales!

Seriously, Bradford will now will take over as SVP of U.S. revenue and market development at Yahoo at a very dicey time.

Besides facing a withering U.S. economy, a weakened stock price after the takeover attempt by Microsoft and ensuing mess related to it, it was revealed that the Justice Department might block the deal Yahoo recently struck to outsource some of its ad sales to Google (GOOG).

Yahoo said that in this newly created role Bradford will oversee sales, market development for advertisers, small business and HotJobs. She will report to Hilary Schneider, EVP of Yahoo’s U.S unit.

Karnstedt, whom I interviewed when he first took over ad sales a little more than a year ago, is leaving to pursue other opportunities.

In Silicon Valley, that means the inevitable stop at a VC firm. Hence, Redpoint!

Interestingly, he joins former Ask.com head Jim Lanzone at Redpoint, while former Yahoo execs Jeff Weiner (Accel Partners and Benchmark Capital) and David Goldberg (Benchmark) also landed cushy EIR gigs after leaving Yahoo.

Karnstedt had been SVP of U.S. sales at Yahoo and had apparently resigned from the company earlier this summer (thanks for not confirming that when I asked so many times, Yahoo!)

With Yahoo seven years, he was charged with the difficult task of integrating Yahoo’s search, display, Blue Lithium and Right Media sales teams.

And while Karnstedt was well liked, many complained that the longtime online ad techie was not enough of a gregarious and schmoozy ad sales exec, with deep relationships on Madison Avenue, as Millard–and Bradford–surely are.

As I wrote in Aug. 2007, after an interview with him at Yahoo’s New York offices:

I made the point to Dave (he is the kind of guy you can call Dave, as you can see pictured here) that an ad guy needs to sell himself, but to no avail, so we press on in text. Nonetheless, let me set the visual scene:

Nicest guy you ever want to meet walks into nondescript room, wearing khaki-oxford-jacket Internet uniform 101. Declares Yahoo is going to kick some advertising butt in the nicest possible way. It is revealed this nice guy has been around the Web block for quite a while. Much chitter-chatter ensues. Cut to my clear-as-Fiji-water observation that nice guy, as nice as he is, has his work cut out for him.”

And now, more than ever in Yahoo’s key ad market, so does Bradford.

This incident will have ramifications in the coming weeks for the composition of Yahoo’s board. But here’s the shocking thing: This latest batch of numbers might still underrepresent the level of disdain shareholders have for this board.

Any corporate election that doesn’t receive 95 to 98 percent support from shareholders for the incumbent management and board is an anomaly. Yahoo’s first press release from last Friday suggested that, despite all the hubbub of the failed merger talks with Microsoft and public criticism from Carl Icahn and others, Yahoo (YHOO) shareholders had let the incumbents off the hook.

Chairman Roy Bostock and CEO Jerry Yang were re-elected with 79.5 percent and 84 percent support respectively. These relatively benign results (compared to last year’s), combined with the fact that there were not more pointed questions at the meeting last week, led some observers to conclude that this board had “faced down” its critics.

Not quite. Gordon Crawford of Capital Research Global Investors did all Yahoo shareholders a favor by demanding a recount. Yahoo and Broadridge complied.

And results of that recount were alarmingly different from the first set of numbers. We’ve all heard of +/- 4 percent in polling, but when was the last time you heard of +/- 50 percent?

The recount might set a modern-day record among S&P 500 companies for the most “withhold” votes for a board in a corporate election. Only Vyomesh Joshi, head of Hewlett-Packard’s (HPQ) printer group, got off without a serious warning from shareholders (a 7.1 percent “withhold” vote).

The “withhold” vote for Bostock was 39.6 percent, not 20.5 percent as originally reported. And 33.7 percent of Yahoo shareholders withheld their support from Yang, not 14.6 percent.

Other Yahoo directors who fared poorly in the election were Gary Wilson (27.7 percent of votes withheld) and Compensation committee members Ronald Burkle (37.9 percent withheld) and Arthur Kern (31.7 percent withheld).

What would we all be doing today if Crawford had never called for a recount? If a “tabulation error” happens and no one is there to hear it, did it happen at all? We will never know.

And there will likely be more shoes to drop in this tragedy of errors. This “tabulation error” was only one of two major question marks surrounding last Friday’s initial voting results. Yahoo easily made Broadridge the fall guy for this first error.

The second error–how few eligible shares were counted in the final tally–isn’t so easily eluded. And for that, Yahoo will be the fall guy.

Only 75.8 percent of the eligible shares as of the June 3 record date were voted in this election. After such intense media scrutiny in the past few months, it seems odd that so few investors participated.

Last weekend, I dove into the numbers in detail and reviewed them against numbers from the last two Yahoo elections. On Sunday night I wrote about the most recent Yahoo shareholder vote and verified that there were 200 million fewer votes cast this year compared to the average over the last two years. I called on Yahoo to appoint an independent third party to review and certify the voting process.

Yesterday, as news of the voting irregularities circulated, I received a number of complaints from frustrated shareholders.

Some claimed they had received multiple proxies from Yahoo over the last month, with several arriving Aug. 4–the Monday after the election. Some said they had had trouble voting by phone. Others, who had initially voted for Icahn’s slate, said when they tried to re-vote against the Yahoo board, they weren’t able to do so.

How many other shareholders encountered similar difficulties? Without a full inquiry, we’ll never know.

These missing votes could have had an even more significant impact on the overall results. For example, Bostock received “for” votes from fewer than half of the total shares eligible to vote (only 45.8 percent of the 1.4 billion shares eligible to vote). He truly lacks the approval of the majority of the shareholders he is supposed to represent. With a 47 percent vote, Burkle also lacks majority support. And while Yang won majority support, he did so by the skin of his teeth, with just a 50.2 percent vote.

Governance Matters

At Friday’s meeting, I asked Yang, Yahoo President Sue Decker and Bostock about three issues that suggest to me that Yahoo’s governance oversight has been lax.

(1) Why did Yahoo sell Overture Japan (a $396 million-per-year business) to Yahoo Japan for $13 million last August? Did Yang, who sits on Yahoo Japan’s board, recuse himself from the negotiations? Who negotiated on behalf of Yahoo and why did they agree to such a low price when Yahoo has a habit of paying three to five times revenues for companies like Zimbra, BlueLithium and Right Media?

(2) Decker serves on three Fortune 500 boards: Intel (INTC), Costco (COST), and Berkshire Hathaway (BRK). Her duties to those companies required her to attend at least 22 meetings last year, according to proxy filings. And each meeting required significant preparation. As a Yahoo shareholder, I fail to see how outside commitments like these benefit Yahoo. Are they really necessary? Shouldn’t Decker drop a few of them until Yahoo finds solid footing again?

(3) About a third–31 to 36 percent–of Yahoo shareholders voted against the re-election of Roy Bostock and fellow Compensation Committee members Burkle and Kern last year. Yet all three continue to sit on this committee (or the board). Why? And why did they agree to pay outside directors average total compensation of $500,000 last year? Google’s (GOOG) outside directors were paid $250,000, on average, for their services last year. Decker received $2,700 for sitting on the Berkshire Hathaway board (and $110,000 per year for serving on the Intel and Costco boards). Why is Yahoo paying its directors so much?

I found the trio’s answers to these questions unconvincing. Particularly surprising were Bostock’s comments on Compensation Committee member tenure and compensation.

In the first place, Bostock said while 32 percent of shareholders voted against his reelection last year, 68 percent voted for him. And that’s not bad, he said. This glass-half-full logic explains why he has never bothered to explain to shareholders why he, Burkle and Kern have remained on the Compensation Committee and the Yahoo board.

Second, Bostock disputed my assertion that Yahoo’s outside directors were paid an average of $500,000 last year. When I asked him if he was definitively stating that he did not receive compensation of about $500,000 last year, he said “yes.” Yet, according to Yahoo’s own proxy statement, Bostock earned total compensation of $499,264 last year. 2007 compensation for Yahoo’s other board members was as follows:

• Ronald Burkle: $482,046
• Eric Hippeau: $496,674
• Vyomesh Joshi: $519,520
• Arthur Kern: $496,990
• Robert Kotick: $492,774
• Edward Kozel: $516,202
• Mary Agnes Wilderotter: $205,832 (for five months of service; annualized $493,997)
• Gary Wilson: $482,046

The average compensation for each Yahoo outside director in 2007: $497,531.

Third, Bostock also claimed that this year’s vote would be a far better indication of shareholder support for Yahoo’s Compensation Committee than last year. With 39.6 percent of shareholders withholding support from Bostock and 37.9 percent withholding it from Burkle, isn’t it time for them to step aside?

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

Given all this, I am deeply concerned that my interests and those of all Yahoo shareholders are not being protected by the company’s board.

We need to know why 200 million shares were missing from this year’s vote as compared to the last two years’.

We need to know why so many proxies were mailed late to shareholders (on our dime).

We need to know why so many shareholders are questioning whether their votes were counted.

Yahoo will try to sweep all these concerns under the rug, but we shouldn’t allow it. The company should immediately appoint an independent third party to address these questions and assure shareholders that their votes were properly counted.

Immediate Changes to the Board

Also, Yahoo needs to immediately make some changes to the composition of its board. Bostock and Burkle should do the honorable thing and step down from this board.

In truth, this should have happened a year ago. One wonders what might have happened in the last 12 months with Microsoft negotiations had Yahoo acted swiftly, following the 2007 annual meeting, to remove them.

]]> http://allthingsd.com/20080806/jackson/feed/ 0 http://allthingsd.com/20080211/yahoo-ceo-to-employees-thank-you-for-not-quitting/ http://allthingsd.com/20080211/yahoo-ceo-to-employees-thank-you-for-not-quitting/#comments Mon, 11 Feb 2008 16:03:55 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20080211/yahoo-ceo-to-employees-thank-you-for-not-quitting/ Jerry Yang’s rallying the troops over at Yahoo again. In an all-hands memo this morning (see below, corrected for capitalization and punctuation), he explained Yahoo’s decision to reject Microsoft’s hostile bid for the company and thanked employees for all they do to “maintain and enhance Yahoo!’s leadership position in the online world.” Presumably, “leadership” in this context refers to the company’s leadership in underachievement.

Subject: our board’s decision

Yahoos,

As you’ll see from the news release we issued today, our Board of Directors has reviewed Microsoft’s unsolicited proposal with Yahoo’s management, financial and legal advisers. After a careful evaluation, the board has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders. Of course, the Board of Directors is continuously evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for stockholders.

We believe Microsoft’s proposal substantially undervalues Yahoo–including our highly recognizable global brand, large worldwide audience, significant recent investments in advertising platforms, future growth prospects, our ability to generate free cash flow and our earnings potential as well as substantial unconsolidated investments (like Alibaba and Yahoo Japan).

You deserve the credit for the tremendously valuable business we have built. All of us in management, as well as the members of the board, deeply appreciate and respect what you have done and continue to do in order to maintain and enhance Yahoo’s leadership position in the online world.

We have been very deliberate about the steps we are taking to position Yahoo. We are putting in place the pieces we need to accelerate growth by becoming a leading starting point for users and the must-buy for advertisers. The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010, and our more focused strategies position us to capture an even larger share of this market. We are moving to take advantage of this unique window of time in the growth of the online advertising market to build market share and to create value for stockholders.

Several key assets form a solid foundation as we execute this strategy.

First, our global brand is a tremendous base from which to build leadership as the starting point for Internet use: Yahoo is one of the most recognizable and admired brands in the world. We have some 500 million users (1 out of every 2 internet users worldwide). In the U.S., we are No. 1 in personalized home pages, mail, music, news, sports, shopping and travel. Yahoo also is No. 1 in time spent on our sites, an increasingly important metric for marketers.

Second, our substantial operating cash flow, which we expect to grow in the double digits in 2009, gives us the financial flexibility to execute our plans.

Third, we have made important investments in our core computing infrastructure that provide us greater scalability and increase the rate of iteration on core technologies like algorithmic search as much as tenfold. And of course, you’re familiar with our investments in enhanced search technology through Panama.

These assets–the brand, the audience, the financial strength, and the technology–position us to capitalize on this pivotal moment for Yahoo and the online marketplace. Of course, our most important resource is you: the thousands of creative, passionate and committed Yahoos who are executing our strategies to deliver value for users, advertisers, publishers–and stockholders.

As you know, we have taken significant steps to refocus our business on our starting point–must-buy strategies. And we’re making headway.

Starting points: Our goal is to grow visits to key Yahoo starting points and properties, by approximately 15% per year over the next several years. And we’re on the move: We are the most visited site in the U.S., and the number of U.S. users grew strongly in the double-digits in 2007 on our yahoo.com home page alone. as our open platform takes shape, it will significantly accelerate that growth.

Mobile, as an area of focus, is the biggest emerging starting point in the world. With twice as many mobile users as personal computer users and projections for substantial advertising growth in mobile, we have an important competitive edge as the No. 1 mobile destination in the U.S., and we are building a superior mobile experience for Yahoo users to further capitalize on this opportunity.

Must buy: At the same time, we will increasingly make online advertising easier and more effective for marketers, opening up new ways for them to address consumers. Our Right Media Exchange, acquired last year, is more open and easy to use, simplifying transactions for buyers and sellers of online ad inventory. Another 2007 acquisition, BlueLithium, brings us best-in-class performance marketing. While we’ve historically tracked the success of our ad business by focusing on metrics related to our owned and operated sites, our goal is to increase the percentage of the total online advertising demand we touch–to 20% of our addressable market over the next several years, from an estimated 15% in 2007.

Our newspaper consortium is a great example. It has grown to more than 600 newspapers, up from just 264 just seven months ago. Combined with eBay, Comcast, AT&T and others, we are creating a valuable, unique network of premium sites to serve our advertisers.

Our key strategies will be enhanced by our adoption of platforms that welcome third-party developers and encourage new applications that will enrich the user experience.

Finally, beyond our core strategies, there’s the added benefit of our substantial, unconsolidated investments in China and Japan: We have major positions in Yahoo Japan, the leader in its market, and Alibaba, which is strongly positioned in China, a market with enormous growth potential.

We have accomplished a great deal in a very short time. Yahoo is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers.

I hope you are as proud as I am of the Yahoo we have built and we continue to build. Thanks for your hard work.

Jerry

]]> http://allthingsd.com/20080211/yahoo-ceo-to-employees-thank-you-for-not-quitting/feed/ 0 http://allthingsd.com/20080115/yahoo-the-parts-of-its-sum/ http://allthingsd.com/20080115/yahoo-the-parts-of-its-sum/#comments Tue, 15 Jan 2008 10:01:40 +0000 Kara Swisher http://kara.allthingsd.com/20080114/yahoo-the-parts-of-its-sum/ BoomTown is usually never in sync with Wall Street analysts, given that their job is too often to sell people on companies and mine is to, well, tell on companies to people.



But I seem to be in violent agreement with Sanford Bernstein analyst Jeff Lindsay of late–at least with a recent report he just did calling for Yahoo to abandon its slower-moving strategies and get much, much bolder much, much quicker.

Suggestions by Lindsay included outsourcing its search business, making deep cuts in staff and also doubling down on its bets in its ad network businesses like Right Media.

(Frankly, I’d just like to see the company immediately-if-not-sooner roll out innovative email features like CEO and Co-Founder Jerry Yang showed at the Consumer Electronics Show last week.)

If you recall, Lindsay penned a previous report last October on the worth of Yahoo by parsing out its various assets. It was instructive in its focus on the value of Yahoo’s somewhat liquid holdings like investments compared to its core business.

The message at the time: Yahoo had some valuable assets–such as its stake in China’s Alibaba.com–and its stock did not reflect these gems. It even suggested the company be split into parts to unlock value.

But his most recent piece is less sanguine–a kind of flip side to the first, noting that the operations side of the business was not up to snuff, causing the valuation of Yahoo to fall. Bernstein blames Yahoo’s too-careful management, as well as its declining share of the search market.

Whatever you think about Yahoo, its still lackluster stock price–it hovers in the low $20-range–make reports like Lindsay’s interesting reading. See also this Motley Fool report yesterday, naming Yahoo the “Worst Stock for 2008.”

Nonetheless, all this bearishness could foretell some bullishness on Yahoo, which appears to simply refuse to move faster than it wants to.



Consider a largely positive piece on Yahoo’s fine-tuning of its business in the New York Times yesterday, which chronicled Yang’s turtle-versus-hare approach to the company’s future.

The article quoted Yang’s I’m-still-here intro to the CES speech (pictured here in this AP shot by Paul Sakuma), which kind of says all you need to know: “I’m guessing that a lot of you are here today to see what the new look and new face of Yahoo is all about…well, I’m sorry to disappoint you. It’s still the same old face. I’ve been around since the beginning.”

And, I have no doubt, until the bitter, sweet or even bittersweet end.

]]> http://allthingsd.com/20080115/yahoo-the-parts-of-its-sum/feed/ 4 http://allthingsd.com/20070518/anything-you-can-do-i-can-do-with-a-bigger-bag-of-money/ http://allthingsd.com/20070518/anything-you-can-do-i-can-do-with-a-bigger-bag-of-money/#comments Fri, 18 May 2007 14:30:42 +0000 Kara Swisher http://kara.allthingsd.com/20070518/anything-you-can-do-i-can-do-with-a-bigger-bag-of-money/ For those who think Microsoft did not have the guts to make big purchases on the Web, the $6 billion all-cash price they ponied up for advertising network aQuantive should quash that sentiment.



That’s more than 10 times its revenue last year, and, yipes, close to 50 times its cash flow. And that is double what the Seattle-based parent company to Avenue A | Razorfish was worth on the public market just before the acquisition, a figure that has already been bid up by all the recent activity in the market.

That includes Google’s $3.1 billion bid for DoubleClick, Yahoo’s $680 million to buy the rest of Right Media and WPP Group’s acquisition this week of 24/7 Real Media for $649 million. And, by the way, AOL bought a German-based online ad company called Adtech this week, too.

If you don’t know what to make of all this, consider yourself in the majority, as these prices seem–let’s just come out and say it, as we are not investment bankers–insane. In fact, the general Internet acquisition market feels to me a lot like the wacky IPO market back in the height of the bubble, where you were often slack-jawed by the rising stock prices for companies with no visible means of comparable growth.

But before I get going on that rant, at least the big players are overpaying in a market that I think we can all agree is one that is just at its most early stages. Here’s why:

1. Spending by big advertisers online lags well behind what many call “audience engagement.” In other words, time spent on the Web has obviously been growing and taking share away from traditional media. But spending online, though fast growing at about $20 billion this year, has not kept the same pace.

2. The time to act, then, is now, to lock up any and all available assets in this space, especially ones that give the buyer a big market share and critical mass. The three biggest online ad players, Google, Microsoft and Yahoo, have snapped up the three biggest independent online ad agencies.

3. As more ad spending shifts online, the ability to have expertise and to innovate quickly will become critical. What all these companies are buying–besides stronger relationships with advertising clients–are people and experience.

4. Most of all, there was no way Microsoft was not going to answer Google after it bought DoubleClick, especially if it wants (and it does) to stay competitive with the search giant in the online ad market. Given that its talks with Yahoo about some sort of partnership (as I have said before–please don’t) have not borne fruit (as eager as, I am sure, Microsoft ‘s Steve Ballmer would like to make that announcement), such a move by the company seemed inevitable.

Could they resist? I think not.

Please see this disclosure related to me and Google.

]]> http://allthingsd.com/20070518/anything-you-can-do-i-can-do-with-a-bigger-bag-of-money/feed/ 2 http://allthingsd.com/20070518/microsoft-aquantive/ http://allthingsd.com/20070518/microsoft-aquantive/#comments Fri, 18 May 2007 13:47:04 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070518/microsoft-aquantive/ Lest there be any doubt that there is a bubble in the online advertising business, consider Microsoft’s planned purchase of aQuantive. After losing DoubleClick to Google, Right Media to Yahoo and 24/7 Real Media to WPP, Microsoft offered a jaw-dropping $6 billion in cash for aQuantive. That’s $66.50 a share–an 85% premium over the previous day’s selling price and about 14 times aQuantive’s 2006 revenues of $442 million. It’s also a hell of a lot more than the $3.1 billion Google paid for DoubleClick–10 times its $300 million revenue–which Don Dodge, the head of Microsoft’s emerging business team, criticized as being “way out of line” when it was first announced. Wonder how he feels about aQuantive’s $6 billion purchase price.

Regardless, Microsoft’s not sweating it a bit. “We’re happy with the price we paid. We believe it’s exactly the right company to buy, so we’re willing to pay the value we are paying today,” said company CFO Chris Liddell during a call with analysts today. “We will use the strength of our balance sheet when we think it’s necessary to drive growth going forward. This deal takes our advertising business to a new level. This allows us to take a bigger piece of that $40 billion pie that is still growing.”

]]> http://allthingsd.com/20070518/microsoft-aquantive/feed/ 0 http://allthingsd.com/20070517/wpp-247realmedia/ http://allthingsd.com/20070517/wpp-247realmedia/#comments Thu, 17 May 2007 19:06:18 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070517/wpp-247realmedia/ If Microsoft is planning an acquisition in the online marketing and advertising space, it better act fast, because if it waits much longer there won’t be anything left to acquire. This morning marketing conglomerate WPP agreed to pay $649 million for 24/7 Real Media, one of the last remaining independent Internet advertising specialists, in an effort to catch up with Google’s expanding online advertising business. WPP CEO “Martin Sorrell has said that he views Google as a ‘frienemy,’ ” Dave Morgan, chairman of online ad network Tacoda, told the New York Times. “He wants Google to view him as a frienemy, too. He has now given his response, which is that he’s not going to just sit and wait and see what happens. He’s going to take an aggressive position against a world where Google and Yahoo will dominate.”

The WPP-24/7 Real Media deal follows Google’s recent acquisition of DoubleClick and Yahoo’s purchase of Right Media and puts to rest rumors that Microsoft was considering offering as much as $1 billion for 24/7 Real Media. Which begs the question: Has the software giant turned its attentions to aQuantive or ValueClick? Or has it concluded that there’s no reason to acquire an ad network when it already has a killer publisher ad server?

]]> http://allthingsd.com/20070517/wpp-247realmedia/feed/ 1 http://allthingsd.com/20070502/microsoft-247/ http://allthingsd.com/20070502/microsoft-247/#comments Wed, 02 May 2007 18:59:05 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070502/microsoft-247/ There’s this great scene in Penelope Spheeris’s The Decline of Western Civilization Part II: The Metal Years where a groupie, sharing a Jacuzzi with the band Odin, realizes that her friends have all paired off with band members and left her with the ugliest of the bunch.

That scene springs to mind in light of reports that Microsoft, after losing DoubleClick to Google and Right Media to Yahoo, is mulling a $1 billion bid for online advertising outfit 24/7 Real Media (see “Takes a Convicted Monopolist to Know One? Ha, Ha, Ha. You Google Guys Are a Real Laugh Riot” and “What? You Thought Yahoo Was Going to Use a Google-Owned Ad-Serving System?”) Which is not to suggest that 24/7 isn’t a worthy acquisition target, just that Microsoft clearly hasn’t scored first choice in this little online advertising M&A dance. And, adding insult to injury here is the fact that this rumored bid for 24/7 is anything but a sure thing. WPP Group, the world’s second-largest advertising company, is also thought be a suitor for 24/7. Given its recent track record, maybe it’s time for Microsoft to move on and start looking at someone else. Like aQuantive. Or (smirk) Yahoo.

]]> http://allthingsd.com/20070502/microsoft-247/feed/ 0 http://allthingsd.com/20070430/digital-daily-video-2007430/ http://allthingsd.com/20070430/digital-daily-video-2007430/#comments Mon, 30 Apr 2007 22:06:56 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070430/digital-daily-video-2007430/
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