The 5 Things Yahoo's New CEO Scott Thompson Should Do Right Away

Move on the buyout position

A former PayPal president, Scott Thompson assumes Yahoo's big chair at an acutely dynamic and also slippery moment. Alibaba, China's giant web firm which is actually 40% Yahoo owned, is girding to make a bid for Yahoo itself. It's gone as far as hiring a Washington-based lobbying firm, and this is being seen as an enormous sign that it has designs on Yahoo. Alibaba's Jack Ma scribbled the writing on the wall, in no uncertain terms, back in September saying he would love to buy Yahoo "if the opportunity presented itself," and now he seems to have pushed this by trying to arrange the situation.

Yahoo's board is said to be resistant to the idea, in the same way cofounder and then CEO Jerry Yang (disastrously?) turned down a bid from Microsoft in 2008 for $45 billion, with the firm now worth less than half of this, and has been maneuvering to protect or dispose of assets that may be the most attractive to Alibaba—such as Yahoo Japan.

Thompson needs to solidify Yahoo's position immediately. Either the firm needs to defend against buyout situations like this or it needs to consider them seriously. There're a host of issues with the potential Alibaba buyout, not the least being a Chinese ownership may upset U.S. regulators, but to dismiss it outright may be foolish. And where Alibaba is interested in treading, others may also be tempted.

Fix the board

Hiring a hot new CEO, one with demonstrable success in control of a different but massive Net firm, is potentially a good move. But Yahoo's board is itself in trouble. Look at what's really happened over the last year or so: Unsure of its direction, Yahoo's board failed to oust unpopular CEO Carol Bartz last June and thus irritated many shareholders. Yahoo lost its position as the No. 1 ad seller to Facebook, Bartz failed to deliver on her promise to turn the juggernaut around, Yahoo's profits slid continuously, and even when Yahoo won headlines read: "Is Yahoo's $610 Million Anti-Spam Win Meaningless?"

Avoiding a weak maneuver like RIM's rumored one, which is to move controversial co-CEOs Balsillie and Lazaridis off the board but allowing them to retain management positions, one of brand-spanking-new CEO Scott Thompson's big challenges may be to maneuver the board membership to achieve one benefit: Effectiveness. If a refreshed board backs up Thompson, allowing him to make bold sweeping changes to the company—big things may be possible, and it's arguable that Yahoo needs dramatic changes in order to swiftly improve its position.

Follow Google and choose a direction

Yahoo does many things. But how many does it do well? Summarizing its business model in a paragraph, let alone something as tight as an elevator pitch, is tricky. We're left pondering what does Yahoo actually do? In many ways it's like Google, with a (core) advertising model, and diverse offerings that include news sites, messaging, mail, financial reporting, navigation, location-based services...and so on. But whereas Google has an absolutely firm central function—search—with the ancillary assets supporting it, and in some cases developing into profoundly important businesses of their own (such as Android), Yahoo is ephemeral.

Technically this isn't a problem. But it does not exactly instill confidence among shareholders, which is a problem. And it's something Carol Bartz never fully realized, and thus failed to tackle. In fact Bartz said, in 2010, "Maybe it's taken me two years, but I've got it: Yahoo is actually a simple story." Her definition was: "We're a tech company, innovative. We're the largest content communication company in the world…Yahoo has stood for a lot in the Internet. It has stood for fun, it has stood for relevance." That sounds semi-convincing, but if you scrape away the glitter...it actually tells us nothing about what Yahoo does.

By copying some of Google's recent tricks, which have involved shearing off appendices and shuttering slightly off-the-wall projects and project incubators, Thompson could focus Yahoo's efforts more sharply on what it currently does well. Consolidation could thus lead to strength.

Fix the brand

This is related to the above section—and perhaps even more crucial in the short term. As well as being ill-defined from a shareholder point of view, what kind of amorphous image does Yahoo present to the consumer?

People who use Yahoo's mail or who have Yahoo set as their browser homepage see it as a portal to web content...sure. But the problem with a portal is that you tend to rapidly step through it, leaving the portal behind. And where the word "Google" has become a verb in its own right, nobody says "I'll Yahoo that." Yahoo's brand identity is fuzzy, old, and possibly even tainted with a "comes from the dawn of the web" aroma that also hovers around AOL.

The consumer-facing identity is wrapped up intimately with the identity the company has within itself. Having outsourced its search to Microsoft, blurred its ownership of online ads with a Microsoft/AOL cross-deal, fumbled with its management, and done nothing to deliver an incredibly strong core feature—a killer app, if you like, in a world that's increasingly about apps—Yahoo is messy, wobbly.

Sure, it's still one of the most visited sites in the world, but how much of that is sheer momentum gained from its position in early Net history? This kind of success is easy to lose with just a single click. Millions of consumers would need to make that single click, of course, but if something more spectacularly powerful, interesting, and immediately useful became the vogue, then those consumers would drift away from a fuzzy brand like Yahoo with ease.

The tablet PC revolution may be key to this: In a world where your UI is dominated by apps, each buyable with a simple click and many an absolute delight to interact with, visiting a Yahoo property takes a deliberate effort...and leaves one hearing the siren calls of non-Yahoo solutions (think of this number: 1.2 billion app downloads over the holidays).

Thompson needs to strengthen the brand image, and tie it to innovative products and new technologies, fast.

Build a strategy to compete with Facebook

Facebook is on the ascendant. You may not like it, global privacy advocates and governments may not like it, but it's true. Yes, there are resisters, and yes it may be slowing a little, but the company is still expanding its reach over the Internet, and with its simple and attractive (and useful) core purpose of social networking it's allowing the firm to make inroads in areas like instant messaging—supported by new smartphone apps—and email-style correspondance that is traditionally a Yahoo staple. With its expanding package of games, useful apps, and even odd but bold moves like Facebook-centric smartphones, the company is moving inexorably into territory that Yahoo traditionally was comfortable in.

However it's achieved, Thompson must develop a coherent and powerful strategy to compete with Facebook—whether it's to out-maneuver, react to, defensively develop innovative new consumer apps or novel advertisign mechanisms, it needs to do something.

[Image: Flickr user Yahoo! Blog]

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1 Comments

  • Jill Kennedy

    Seems like a fairly solid pick.  I don't know that you can turn that brand around.  It's fine just as it is - it just doesn't really have much potential for growth.  I say take it private, be content with OK profits and be done with it.  I see that Carol Bartz has also received a job offer... from Manka Bros.

    http://mankabros.com/blogs/cha...