Commercial Success

To grasp what's happening at Yahoo, look at two snapshots, then and now. Start with the late 1990s: The founders, Jerry Yang and Dave Filo, are barely out of their twenties, but these two boyish, scrawny Stanford computer-science grad-school dropouts still look and act a lot like teenagers. Infused with the idealism of the early wave of Internet pioneers, they say that they're motivated not by starting a business or making money but by creating something useful for the community. Even though they've become instant multibillionaires, Dave -- who grew up on a commune -- remains compulsively frugal: He still lives in a cheap rental apartment, and he often sleeps on the floor of his open cubicle at work, which is strewn with junk. He wears T-shirts that he got free at hacker conferences, even if the shirts have logos of Yahoo's rivals. Jerry and Dave's colleagues play soccer inside the office in an open space across a glass wall that looks right into the boardroom, even while the board of directors -- the grown-ups! -- meets there. And they race their mountain bikes through the hallways of the company's Silicon Valley headquarters. Jerry and Dave's idea of a "power lunch" is the greasy glory of the In-N-Out Burger, which pulls its delivery truck into the Yahoo parking lot.

That was then, but this is now: The red-hot California company with two free-spirited boyish genius founders -- zipping around on Segways, playing roller hockey in the parking lot, making billions while hardly into their thirties -- is Google, not Yahoo. And the highest-profile new public face of Yahoo is a grown-up: Wenda Harris Millard, the company's chief sales officer, who's responsible for bringing big-brand advertisers to the Web site. By 1990s Silicon Valley standards, she seems suspiciously New York and unspeakably old economy. She doesn't act like a teenager -- at 50, she's the mother of two teenagers in Connecticut. Before coming to Yahoo, she had a long career as a publisher of magazines -- the dead-tree kind, not the electrons-on-the-screen kind. She takes the Metro-North commuter train to work (what can be more old school?) at an office tower near Grand Central Terminal. She's a habitue of the Golden Triangle for New York's power-lunching media elite: Michael's, the Four Seasons, and the hot spot of the moment, Lever House on Park Avenue. Lever House's ponytailed maitre d' greets Wenda warmly by her first name and escorts her to the best table -- the center booth -- where she nibbles on a $33 entree of seared ahi tuna and tastes a glass of white Burgundy while seeing and being seen by the potentates of the media business. She's suntanned from spending the weekend in the Bahamas with her friend Martha Stewart -- it was Martha's last hurrah before entering prison. She expounds on the crucial distinctions of where players sit at the power-lunch joints -- how the ad sales execs prefer the Pool Room of the Four Seasons restaurant while the editors haunt the Grill Room.

Power-lunching? What's going on here? Has Yahoo lost its original spirit? Hardly. The Web site is still one of the most powerful forces in the Internet revolution that's transforming the global media. The big shift is that Yahoo is no longer trying to create the revolution in opposition to the establishment. It's fomenting revolution from within. Millard's mission is to promote the Web as the future of advertising. Thanks to her insider's understanding of the New York media scene and her formidable energy, she has been able to get Madison Avenue to see Yahoo not as upstart but as savior -- the vehicle that will rescue it from the long, harrowing decline of the medium it has been tied to for decades: broadcast television.

The Web always had the potential for reinventing and reinvigorating advertising. With its unique ability for measurement -- tracking who clicked on an ad and how they interacted with it -- the Net promised to solve the classic problem stated by department-store pioneer John Wanamaker: "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." But in its early years in the 1990s, the Web couldn't deliver the mass audiences needed by national consumer brands. Lately, though, Millard has been instrumental in showing Madison Avenue that the Internet has developed the audience reach, the technology, and even the creative ferment to realize its great potential.

And Madison Avenue is now ready to listen. For many years, the biggest advertisers have kept spending more and more money trying to reach a mass audience through their mainstay of broadcast TV. The tube used to make their lives so much easier: In the early 1970s, when people turned on their TV sets, they tuned in to ABC, NBC, or CBS, or their affiliates 80% of the time. But the Big Three's share has fallen to 33% with the rise of Fox, cable, video games, videocassettes, and DVDs. And advertisers don't really desire the viewers who remain loyal to the broadcast networks, who are older, poorer, less educated, and more rural.