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O'Brien: New Yahoo CEO needs to act fast

January 2012

By Chris O'Brien


Mercury News Columnist

Posted: 01/04/2012 11:19:31 AM PST

Updated: 01/04/2012 09:09:50 PM PST


New Yahoo (YHOO) CEO Scott Thompson is not a man with a plan.

During a conference call Wednesday morning to announce his surprise appointment to run the beleaguered Internet giant, Thompson made it clear that he doesn't begin his new job with any clearer sense of how to revive Yahoo than his predecessor, Carol Bartz.

Instead, when faced with questions from investment analysts about how he planned to turn things around, the former president of PayPal repeatedly pleaded for time to learn the business and figure out where to take it. In other words, he's asking for the one thing he's not likely to get.

"Give me some time," he said, over and over.

The problem is that investors, advertisers and consumers have been waiting for such answers for a long time now, stretching back several years and two previous CEOs. Patience has grown thin. Investors in particular are still smarting over the missed opportunity to sell to Microsoft at what now seems like an astronomically high price.

Ken Marlin, an investment banker and adviser who focuses on media companies, said he's not sure if there's time for anyone to turn Yahoo around.

"Yahoo needs someone to figure out what purpose it wants to serve in life and execute on that vision," Marlin wrote. "It needs a clearer definition of who are its target customers and what is it going to do uniquely to meet some well-defined need of those customers. I simply do not know if Scott has that vision or the ability to bring along a recalcitrant board. It will be interesting to watch -- and it may be too late."

The company hired Bartz three years ago and she proceeded to shut down or sell pieces of Yahoo's business to supposedly create a sharper focus and identity. And yet, time and again she proved unable to articulate a clear message about what Yahoo stands for. And so last year she was shown the door.

Now comes Thompson, a respected executive and technologist in Silicon Valley who oversaw PayPal as it grew from a $1.8 billion business to a $4 billion business.

So why did Yahoo's board think Thompson is the right guy for the job?

"Scott has a demonstrated understanding of the importance of creating a great customer experience and a strong value proposition for partners and customers as the foundation of a successful Internet business," said Yahoo Chairman Roy Bostock.

Pretty generic stuff.

Unfortunately, Thompson appears to be picking up where Bartz left off: Trying to figure out what to do with Yahoo. Yes, PayPal is an Internet business, and a successful one. But throughout the call, Thompson stressed that he needed time to learn Yahoo's business, what its partners wanted, what its customers wanted.

His aspirations for Yahoo are to make it an innovative and disruptive business again.

"If we do it right, and we intend to, that will become the identity of the business," he said.

And just how will he do that? How will he keep Yahoo competitive in display advertising? How will he stem the departures of high-level executives? How will he make Yahoo matter again?

"It's just too early for me to have an informed opinion," he said, repeating several variations of that answer at other times.

OK, maybe it would be unrealistic for the new guy to have a fully formed game plan on Day One. And Thompson made it clear that he needs some breathing room to get the strategy right. But he also has to understand that his honeymoon, if there was one, was over by the time his conference call wrapped up. He needs to make clear he has a sense of urgency, which I did not detect. Yahoo's various stakeholders are not going to sit on their hands waiting for a plan.

Karsten Weide, an analyst at IDC, said Thompson won't have the same time as Bartz did, but was willing to give him six months to come back with a plan. Weide said he was pleased Yahoo found someone who is known as a technologist, but he's concerned about one aspect of his résumé.

"He doesn't have a background in media and advertising," Weide said. "You need to understand the product."

Thompson was right about a couple of things. Yahoo's potential remains tantalizing. The Internet and how we experience it continue to change and is likely to be radically different in the next five to 10 years. And Yahoo, with 700 million unique visitors, still has a lot of raw material to work with.

"It presents a huge opportunity and a big challenge," Thompson said.

For that reason, Yahoo remains one of the most vexing puzzles in Silicon Valley. On Wednesday, we got no closer to learning whether Thompson -- or anyone -- can solve it.

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