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YahOUCH!

By - November 18, 2006

YahooBrad Garlinghouse

For the past few quarters, many of us have sensed something of a malaise brewing inside Yahoo. (My first question to David Filo at Web 2, for example, was centered on Yahoo’s sliding image as an innovator, and how it’s languished compared to Google in terms of search and monetization). Now Paul Kedrosky has posted an internal memo (and WSJ does too) that puts that malaise into words. Written by SVP Brad Garlinghouse, it’s a pretty thrilling manifesto – the kind of internal document that gains power when it becomes public.

Now the question is, what will Semel do with it? The public airing of such a damming memo certainly demands some kind of response. Wow.

…all is not well. Last Thursday’s NY Times article was a blessing in the disguise of a painful public flogging. While it lacked accurate details, its conclusions rang true, and thus was a much needed wake up call. But also a call to action. A clear statement with which I, and far too many Yahoo’s, agreed. And thankfully a reminder. A reminder that the measure of any person is not in how many times he or she falls down – but rather the spirit and resolve used to get back up. The same is now true of our Company.

It’s time for us to get back up.

I believe we must embrace our problems and challenges and that we must take decisive action. We have the opportunity – in fact the invitation – to send a strong, clear and powerful message to our shareholders and Wall Street, to our advertisers and our partners, to our employees (both current and future), and to our users. They are all begging for a signal that we recognize and understand our problems, and that we are charting a course for fundamental change, Our current course and speed simply will not get us there. Short-term band-aids will not get us there.

Specific points Brad makes:

We lack clarity of ownership and accountability. The most painful manifestation of this is the massive redundancy that exists throughout the organization.

We lack decisiveness. Combine a lack of focus with unclear ownership, and the result is that decisions are either not made or are made when it is already too late.

We have lost our passion to win. Far too many employees are “phoning” it in, lacking the passion and commitment to be a part of the solution. We sit idly by while — at all levels — employees are enabled to “hang around”. Where is the accountability?

Garlinghouse goes on to make specific recommendations about how the company should be organized (way flatter), staffed (cut 15-20%) and run (kill redundant businesses, etc.).

I can only imagine the fire drill going on at Yahoo right now over this. But my two cents is this: Accept this criticism as heartfelt, and assuming the leak was not malicious, don’t go on a witch hunt. Don’t circle the wagons, and – this would be risky but right – if you truly believe that Garlinghouse has valid points, take the memo to heart and address the points it raises.

No one wants to see what happened to DEC, Xerox, IBM, or Microsoft happen to Yahoo. Maybe this is the wake up call it needed? (Of course, having the leak on the weekend before Thanksgiving does minimize the impact…)

Update: From the Journal: Chief Operating Officer Dan Rosensweig has asked Mr. Garlinghouse to head a group of Yahoo staff looking into the issues in the memo over two months, say people familiar with the matter.


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12 thoughts on “YahOUCH!

  1. ZF says:

    Brad paints a fairly detailed picture of the company and its problems, but in that picture there is no trace of a CEO addressing those problems.

    Since Brad has a Harvard MBA, and that course is focused entirely around understanding the corporate CEO’s role and responsibilities, I think we have to assume the omission was deliberate and meaningful.

  2. phoneranger says:

    YahOUCH. This is my locution. I need attribution. Fred Wilson stepped up when he used it. Sorry to be so prickly about this but I am just following the lead of my buds at Universal and GOOG/YT. If you don’t defend it, you don’t own it. ;)

    OTOH. You said “No one wants to see what happened to DEC, Xerox, IBM, or Microsoft happen to Yahoo.” See a trend there? What happened to those guys — success followed by decay followed by…. It’s inevitable. GOOG and NWS take note. Nothing is forever.

  3. Anon says:

    I dunno – maybe I’m too cynical, but what if the manifesto is actually an orchestrated PR campaign? A “shocking” way to show Y! plans to get up and get moving?

    That said, the memo is awesome – totally on point. If Y! takes action the way Brad suggests, its stock price will recover.

  4. Yo Phoneranger: Great minds think alike. Imagine that. I didn’t see your site, or Fred’s, first.

  5. dhoom says:

    Yahoo is learning the google way – of ‘leaking’ internal memos . Lets hope they also leak out some products and not just memos. Definitely the ‘leak’ was worth it thru the blogosphere.

  6. ZF says:

    The guys over at Google are probably laughing pretty hard this morning, because Brad’s memo does not identify the one really weighty problem at Yahoo, which is that Terry Semel has probably never understood the first thing about the difficulties with Panama’s performance. All of the company’s other problems (many of which Google also suffers from) pale into insignificance beside this one.

  7. There is absolutely nothing wrong with Yahoo – considering that just 12 years ago – it was nothing more than a simple HTML directory of links begun as a hobby, and in a span of one decade has become what it is – is nothing less than AMAZINGLY ASTOUNDING !!!!!!!!!!!

    The letter talks about the ‘PASSION TO WIN’…..
    that is a psychological, egotistical, disorder that afflicts some power hungry few.

    Winning just for the sake of being Number One is bizzare -those obcessive people will never be satisfied, NEVER…EVER.

    What is left to win, possible the SERPs could become a relevant as Google – until the next generation of search technology is created.

    But in terms of the Web 2.0 acquisitions – they are nice – but they really are not needed.

    They are interesting – but they are not fascinating. Only because most users can now do just about ANYTHING they want or need to do for hobby or business.

    Substituting online services for client side software is nice and convenient – but there has to be a dire need for it, the option to remotely log in to a VPN and do your work is just too easy for most – and of course – legal or not legal – many people are just copying their licensed software to other laptops and computers to get full usage out of it rather than just ONLY using it a one computer, or getting several licenses.

    Also, winning depends alot on Branding and Marketing…..which essentially just gives temporary emotional satisfaction to a consumer – but does NOT necessarily mean that a well branded or marketed product or service is any better that one that is NOT well-branded or marketed or hyped aggressively.

    Society has so much instant gratification and recreation alternatives…..that there is just not that much else needed at the moment.

    There in fact may be a backlash in a decade among the very young techies who were so inundated with Virtual technolgy since birth…that they never REALLY experienced to direct human socializing that baby boomers and generation X at least experienced before the virtual technology boom.

    Oh, Search Engines WEB…so brilliant!… So incisive!

  8. TagMan says:

    The memo is weak. It’s generic. Wouldn’t even exist had the acquisition of Overture gone more smoothly. Google’s executing better on search and contextual advertising than Yahoo. That’s the core reason why Google’s stock is outperforming Yahoo’s stock. Fix that first. Too early to tell if Panama’s the answer. Don’t fire employees while Google is hiring. Don’t give up on important acquisitions of products (and people) like Flickr and del.icio.us. Did this SVP forget to file his TPS report on time?

  9. George F. Kennan says:

    Well, the folks at Google definitely read the WSJ article because it was posted on the internal email list industry-info Saturday morning. As for Brad, he is part of the problem, not the solution. He had the chance to buy Flickr, but then some other group bought it later, bought Dialpad (where he was CEO prior to joining Yahoo!) for a VoIP solution, and Oddpost, which took 2+ years to integrate and go fully public beta as Yahoo! Mail.

  10. Wyatt Bellis says:

    Well, as a previous management employee of the big Y!, I can say that everything addressed in the “memo” is exactly why I left the company. Brad spelled it all out and now let’s see if they can/will actually change. I guess it’s hard when you are making millions in salary and stock options to really care about what is right for the company.

    Y! says it cares about what employees think and what is happening in their “world”, but the reality of it is that they don’t actually care as long as you tow the company line and don’t speak out of turn.

    I could talk for ages, but then I would probably be in violation of some employment agreement that is still in effect. Like when I handed in my notice, there was no “sorry you are leaving, why are you leaving, etc”. Instead, there was a 2 page letter from HR, of which most of it was dedicated to reminding me about the confidentiality agreement that I had signed when I joined.

    Ho hum. All of the above is purely my own personal opinion and is in no way intended to be detrimental to Y! or any of its subsidiaries.

  11. Steve M. says:

    Many questions…
    Many ideas…
    Many suggestions…
    Many recommendations…

    Much head scratching and teeth gnashing…

    One real answer…a new, better, “ permission bid on our actual traits and characteristics instead of the words we type into little search boxes” PPC ad platform…that Google; thanks to pending patent 11/250,908; can’t get its hands on…

    One real answer…

    Target people. Not words.

    Think Keytraits. Not Keywords.

    Think PPC 2.0.

    Think paid match.

  12. … and then there is the simple 2 step solution:

    1) Get context matching within 10% of Google’s quality.
    2) Offer publishers 80% of the rev share.

    About 40% of Google revenues are publisher generated, a staggering amount of cash. Publishers will go where they are paid best and go there fast. Yahoo’s been squandering this gold mine. As a shareholder this is … upsetting.