InsideGoogle

Terry Semel Out As Yahoo CEO!

Oh thank god they’re doing something. I am truly happy for Yahoo now, even as I worry about its future.

Jerry Yang, one of Yahoo’s founders, just announced on the Yahoo blog that he is replacing Terry Semel as CEO of the company, although Semel will be Yahoo’s Chairman, but in a non-executive role. The BBC says Semel resigned today as CEO after six years, and that Susan Decker, head of advertising, will move in as President of Yahoo (previously, Yang was “Chief Yahoo”, presumably making him and co-founder David Filo the President).

Semel’s resignation should please shareholders, many of whom have been calling for his head as profits have fallen and he has pulled in bonuses equal to a quarter of all yearly corporate income. Semel was raking it in as Yahoo faltered, earning close to (or exceeding) a billion dollars in stock grants while his company lost market share and growth to Google, and failed to close deals that many saw as necessary to the company’s future.

Yahoo shares rose over 7% on the day.

Among Semel’s mistakes:

• Failing to buy Google for $1-2 billion when it had no money and no prospects.
• Failing to see that Yahoo needed to develop a search engine early, costing $2 billion when they bought Inktomi.
• Failing to buy other companies, like Facebook, YouTube, DoubleClick, MySpace.
• Choosing not to sue Google into oblivion when it infringed on Yahoo’s Overture patents prior to Google’s stock offering, a lawsuit that, in theory, could have destroyed Google. Yahoo instead settled for Google stock, sold it too early for $223 million, and thus lost $1.17 billion based on today’s share price.
• Failed to integrate Overture and other technologies to create Panama fast enough, giving Google time to create an insurmountable lead. Panama’s delays coincide with the period Google passed Yahoo.

What Semel did right:

• His first years at Yahoo saved the company, pulling it past the dotcom crash and making it profitable. Yahoo would not be here today if not for him, but it would have done better if he had left after three years.
• Revenues increased nine-fold in his tenure, the company turned a profit, then its first billion dollar profit last year (though profits fell this year, again, because the company lost its way in his later years) and the stock rose 300% from his hiring through 2006 (and fell 35% in the 18 months since).

Semel did great things for Yahoo, saved the company, and got it in the right place to conquer the internet. Then he bet on Hollywood, didn’t invest enough in search, advertising, and wasn’t aggressive enough when some opportunities presented themselves, and he lost. His first three years are the best of any dotcom CEO, and and his last three were a mistake. Had Semel stepped down three years ago, Yahoo could have been stronger today.

Yahoo faces an uphill battle, but they seem to have made the right decisions going forward. Yang might be the right man for the job, perhaps bringing back some vitality to the company (he is only 38) and the aggressiveness needed in this new economy. Susan Decker has done some great things in the ad group, but she is also part of the company that has slipped to Google. Yahoo would do well to fill her old job with someone new and incredibly talented (and finally fill the “search and content operations” position), if they still know how to bring in good people.

Yahoo seems unable to hire good executives. Any other company would try to bring in a new CEO. Yang may be talented, he may even be the answer, but moving Yang in, promoting Decker, leaving important advertising and other executive positions open, it smells of a company that needs good execs but can’t convince them to work there. That’s the new problem going forward.

Valleywag’s obituary of Semel’s career says he was not responsible for saving Yahoo, but rather just lucky, and that he has been criticized as not understanding the fundamentals of the technology his business ran on. Semel was indeed a businessman, not a technologist, and in the long run that was possibly his undoing.

They also say Yahoo is now an acquisition target. At no time in the last few years has that been more true than it is now. Yahoo lacks quality people in a few positions, and might thrive more in a company that can fix those problems for them. Microsoft is the obvious suitor.

June 18th, 2007 Posted by Nathan Weinberg | General | one comment