Jerry Yang: Bad at Business or Politics?

by on November 18, 2008 · 26 comments

Yahoo! has seen better days, but it’s still a profitable company with a market cap of $16 billion, something that many tech companies that began in the 1990s can’t say (mainly because they no longer exist).  Even though Yahoo! continues to be a profitable company, it is no longer viewed as an innovator, which is hurting its stock value immensely.  It’s also hard to say exactly what Yahoo! does, even its employees and executives can’t figure out what the company is all about.

All of this added up to yesterday’s resignation of Jerry Yang.

Yang’s tenure at the helm began when he stepped in for Terry Semel in June 2007.  Since that time Yang, one of the co-founders of Yahoo!, has been seen as the man who couldn’t do anything right.  He passed up an offer from Microsoft to buy Yahoo! for $33 dollars a share, claiming the company was worth $37.

Yang then pursued an advertising deal with Google, but on November 5th it was announced that Yahoo! and Google were backing out of the deal due to regulatory stumbling blocks erected by the Department of Justice.

As the AP story on Yang’s resignation states:

Just a few hours after the Google partnership collapsed, Yang publicly said he thought Microsoft should hook up with Yahoo. But Ballmer threw cold water on the idea the next day by declaring he doubted a deal could be worked out.

So one is forced to wonder where Yahoo! is to go from here.  It is a company without a core mission, without leadership, and without a suitor that could give the meandering tech giant  the direction it so desperately needs.  Hopefully, Microsoft does come courting again, and perhaps Yang’s successor will be a bit more eager to make a deal.

But then again, was Yang really that bad?

Yang was probably right that Yahoo! is worth more than the MS offer, or at least it would have been had Yahoo! been able to monetize its more esoteric content through a deal with Google.  Unfortunately, the deal was torpedoed by regulators.  According to CNET’s Declan McCullagh, this was partly due to the lobbying efforts of Microsoft.

So was Yang too consumed with pride to give up the company he founded?  Or, was he guilty of naiveté regarding how the game is really played in DC?  Most likely, it was a little bit of both.  Its unfortunate, however, that the latter had to be a factor at all.

Yahoo! could become a very interesting and innovative company again, if it can focus its efforts and find a new way forward.  That new direction should be determined by what will serve consumers best in the free marketplace.  Unfortunately, Yahoo! doesn’t get to operate in a free market—it operates in a system where currying favor and paying high-powered lobbyists matters as much as creating a good product and offering value in the marketplace.

In the end, that reality hurts both Yahoo! and consumers.

NOTE: My apologies to TLF readers and Declan McCullagh for my post’s earlier spelling errors and thanks to Ryan Radia for pointing them out.  Although, this does prove my theory that the number of interruptions during the writing of a post directly correlates to the number of absurd errors in the post.

  • MikeRT

    Let's face it. Yahoo! didn't take advantage of the opportunities available to them. They bought Overture, but didn't take it to the level that Google took AdSense and AdWords to. Yahoo! had a chance to buy Google early on when Google was small, and then turn them into an independent subsidiary that would provide all of the coolness for Yahoo!'s search engine.

    Yahoo! is probably more in trouble from several failed opportunities than federal intervention.

  • http://bennett.com/blog Richard Bennett

    I appreciate the fact that sophisticated policy wonks tend to regard Silicon Valley's geeks as untutored rubes from out in the sticks, but it's a actually a bit of a myth. Long before Yahoo! and Google got together to fondle each others private ad networks, Yahoo! was striking deals with the government of China to deny pro-democracy activists their human rights and advocating in Washington for a regulatory stranglehold on ISPs, so they deserve what they got in the regulatory wars. Yahoo! made a series of business blunders that culminated in Yang's effective termination as CEO, which just goes to show you that the skills it takes to start a company aren't the ones it takes to manage one. Forbes has a nice list of these screw-ups here: http://www.forbes.com/2008/11/18/yahoo-mistakes

  • http://www.cordblomquist.com cordblomquist

    Richard, I don't think Yang is a rube from the sticks, but I one has to wonder how Yahoo! or Google could have thought their ad deal had any chance of going through given the current antitrust climate. It took around a year and a half for Sirius/XM to get approved, yet Google and Yahoo! bail out of their deal after just a few months seemingly surprised by the level of regulatory scrutiny.

    Yahoo! has made a lot of mistakes. They've been mismanaged for years and have failed to compete on search and advertising at every turn. Now they're trying to become a content company, but they seem to be failing to do that effectively as well. They have some of the greatest properties on the web, but no ability to make the whole greater than the sum of its first-rate parts.

    You're also right to say that Yahoo! has done its fair share of nasty deals with governments, both domestic and foreign. I'm not sure, however, that we should wish bad actions back on to them as a consequence. It's my wish that no one use the regulators as part of a business strategy, which clearly Yahoo!, Google, Microsoft, and nearly every big name in tech is doing. The best way to ensure that happens is to take away power from the regulators. Then these folks could focus on developing good products instead of beating up on each other in DC.

  • http://bennett.com/blog Richard Bennett

    I'm not a hardcore libertarian who rejects all forms of government regulation, more of a libertarian light who believes in zero-based regulation. If a case can be made that a firm is inhibiting competition, I'm all for slapping them upside the head. It strikes me that Yahoo's Google deal was nothing more than a poison pill aimed at keeping Yang in the CEO's job by blocking the MS takeover attempt. So the SEC is the agency that should have been interested in it. He was screwing the shareholders to protect his own egotistical interest in being a CEO.

    But I certainly agree with you that the move was ill-considered given the current climate in DC regarding the Internet and monopolistic practices. The irony is that Yahoo and Google largely created that climate by jumping aboard the net neutrality bandwagon.

  • http://bennett.com/blog Richard Bennett

    I'm not a hardcore libertarian who rejects all forms of government regulation, more of a libertarian light who believes in zero-based regulation. If a case can be made that a firm is inhibiting competition, I'm all for slapping them upside the head. It strikes me that Yahoo's Google deal was nothing more than a poison pill aimed at keeping Yang in the CEO's job by blocking the MS takeover attempt. So the SEC is the agency that should have been interested in it. He was screwing the shareholders to protect his own egotistical interest in being a CEO.

    But I certainly agree with you that the move was ill-considered given the current climate in DC regarding the Internet and monopolistic practices. The irony is that Yahoo and Google largely created that climate by jumping aboard the net neutrality bandwagon.

  • http://bennett.com/blog Richard Bennett

    I'm not a hardcore libertarian who rejects all forms of government regulation, more of a libertarian light who believes in zero-based regulation. If a case can be made that a firm is inhibiting competition, I'm all for slapping them upside the head. It strikes me that Yahoo's Google deal was nothing more than a poison pill aimed at keeping Yang in the CEO's job by blocking the MS takeover attempt. So the SEC is the agency that should have been interested in it. He was screwing the shareholders to protect his own egotistical interest in being a CEO.

    But I certainly agree with you that the move was ill-considered given the current climate in DC regarding the Internet and monopolistic practices. The irony is that Yahoo and Google largely created that climate by jumping aboard the net neutrality bandwagon.

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