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.

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