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Yahoo!'s five biggest mistakes

By Brian Caulfield, Forbes
Last updated on: November 21, 2008 16:15 IST
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Sirens blared outside Yahoo!'s campus Tuesday, a day after chief executive Jerry Yang said he will step down as the Web portal continues to struggle to gain a grip on the advertising market and capitalise on its media assets.

Paramedics, police and a fire truck responded after a Yahoo! employee suffered a seizure, a company security guard said. It's unclear what caused the seizure, but employees at the company's headquarters are bracing for 1,500 jobs cuts that are expected next month.

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With the Web portal's future less certain than ever, employees were guarded when asked about Yahoo!'s troubles. The company's stock is down 63 per cent from what Microsoft offered to pay for it in February, and Google continues to bite off chunks of Yahoo!'s business by the mouthful.

Many employees, however, weren't talking. Why risk a job in this economy? "I'm sorry, I can't say anything," one employee said as he rushed away with a box lunch in hand.

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Still, asking Yahoo! employees what went wrong is only fair. The company is constantly criticised in Silicon Valley, where it is seen as the loser to upstart Google in the race to control the Web.

Yet Yahoo! is staffed by some of the smartest, most Web-savvy people on earth. Surely, they deserve a chance to respond.

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Here's what employees said when asked about Yahoo!'s most talked-about missteps.

1. Aborted projects

Yahoo! is rife with projects that have been started, with great fanfare, only to die quietly months, sometimes years, later.

Rank and file employees don't deny it: "They wasted a lot of money on projects that have been scrapped," one engineer said of the company's management.

2. Missing the Google Express

Yahoo! had the chance to buy Google in 2002. Then Chief Executive Terry Semel reportedly balked at the $5 billion price after months of negotiation. In retrospect, that was clearly a mistake.

No Yahoo! employees would touch that one. "I have no idea," one employee said.

"I need to go off to a meeting now," another answered.

3. Hiring Terry Semel

Another commonly cited mistake: Hiring former Warner Bros studio honcho Terry Semel as chief executive. Yahoo! stumbled in the wake of the tech bust early in the decade. It brought in Semel to turn things around. In retrospect, however, Semel was just riding a powerful rebound that other managers, such as the boys at Google, were playing far more skillfully. Semel declined to buy Google; at the same time, he funded a push into media that has largely foundered.

"You should really talk to a press spokesperson about that," one employee said.

4. Failing to click with DoubleClick

Another deal Yahoo! missed out on was DoubleClick. The advertising network specialized in the display ads that had long been Yahoo!'s strength as it struggled to hold back a surging Google. But when Yahoo! didn't move quick enough to purchase the ad network, Google pounced, helping to close the gap.

"I don't know, I'm not in a position to really speculate," one employee said as he clutched a pair of boxes and a cup of juice.

5. Not bonding with Ballmer

Perhaps Yahoo!'s biggest bonehead manoeuvre was failing to deal with Microsoft's acquisition offer quickly and cleanly. As a result, the drama dragged on for months, sapping Yahoo!'s energy and opening the door to Carl Icahn, the aggressive corporate raider, who grabbed three seats on Yahoo!'s board in August. The move undoubtedly led to Yang's ouster this week.

"It's difficult to know, difficult to know," a Yahoo employee said when asked about the matter.

All these mistakes can be summed up in one word: indecisiveness. One employee, at least, wasn't shy about blaming management for the problem. "When you hear the culture is indecisive, that's referring to people who are higher up," one employee said. "Many of the employees are making great efforts to turn the tide."

Other employees blamed bigger problems for Yahoo!'s woes. Some cited vague "macroeconomic" problems. Others cited competition from newer, "cooler," Web brands such as MySpace and Google.

And several argued that Yahoo! can still compete. One mentioned Yahoo!'s cloud computing initiative as an effort that could help the company claw its way forward once again. "It's a talented group of individuals, and we're working on some interesting technologies," he said.

"We are competitive, particularly with Yahoo! Mail and Finance," another added.

And, unlike banks and domestic auto manufacturers, no one at Yahoo! is asking for a government bailout. "I don't think anyone in this industry is going to pop that question," one engineer said, shaking his head. "If you do, you're admitting you've got nothing left, no future."

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Brian Caulfield, Forbes
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