Yahoo's Response: The "Real" Declaration

Following my earlier post regarding Yahoo's recent restructuring efforts, Yahoo responds. The story was first illuminated by TechCrunch's posting of an internal email from their CFO. As it turns out, Yahoo wasn't too pleased with their posting-- surprise, surprise. Nonetheless, Yahoo management was quick, and kind enough to respond to my analysis of the posting here at Sixorg. In fact, I was surprised to hear from quite of few of my friends at Yahoo, all eager to get the story updated. So here's what we now know...

In my posting I stated that Tim Cadogan was heading up core search. Unfortunately that is not the case. Tim is instead heading up Search and Listings Marketplaces, which is essentially search advertising, not core search. Core Search as it turns out, resides in separate organization called the Audience Group under the leadership of Jeff Weiner as part of his Network division. "The Network division is now comprised of five areas including Search, Community & Communications, Front Doors, News & Information and Entertainment. We believe this new structure will allow us to better align our strategy with the organization and deliver on its mission to "connect people to their passions, their communities and the
world's knowledge, " states a Yahoo! spokesperson.

Jeff's been in various M&A, and search roles since Terry Semel brought him over from his Hollywood venture investment firm, Windsor Digital, where Jeff was doing M&A work for Terry's deals. Jeff is a good guy, and well liked by some hard-core senior search gurus inside Yahoo that I know personally. Yet some folks there tell me they find it curious how Jeff was nominated to run a multi-billion dollar core search group, with no search background prior to Yahoo. Remember, in the Valley, it's not always what you know, it's who you know.

Eckart Walther and Andrew Braccia head up Search within the Network division, which is a good thing. Eckart is sharp, and the real deal in core search. I enjoyed engaging with Eckart on core search innovation throughout the partnership between our companies.

Yahoo also confirms that all teams dedicated to Panama, Yahoo's new search advertising platform, are housed under Sue Decker.

The only real problem I see with this emerging structure is NOT the suggested peanut butter being spread around the company. In fact, a company of Yahoo's scale and global reach requires at least this much infrastructure and yes, bureaucracy, to continue to scale and drive growth efficiently. Yahoo faces a similar problem that many new entrants into the search and search advertising business face today. It's the chicken and egg dilemma. You'll notice that Yahoo has organized itself into a pair of Supply and Demand groups, to become better market makers for the advertising business.

But what good is an rich network of advertisers without premium inventory across the web publishers' real estate on which to run it? And conversely, what good is a rich publisher base, if the ads and ad serving technology can't stand up very well against the competition? Tim's group inside Yahoo is perhaps the most vital in this equation. However, Yahoo's creation of three peer groups in APG: Supply, Demand, and Products may very well create more challenges down the road. The "magic in the middle" as Yahoo describes it grossly underestimates the role that Panama and other core technology must play in Yahoo's latest competitive bid. It is far more germane to Yahoo's growth, than simply the glue between APG's supply and demand. Just ask Wall Street:

All of Yahoo's recent stock activity is based not on new divisions, roles, or titles, but solely on the promise of Panama, a content matching technology. Mark Morrissey has been promoted to SVP of APG Product Management, and as such plays a key role in clarifying this company wide. This is one thing that Google has not lost sight of, even amidst their mesmerizing growth.

At a bare minimum, a dotted line to core search is a must (but we all know that would just be cheating). I just can't rationalize keeping core search and core ad serving technologies in two very different parts of the organization, because of their revenue generating power. The technologies are very interdependent, and strategically linked to driving web traffic, click-throughs, and loyalty (trusted search). Remember, keyword searching isn't the only way we search anymore.

Let us not forget, the true 'Audience' as Yahoo puts it, is the end user, the web surfer, the web searcher. And this Audience is a key ingredient to the supply and demand channels for both publishers and advertisers.

Read the full story

Yahoo's Declaration of Dependence

As Mike puts it today on TechCrunch, a lot of peanut butter bein' spread around Yahoo again with Sue Decker's email sent out company-wide this morning. I had dinner with Sue a couple years ago, and ultimately completed a few strategic deals between Yahoo and Groxis, the company I co-founded and ran for the past five or so years. What I can tell you is this. Sue is a smart, driven executive. No doubt she'll get the operational job done better than anyone at Yahoo today. However, I question a few of the organizational moves she's outlined in this 2007 manifesto. Perhaps the most glaring and most critical to Yahoo is where their core search group gets parked inside the organization. According to the email, core search is now part of "Marketing Products" which I find rather curious.

The three most important rules for any startup company in the Valley are: focus, focus, focus.

The good news is that Tim Cadogan has been tapped and promoted to head up the core search organization. Tim is a very smart, capable, and cool guy, with whom I structured our 'landmark' deal with Yahoo. Landmark in the sense that we were one of the first search companies to get Yahoo and Google to play nice in the same small sandbox that was my startup. Anyway, Tim is unquestionably the right guy for the job, and needs his group to be elevated to have a greater effect on how the core search is being leveraged not as a marketing product, but as a supply-side horizontal revenue generator across the company. The new structure could put the company at risk by layering it vertically into the organization. If you look at Google, core search is far bigger, and far more horizontally aligned across the company. And for good reason. It (along with AdWords) is their bread and butter. It used to be Yahoo's bread and butter too.

I can't help but think that Yahoo's acquisition spree has precipitated this latest move. With so many seemingly random acquisitions to keep pace with competition, the company has had to react vs. act. This leads to a contrived strategy based on the new assets they have to deal with and leverage effectively to please Wall Street (read: justify the acquisitions). Whereas you'll notice Google to be slightly more proactive, with a seemingly tight-lipped strategically planned growth strategy. We'll be watching closing to see how this new plan plays out for Yahoo. Don't lose sight of the importance of core search, Sue, Yahoo depends on it. And remember, it's never too late to focus, focus, focus.
Read the full story