AP reports on Terry Semel's stepping down from the CEO role at Yahoo after challenges to his leadership at a recent stockholders meeting made a swift move to restore investor confidence an imperative. The move is notable as much for what didn't happen as what did: Yahoo co-founder Jerry Yang will be taking on the CEO role to re-establish both investor sentiment and Valley creds for the short term while Susan Decker, thought to have been Semel's hand-picked probable successor, notches up to President from overseeing ad operations. This may mean a wait-and-see period for Decker while the company as a whole adjusts to Semel's departure before moving up to the top role but more likely it's a move for Semel to have a proxy for his vision at Yang's disposal to ensure that his initiatives have some leadership to prove out his legacy.
Semel's media background was seen as a plus when he took over at Yahoo, promising "adult" leadership and the ability to lead Yahoo towards deals with mainstream content providers that would help to build up its portal in the eyes of online audiences. But a funny thing happened on the way to the earnings reports: search engine Google proved that being able to contextualize the world's content was more important than trying to build a bigger and better AOL. Yahoo has made some strong moves in recent months towards building up the power of user-generated content to drive Yahoo traffic, but the key revenue driver - contextual ad performance - continues to lag.
What are the prospects for Yahoo in the wake of Semel's reign? All in all, pretty good. While Yahoo has suffered from focusing too intently on traditional media products in the past, its push towards stronger social media offerings and innovative reuse of these assets for new portlets for consumer goods and hot topics offers Yahoo a role as a lead innovator amongst traditional media companies. With Semel out of the picture it's likely that staff trimmings will cut through some loyalty factors and allow Yahoo to gain some momentum in deal-making to shore up its innovation position and market share. Yahoo is building high-quality content that appeals to mainstream Web users, effectively bridging the gap between AOL-like neophytes and seasoned users with highly focused interests with an array of well-designed content products.
But the key problem remains that Yahoo has mapped out a strategy that weds it largely to the goal of most traditional media companies: build market share and viewership for a destination portal. While its ad network will help Yahoo to expand past that footprint effectively, their dedication to making it work for brand advertisers is likely to make it too focused on the declining footprints of traditional media companies to build market share quickly enough to be fully competitive with Google's ad campaigns. As pointed out by TechCrunch recently the "long tail" of content is getting only thicker, placing a premium on products that can absorb and interpret its content for highly focused audiences. This will continue to play to Google's advantage as it builds both revenues and margin from an abundance of less-expensive content sources that can be monetized through its contextual ad technologies and dominant search engine.
Yahoo has also neglected its enterprise strategy for many years, effectively ceding this arena to Google and a host of other services that are effective in contextualizing both enterprise and Web-sourced content. With "prosumers" dominating online markets increasingly Yahoo has little to offer professionals online beyond its dominant financial portal. Google's enterprise efforts may be also-ran in comparison to efforts by IBM, FAST and Autonomy, but increasingly it's an also-ran that just happens to have at least some footprint everywhere. On the publisher's side of the equation are subscription database services struggling to hold on to revenue and margins through more sophisticated content integration services - not likely candidates for partnership via Yahoo's highly consumer-oriented efforts.
New management can help Yahoo to take advantage of its considerable media assets but it's going to have to be a team that's willing to make some tough decisions regarding its traditional media partners fairly quickly. As more of these partners take a multi-channel strategy for content distribution the advantages of paying hefty percentages for the use of their content only props up the potential revenue streams of Yahoo competitors who go to play with mainstream media players. Yahoo must dance delicately as it works to continue its strong relationships with existing media companies while managing to be much more stingy in its licensing negotiations, so as to free up more capital for deals and product investment.
What will be Semel's ultimate legacy? I think that it's easy to lose sight of how disjointed Yahoo was when Semel took over. While balkanization still plagues some Yahoo operations overall he helped to forge what it arguably a well-run company that has created a dominant position in many forms of destination media. The ad game was already moving out of Yahoo's grasp when he came on, so while he can't be credited for a triumphant reversal he laid the groundwork for a good product strategy. The largest spot on Semel's record will be the loss of major deals for online video. With Google Video emerging as a leading search engine for video content across the Web and YouTube firming up as the leading source of user-generated online video it can be argued that Semel's media roots failed to prepare him for the most rapid shifts in online entertainment in the past ten years. But this blind spot was hardly unique amongst major media companies.
We'll see how rapidly Yahoo repositions its considerable assets in the months ahead, but my guess today is that Yahoo will emerge a year from a now a far leaner operation more focused on user-generated content and on making content from all sources more usable. Mainstream media and brand advertising will still be a very important part of Yahoo's revenue mix but we're likely to see Yahoo acting more as a better bridge for media companies to Google-like strategies that lead mainstream media content away from the confines of fixed portals. Better widgets, better feeds, better toolkits for developing branded portlets, better user-enabled aggregation tools - there are a lot of ways to make Yahoo content grow beyond its current destination footprint. That is, if Yahoo is willing to challenge traditional media companies more aggressively to move beyond their roots.