Is Scott Thompson the ‘back to basics’ guy Yahoo’s needed all along?

January 6, 2012

Yahoo has once again gone outside the company to breathe new life into the once-mighty Internet titan: Scott Thompson, most recently the president of eBay’s PayPal division, takes the helm on Monday, January 9th.

The four-month search ends the latest period of uncertainty for Yahoo, which has been struggling to regain its rightful place in the hearts and minds of the digerati — to say nothing of an indifferent Wall Street.

Investors have been sour on Yahoo for a while. The news of Thompson’s hiring was met with boos on NASDAQ, where Yahoo closed Wednesday at $15.78, down 51 cents. With a “fool me twice” attitude, potential will be no substitute for results. And given the spectacular flame out of former CEO Carol Bartz, investor patience must be wearing thin (if, that is, it still exists at all).

Thompson seems to be arriving with a clean slate and marching orders that give him a fairly free hand — “he will work closely with the Board as we continue the strategic review process to identify the best approaches for the Company and its shareholders.” Indeed, Thompson hadn’t even met with the top Yahoo executives, which I would take as a sign that his allegiance is entirely to the board.

That’s a good thing, because Thompson has his work cut out for him. Consider this reaction from Lawrence Haverty, a fund manager with GAMCO investors, which owns Yahoo shares.

“It’s a positive outcome,” Haverty told Reuters, “but not as positive as a sale of the company.”


Yahoo’s fortunes seemed to be merely waning until they fell off a cliff, when then CEO and co-founder Jerry Yang led a charge three years ago to reject an unsolicited takeover bid from Microsoft. The $45 billion offer worked out to $31 a share, a hefty premium at the time and twice what Yahoo is trading at today.

That botched negotiation began a downward spiral which saw the rapid departure of Yang and the installation of firebrand Bartz, whose 11-month tenure ended with an unceremonious phone call. Bartz, another outsider, arrived with great fanfare but was unable to leverage her rough-hewn, take no prisoners demeanor to turn things around.

The seeds of Yahoo’s slide, however, go back much further than the fateful decision to wave off Microsoft’s lifeline. It’s more than a little interesting that things started to go south for both Yahoo and AOL, the other Big Bang Internet giant, when each company tried to convert themselves into content companies. AOL’s merger with Time Warner is considered the Michael Dukakis moment of technology deal-making. Yahoo let Google slip through its fingers, did almost everything wrong when it decided to compete head on with the search giant, and its flirtation with Hollywood-style content creation under Terry Semel was an unmitigated disaster.

Still, Yahoo deserves better than to be an also-ran. remains the #4 site in both the world and the United States, according to It claims 700 million users, which is around 100 million fewer than Facebook but a crowd that is probably just as engaged.

A message to the Google generation: Pretty much everything you think is cool about the Internet was pioneered or tried early on by Yahoo. Not everything worked, of course, but Yahoo made a lot of the mistakes others could then learn from.

It isn’t sexy, but maybe it’s better for Yahoo to try and be the best damn organizer of information there is, rather than a mediocre media company. Yahoo began with a quaint notion that the web could be catalogued. That proved unsustainable. But it is still a premier destination for finding the work of others. You know, sort of what Google does more successfully while continuing to avoid being tagged a media company.

Yahoo hasn’t given up on search — it joined forced with former nemesis Microsoft a year ago — and is segueing nicely enough into mobile.

It’s not a shipwreck and needn’t be. But it does need a steady, focused leader who picks his fights based on what can be won, rather than choosing ideologically defensible but strategically questionable targets.

Thompson made clear that accentuating the positive in Yahoo’s assets would be a priority.

“The data these Internet businesses create, the ability to use analytical technology to build a better businesses for your customers … I feel certain that wealth of data’s going to be exploitable for next generation products, next generation experiences,” Thompson said, as reported by Forbes. “My instinct says down in that data we’re going to be able to find ways to compete and innovate that the world hasn’t seen yet.”

Follow +John C Abell on Google+.

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