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Summary:

The Wall Street Journal today posts an internal memo written by Yahoo senior vice president Brad Garlinghouse. In it he calls for a drastic reorganization and refocusing of the sprawling Internet giant. We have the opportunity – in fact the invitation – to send a strong, […]

The Wall Street Journal today posts an internal memo written by Yahoo senior vice president Brad Garlinghouse. In it he calls for a drastic reorganization and refocusing of the sprawling Internet giant.

We have the opportunity – in fact the invitation – to send a strong, clear and powerful message to our shareholders and Wall Street, to our advertisers and our partners, to our employees (both current and future), and to our users. They are all begging for a signal that we recognize and understand our problems, and that we are charting a course for fundamental change, Our current course and speed simply will not get us there. Short-term band-aids will not get us there.

An article by Kevin Delaney on the topic is behind a pay wall, but the WSJ is giving open access to the full text of Garlinghouse’s memo, which centers on the metaphor of spreading peanut butter too thin.

Garlinghouse is refreshingly blunt in his assessments and suggestions. For example:

  • “We have lost our passion to win. Far too many employees are ‘phoning’ it in, lacking the passion and commitment to be a part of the solution.”
  • “We need to exit (sell?) non core businesses and eliminate duplicative projects and businesses.”
  • “We must reduce our headcount by 15-20%.”

Yahoo has already restructured somewhat in response to the memo, which was written last month, giving Garlinghouse charge of the new “communities, communication, and front doors” division. Just yesterday he was quoted spreading the gospel in articles about Yahoo’s acquisition of contest site Bix.

“The way they’ve built this, we can integrate this across the entire Yahoo network,” he said to Red Herring. “This is an example of how Yahoo was very nimble about executing this.” Meanwhile, he told ClickZ, “We definitely see this as a platform. It’s not just about a great destination experience, but also about how it can be omnipresent across everything Yahoo does.”

But actions speak louder than words. Garlinghouse laments in his manifesto that Yahoo has too many competing products, both internally and as a result of acquisitions. Didn’t Yahoo introduce a new contest site, Yahoo Talent Show, less than a month ago? And now the company buys Bix. It’s going to take more than leaking a memo to turn things around.

  1. I couldn’t agree more with Brad – I’ve been saying similar things for the past year. As a former employee of Yahoo, I can attest to the lack of passion in a lot of groups. I heard a lot of talk about innovation and excellence, but felt the company never executed on it.

    I think the biggest challenge Yahoo faces, and one that sits at the core of all their problems, is trying to attract the best talent. Ask anyone in the industry if they would rather work for Yahoo or Google, and you’ll probably find the majority don’t choose Yahoo. They need to figure out a way to change this, get rid of the people/biz units who aren’t contributing the success of the company, and (dare I say it) consider finding a new CEO. Terry has made close to $1bb off of Yahoo, and I can’t say he’s put a whole lot of value back into it.

    It’s almost sad now when I chat with people I know who still work there. I get the sense they’re eager to find a job elsewhere, and don’t look forward to going to work every morning. It’s going to take more than some HR attemps at raising morale and short-term patches to fix the problem.

    -Andrew

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  2. Liz: Nice coverage.

    Andrew:

    I will say it. It’s time for Terry to go. This memo leaking is another sign that there is way too much internal pushing-and-pulling in several different directions.

    It’s time for Jerry Yang and David Filo to step to the fore. Here are some specific suggestions of next steps in an open letter to Jerry and David:

    http://breakoutperformance.blogspot.com/2006/11/open-letter-to-jerry-yang-and-david.html

    Thanks,

    Eric

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  3. An Important Internet Development?…

    Hot Air discusses the Digg link site. Web surfers visiting at other sites select the posts, which then appear in brief, trackback-like form at Digg, with a link to the original. Hat tip: LGF ————————————————————-…

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  4. There are a lot of parallels between Terry Semel and Carly Fiorina. It’s time for him to step down on his own, or be asked to step down.

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  5. …a 10-15%+ greater share of search…an 85%+ reduction in human-generated PPC click fraud…a stock price of $75-$100/share w/in 24-36 months…would all go a long, long way to meeting Yahoo’s most pressing needs…

    But what could possibly deliver such results?

    This: A new PPC ad platform where advertisers permission select and bid on people’s actual traits and characteristics instead of the words we all type into little search boxes…

    Target people. And words.

    Think Keytraits. And Keywords.

    Embrace paid match. And paid search.

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  6. I think the main problem with Yahoo’s strategy is its insistence on trying to beat Google at its own game. They’ve spent years effectively beating their heads on a brick wall as they constantly tried to challenge Mountain View in search engines and contextual advertisements. That just doesn’t work, and I don’t think there’s much hope for Yahoo until they figure that out. Whatever else happens, Google won’t let contextual advertising – which accounts for almost all of its revenue – go without a fight.

    What can now save Yahoo is innovation and being first-to-market rather than direct competition. Ads on mobile phones in the UK were a step in the right direction (though arguably it’s only a matter of time till Google gets into the mobile game and then Yahoo will find itself back at square one, unless it manages to leverage its first-to-market advantage).

    Honestly, I would not be surprised if Yahoo were to pull an IBM and try to reinvent itself almost from scratch, scrapping its search engine and YPN (perhaps by selling them to Microsoft, itself knee-deep in a war on Google?) and simply seeking for new innovative ways of capitalising on new Internet trends (which do emerge quite often).

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  7. I posted my thoughts earlier here:
    http://www.centernetworks.com/current-yahoo-crappy-peanut-butter

    (i even created the first ever Yahoo peanut butter container! lol)

    I think it is time for Yahoo to fight like Rocky. Damnit. Yahoo could be great once again. But yes, they have issues. Did it take a memo to say that having more than one photo service is bad? Did it take a memo to say that there are employee motivation issues. Geez.

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  8. Probably Om knew this was coming.
    http://gigaom.com/2006/11/12/yahoo-vps-exodus-continues/

    Yahoo! has to get lean, only then it can run.

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  9. memos & peanut butter aside, there are two things Yahoo has going for it: eyeballs & cash.

    currently, they’re doing the best they can to monetize the eyeballs. they could do better of course, but until panama is out & working, they’re still doing >$1B in free cash flow annually. that ain’t chump change.

    so what do you do with the cash?

    1) give it back to shareholders via dividends or stock buybacks
    2) invest internally in new products, or
    3) buy innovation & acquire new companies / features

    of the 3 strategies above, a pessimist might argue for #1, and internal bureaucracy is likely too much to do #2 very well… however, as an optimist and entrepreneur i’d suggest more of #3.

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  10. *Dead Wood at Yahoo:
    There are people at yahoo who simply put don’t work real hard and they have become dead wood. This is not good for them, it is not good for the employees who are passionate and working hard, and finally it is not good for shareholders. In most cases these people are known within their groups and should be eliminated on monday morning so that they can find something that they are passionate about.

    *Lose the celebrities
    While Google and others bring in folks like Vinod, Game Theory economists, etc. Yahoo brings folks like Tom Cruise and wastes the time of over 2,000 employees to talk about no

    *Technology
    I am certain Y! has some great engineers, but based on the products that they have been pushing as of late they also have some mediocre engineers. for example, the new yahoo mail beta product is still painfully slow.

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