Yahoo CEO: Must be clearer about what we won’t do

Yahoo CEO Scott Thompson

On the macro level, just about everything new Yahoo CEO Scott Thompson told analysts and investors Tuesday could apply to any big company: focus on core businesses; put customers first; don’t buy things that aren’t absolutely necessary; put your best people in the right places; need to be nimble; think like a growth company.

But Thompson did get a tad micro in an almost-SNL-worthy Boston accent that came in most handy when he was chiding Microsoft for failure to deliver on search, when he was talking up the need for Q1’s decent results to be better — and when he described true personalization as knowing he only wants to hear about the Bruins, the Celtics and the Red Sox.

For the blow-by-blow, or most of it anyway, check Kara’s giddy live blog or Rob Hof’s version. Here’s what stood out to me:

Earnings: Yahoo produced some positive results in Q1, pushing its share price and expectations up. Profits rose by 28 percent to $256 million on $1.07 billion in revenue, a 1 percent increase over the same quarter last year. This gave Thompson a shinier surface to stand on when declaring that Yahoo would do better on his watch: “I’m not satisfied with the pace of topline growth and won’t be until we’re on pace with market growth.”

Stripping down: We’ve heard it before, heck, we’ve said it before. Yahoo has been weighed down for years by way too much product. Thompson’s light-bulb moment came after discussions about what it would take to change Yahoo: “Yahoo has been doing too much for too long … We need to be clearer going forward about what we won’t do.” How is he going to fix this? Fifty properties that “don’t contribute meaningfully” are being shut down. I’ve been told most of them are outside the U.S. but Yahoo won’t confirm that or provide details. Hard to imagine that 50 will be enough but Carol Bartz did give him a head start.

Instead Yahoo will focus on the properties that contribute the most engagement and revenue — news, finance, sports, entertainment and mail. R&D and resources will go to owned-and-operated sites, halting third-party efforts.

YHOO Chart

YHOO data by YCharts

Execution: Chief Product Officer Blake Irving is among those who won’t be around for the Thompson era. Thompson didn’t namecheck him that I heard but he did rip the product process and promised to reduce frustration by dismantling it. Of course, his predecessor Carol Bartz set up this system to accomplish the very goals Thompson says he is after. Yahoo’s process is “way too complex,” he said on the call, and has “stifled innovation” frustrating Yahoos who really want to produce. Instead, as he mentioned in last week’s re-org memo, he’ll put engineers back with the product groups to encourage innovation and shorten the process.

Microsoft and search: If you can throw a company that’s much bigger than you under the bus, Thompson did it. “The search alliance is not yet delivering what we expected,” he said, adding that he “personally” working with Microsoft to fix it. Search revenue was up 8 percent because of tweaks Yahoo made to improve the search experience, Thompson and CFO Tim Morse said, not because of Microsoft. The search alliance has had a slow path; the transition is only now wrapping up in the UK, Ireland and France. Morse was a tad more good cop: “We’re covered for another year of the guarantee. I still belive we’ll get there.” Later Thompson said Yahoo and Microsoft are in “early days of revisiting the relationship .. it’s something we have to get right because it’s obviously important to us.”

Display advertising: Display advertising, where Yahoo should shine, is still a problem child, down 5 percent in the Americas unit for Q1, down in Europe and up single digits in AIPAC. (Yahoo currently is divided by regions; when Thompson’s recently announced re-org kicks in May 1, the regions will handle sales while responsibility for products moves to new units.) Morse: “We do see display revenue regaining growth YoY in the second quarter so feel good about that.”

M&A: Also from the CEO handbook, Thompson promises to be very thrifty and to back up any acquisitions, not that he’s shopping, and “will know what the outcome of any M&A will be before” we spend. Where might Yahoo spend? Asked whether Yahoo can improve its ability to analyze data strictly through existing internal resources, Thompson replied, “Everything we’re doing with data right now is inside the business … That said, if there is a company or group of people that have unique ways, unique science, unique technology to really help us leverage up inside (we’d look). We don’t have anything to announce today.”

On the flip side, despite wide belief that the business is already for sale, Thompson insists he hasn’t decided whether to sell Yahoo’s ad tech business, including Right Media. “We’ve made good progress but haven’t come to a conclusion. It would be premature to imagine we could give that answer today.” He promised: “We will be able to articulate our entire strategy on the ad stack.” No timeline though.

Suing Facebook: The backlash to Yahoo’s suing Facebook over 10 patents doesn’t appear to have had any effect. The lawsuit was included in the Q1 earnings report as a business highlight and by Thompson as one of the steps he took in his first three months, explaining,

“Other companies license our IP. Facebook must do the same or change the way they do business.”

Mobile and devices: Yahoo execs promise mobile superiority the way Lucy holds a football for Charlie Brown. Thompson’s version: “We need to get real good real fast in mobile … on devices overall — and we’re not there today. We won’t stop until we have a #1 position on every device.”

E-commerce: This is a trick item, sort of like when we would put a blank space in the school paper and claim it was supposed to be about apathy. Nothing apathetic about Thompson’s approach to e-commerce, which is supposed to power some of that promised growth, but not much new either. I expected a little more than the CEO equivalent of “watch this space” given the drumbeat that’s been getting louder and yesterday’s announcement that his fellow PayPal import Sam Shrauger and Yahoo vet Mollie Spilman will head the new e-commerce unit. Thompson did walk back a bit on calling the unit “new” as it is based on existing properties being rolled up.

What next? It’s hard to be nimble while playing musical chairs so the transition needs to be quick. That’s not going to be easy given the 2,000 layoffs, the product shutdowns and the changing lines of command.

Thompson insists he doesn’t have to reinvent Yahoo — but “we absolutely do have to reinvent the experiences our users have with the marquee properties that bring them here every day.” The longer it takes to do that, the more ground Yahoo loses.


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