Jerry Yang is idolized in Silicon Valley and around the world, with reason.
But I think he is starting to show why he is no CEO, at least not one of a publicly traded company. He is telling employees to “stay focused” while he and the Board “explore options” to what most now see as inevitable: a sale to Microsoft.
In his eyes, however, increasingly the only option - one that won’t pass anti-trust scrutiny frankly - is to outsource search to Google. This is not only a worst option, it is only going to aggravate Yahoo!’s problems.
So Yang will yo-yo around the campus and talk to investment bankers searching for an answer, when he has the inevitable outcome before him: partner with Microsoft and remain relevant. Let’s face it, much like all that changed at aQuantive was that it became a subsidiary of Microsoft, then most probably, Yahoo!’s brand will remain intact, but at least, it won’t be Google’s whipping boy.
If Yahoo! outsources search to Google, it only adds velocity to Google’s firepower, bear in mind, Google’s growth rate is falling. Google here needs Yahoo! more than Yahoo! needs Google. What Google needs, it the financial firepower and resources of Microsoft. Oh, it also needs MSFT’s execution track record and bravado.
Why? If Google and Yahoo! remain two stocks competing for shareholders’ money, and Google wins Yahoo!’s business, Google (the stock) will far outperform Yahoo! (the stock).
This not only will make the $30 price barrier a short-lived dream but it will make $20 seem like a bargain.
Last year Eric Jackson went all out to replace Terry Semel; if Jerry Yang does not honor his fiduciary duty to shareholders and messes this potential salvation up, someone (trust me) will ensure that Jerry is shown the door and returns to his honorary Chief Yahoo! role. You can’t ask for the ball if you’re not willing to let it go.
I sat through 3 years’ worth of conference increasingly losing patience and faith in Jerry Yang and YHOO’s management. Meanwhile, despite everything being thrown at them, MSFT continued to execute. Recognizing that it needs to emulate what it has in Office and Windows in the burgeoning online ad market, it now wants to acquire Yahoo!
What Yahoo! should do, and should do soon, is to go back to MSFT and get it to bid $50B which would make Yang triumphant in shareholders’ eyes. I wrote in detail here. He should also get concessions such as leaving the Yahoo! brand intact, keeping autonomy to some extent… yada, yada, yada. But ultimately, devoid of any other options (PE, competing bids) the mere thought of handing off search to Google is criminal.
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February 7th, 2008 at 3:14 am
Huh? I use to think you had some smarts, but to say that google needs yahoo more than the reverse is stupid beyond belief. are you smoking crack? Last i looked google was still increasing revenue over 50% yoy vs. yahoo. secondly google needs microsofts firepower and execution? Uhhh.. you know google has about $15 billion which is close to microsoft and when was the last time you heard anything about groove or tellme? Or what about onfolio? I understand you are long yahoo but you have lost me as a reader with this post.
February 7th, 2008 at 11:33 am
Mark, thanks for the comment, I clarified my position and comment here:
http://watchmojo.com/web/blog/index.php/2008/02/07/if-yahoo-outsources-search-to-google-who-wins/