Bartz's Two-Year Turnaround Efforts at Yahoo Squeezed by Google, Facebook
Carol Bartz arrived at Yahoo! Inc. in January 2009 with a reputation for tough talk and turnarounds, having revived design software maker Autodesk Inc. The two California companies are 65 miles apart and worlds apart culturally -- a gap she has been unable to bridge.
The skills required to serve a customer base of architects and car designers haven’t translated to fickle online users, who jump from Google to Facebook to Twitter -- and at a slower rate to Yahoo. Google Inc. was the most visited site among U.S. users in October, and Facebook Inc. surpassed Yahoo among worldwide users, according to researcher ComScore Inc.
“I’m not sure what Yahoo’s trying to do anymore,” Michael Leo, chief executive officer of Operative Inc., a New York online advertising agency, said in a telephone interview. “Advertisers don’t know; their own employees don’t seem to know; they’re lacking clarity of purpose.”
Bartz, 62, raised by her grandmother on a farm in Wisconsin, has cut costs, pared extraneous products and focused Yahoo on news, sports and other content. She’s had less success reviving growth and finding ways to keep pace with newer, faster-growing Web powers. Sunnyvale, California-based Yahoo’s third-quarter revenue of $1.12 billion, excluding money passed on to partner sites, fell short of the $1.13 billion average of analysts’ estimates, according to data compiled by Bloomberg.
Bartz declined to be interviewed for this story.
Yahoo had approached Groupon Inc., the Chicago-based coupon site, and didn’t make a deal to acquire the company, according to two people close to those discussions. Now Groupon is in talks with Google, the people said. Another startup, New York mobile-location company Foursquare Labs Inc., raised $20 million from investors led by venture firm Andreessen Horowitz in June, after other media outlets reported that it turned down an offer from Yahoo.
Yahoo declined to comment on its acquisition strategy.
With Yahoo stock trading at less than half the $33-a-share bid it rejected from Microsoft Corp. in 2008, private-equity firms are eyeing Yahoo as a buyout candidate. Speculation that former News Corp. CEO Peter Chernin may join bid groups pushed Yahoo’s stock up 6.3 percent to $17.17 in intraday trading Nov. 18. A person close to Chernin said in a phone interview that Yahoo is among the companies the media executive has discussed with private-equity groups.
Yahoo rose 16 cents to $16.38 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have lost 2.4 percent this year.
Bartz, who was CEO at Autodesk in San Rafael, California, for 14 years and replaced Yahoo’s co-founder Jerry Yang in the aftermath of Microsoft’s failed bid for the company, has two years left on her contract, according to a filing. Directors stand behind her, said a person familiar with the board’s thinking.
Bartz’s chief leadership initiative is to define Yahoo’s future course, said Paul Saffo, a managing director at Discern Analytics, an investment adviser in San Francisco.
“Yahoo is a big sprawling company with a collection of very different products,” Saffo said. “The challenge is to identify its soul. That’s a really different kind of job than Bartz had at Autodesk, which is a company with a very clear market and clear product.”
Bartz was asked at a technology conference in San Francisco earlier this month, “What is Yahoo?” She responded, “Content, Communications, Media, Technology, Innovation.”
“Yahoo has always stood for those words,” Bartz said. “I think it went off track a little bit when people thought it was a search company.”
Google, Facebook Threats
Internet users, especially those in their teens and 20s -- among the most prolific users of the Web -- go online to find their friends, watch videos, shop or do other tasks. That’s why Google and Facebook are positioned to grow at a faster pace than the less-targeted Yahoo, according to Rob Norman, CEO of GroupM North America, a New York-based media buying unit of WPP Plc, the world’s largest advertising company.
“Google on the video side and Facebook on the social-media side have grabbed stronger positions in areas of growth than Yahoo has,” Norman said in a telephone interview. “Yahoo is still very big, they’re still very important but the competitive set has evolved.”
Facebook, based in Palo Alto, California, took the largest share of the U.S. online display-advertising market in December, based on the number of ad views, according to Reston, Virginia- based ComScore. By September, Facebook had increased its share to 24 percent, compared with Yahoo’s 11 percent.
Google, based in Mountain View, California, had a more than 3-to-1 lead on Yahoo in the search market in July 2009 when Bartz announced a 10-year agreement with Microsoft. that has the software company’s Bing service powering Yahoo search.
Last month, Microsoft and Yahoo handled a combined 28 percent of search queries, up from 27.9 percent in September, according to ComScore. Google’s market share grew to 66.3 percent from 66.1 percent.
Yahoo’s competitors also have positioned themselves in smartphones, whose global sales grew 96 percent to 80.5 million units in the third quarter of 2010 from 41.1 million units a year earlier, according to Gartner Inc., a research firm in Stamford, Connecticut.
Unlike Yahoo, Google and Apple Inc. have operating-system software that helps determine what tools users will use. Yahoo doesn’t plan to build a mobile operating system, Bartz said at an analyst meeting in May.
An ad campaign, which used the tagline: “It’s Y!ou” and cost $100 million over 2009 and 2010, didn’t keep people on the site for longer time periods. Users in the U.S. spent 9.5 percent of their online time on Yahoo in September, compared with 13.8 percent two years earlier, according to ComScore.
“The campaign didn’t do anything to define Yahoo and why it’s relevant to the customer’s experience,” said Josh Feldmeth, CEO of the New York office of Interbrand Group, a brand consulting unit of ad agency Omnicom Group Inc.
Bartz stands up to her critics. When she was questioned about her progress at a conference hosted by the technology-news website TechCrunch in New York in May 2010, she said CEO Steve Jobs took seven years to turn around Apple.
She’s been rebuilding her senior management team, after the departures of many veteran executives, such as Jimmy Pitaro, who left as vice president of media in September to become co- president of interactive media at Walt Disney Co.
Of the 11 senior executives who spoke at Yahoo’s May 2009 analyst day, six remain. Blake Irving, a 51-year-old former Microsoft veteran, joined as Yahoo’s chief products officer in May. Ross Levinsohn, 47, a former president of New York-based News Corp.’s Fox Interactive Media, became executive vice president of the Americas region in October.
Bartz needs a bold acquisition to revitalize the company, said Maha Ibrahim, a general partner at venture firm Canaan Partners in Menlo Park, California. Buying Groupon would have enabled Yahoo to become a leader in a growing niche, she said.
“It would have said, ‘We want to dominate local shopping, social shopping and that’s what we’re going to be great at,’” Ibrahim said. “When Yahoo decides who they want to be, I think they have the talent, the ability and the financials to make that happen.”
John Chambers, CEO of Cisco Systems Inc. in San Jose, California, on whose board Bartz sits, said she will prevail.
“Never bet against Carol Bartz,” Chambers said. “She is good and she is tough. I think she’ll navigate through.”