At Yahoo!, It's Goodbye to the Future

Timothy Koogle's exit as CEO reinforces a new reality: Stand-alone online media giants aren't ready for prime time

It looks like the Internet will never be the same -- at least not in the corner cubicles inhabited by chief executives of the leading Internet media upstarts. Indeed, an era ended on Mar. 7 with the announced departure of Yahoo! Inc. CEO Timothy A. Koogle. He was the last of the pioneering Internet CEOs, charged with building the new media giants of the 21st century. Koogle follows a long list of Net media bigwigs to step down, from Excite's George Bell to Lycos' Bob Davis to Infoseek's Harry Motro to CNET's Halsey Minor. In some cases, it was due to frustration with old media partners. In other cases, it was just plain frustration.

The one executive to remain atop his perch, AOL's Steve Case, doesn't really count since he now presides over an empire that is as much old media as it is new media. Now Yahoo! is commencing a search for someone with more traditional media and business expertise to replace Koogle, an old technology hand who will remain on as chairman after a replacement is found. "Yahoo needs somebody with perspective outside of technology," says Safa Rashtchy, senior analyst at Piper Jaffray. "They will go after somebody from traditional media or consumer goods."


  The lesson in all this has little to do with the management capabilities of Koogle or his colleagues. Indeed, many industry watchers rate Yahoo!'s CEO as one of the sharpest execs around. It has been his management knowhow and leadership that many believe put Yahoo! on the map and has kept it in a position to be one of the few Internet survivors. "Koogle has been the integral part of Yahoo!'s success," says Derek Brown, an analyst at WR Hambrecht & Co.

But "has" seems to be the key word. Koogle's exit may come down to the simple reality that neither consumers nor advertisers nor content producers are ready for stand-alone online media giants. Certainly Wall Street isn't ready, having pummeled the stocks of both CNET and Yahoo!, two of the handful of profitable Internet players. The huge downturn in both advertising and the economy is certainly to blame. But only in part.

The real problem continues to be that the delivery of information and entertainment online is still not compelling enough -- or fast enough -- to attract the droves of viewers or big-buck advertising deals that would allow these companies to flourish financially. Thus far, audio and video over the Net have been downright disappointments. Nor has online shopping proven to be the blockbuster so many anticipated. There simply aren't enough people willing to buy enough goods via the Web to make the Yahoo!-like portals leading commerce centers.


  Then there's the whole issue of the offline channels controlled and dominated by the likes of AT&T, Disney, Viacom, and Time Warner. Their cable and television offerings, to say nothing of their other outlets, make the Web look too nascent to compete for the best talent, content, or business deals.

Consequently, the Net today is merely one component in the greater media smorgasbord. In another time, perhaps just a few years from now, Yahoo! will thrive as a pure Net company. As broadband technology and handheld devices are more widely adopted, Yahoo! will likely acquire the oomph to service enough vendors and consumers around the globe to make a highly profitable business -- one that's equipped to weather tough economic times. But Wall Street is no longer in the mood to bet on the future, which is, after all, what Koogle had come to embody.

By Linda Himelstein, with Ben Elgin in Silicon Valley

Edited by Douglas Harbrecht

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