OK, Yahoo, now you’ve done it. You’ve gone with PayPal tech whiz Scott Thompson for your new CEO, and that’s fine.
Picking a technologist as your new leader wasn’t what everybody wanted you to do (if the market is any indication). But the move is a clear bet, and Thompson himself says he wants the company to innovate again. The question now is: Do you have enough confidence in your choice to play the hand without folding?
Yahoo’s stock fell yesterday after the news, and it’s struggling today. Scuttlebut says that’s because investors wanted Yahoo’s board to move closer to either selling the company or actually following through on turning the brand into a media powerhouse — a goal that eluded previous CEO Carol Bartz, who was fired last fall.
Thompson is a technology guy, not a business or media guy, so it’s obvious why Wall Street is disappointed. It’s also been said he has no “turnaround” experience, and rejuvinating a digital brand is a nigh-impossible task. But the board clearly liked what it saw in Thompson, who started at PayPal in 2005 as chief technology officer, then rose to president 2008.
PayPal grew a lot during that time, but so did online commerce in general. Now Thompson has a chance to prove it wasn’t a fluke, and Yahoo has another shot — probably its last — to revive its brand. That must be its plan in picking Thompson, though to get the company moving in the right direction again he’ll need to make some big strategic moves, some of them painful. Check out our recommendations in the gallery below.
1. Get Back Into Search
Yahoo partnered with Microsoft to have Bing power its search engine a couple of years ago, part of a deal that let Yahoo run advertising for both. While the arrangement may make sense from a financial standpoint, it robs Yahoo of direct control over one of its primary products, and strengthen's Bing's brand more than Yahoo's. Sure, most people familiar with tech were using Google or Bing anyway, but the move basically told them to never come back.
Those tech-savvy people are influencers, and Yahoo needs to win them back if it's ever going to grow again. Ending its soul-leasing deal with Microsoft would free Yahoo up to innovate in one area most associated with the brand. Yes, Google is the 400-megaton gorilla in the room, but ceding the search-engine war when you're primary business is advertising is like saying you'll fight, but you're leaving the heavy weapons at home.
2. Platform First, Services Second
Yahoo has a problem with its products: It's always chasing its competition. Typically, an innovator or competitor will launch a service, then Yahoo will follow much later with a similar product that's inferior. And its core services (search, email) were quickly outclassed by more nimble and focused players. Think Flipboard vs. Livestand, Gmail vs. Yahoo Mail and Digg vs. Yahoo Buzz. Over the past six or seven years, Yahoo has been the ultimate me-too digital brand.
Even though some of those services have improved (notably Mail), a bunch of disparate services does not a platform make. This is something Facebook, Amazon and Google understand, but Yahoo doesn't. Yahoo has a bunch of people using its services, but they're not connected in any meaningful way. Yahoo needs to find its focus going forward -- maybe it's the multitude of niche and hyper-local Groups that are still very popular -- and start uniting its suite of products around that. And it needs some good ones.
3. Make Your HuffPo Move
When AOL bought The Huffington Post, it was a questionable decision, but it was a strong move forward in the company's plan to rechristen itself as a media company. It also got people talking about the brand again. Yahoo needs an equivalent action to really assert itself either as an innovator or serious player in the media business. Acquiring the right startup or small-but-growing company (I'm looking at you, Tumblr) could give Yahoo direction, attention and something it's in short supply of -- cool.
4. Get Allies
As much as it may have wanted to at one point, Yahoo can't compete in every digital arena. Part of Thompson's challenge will be to give the aging brand some focus. To do that he should get out of some areas (not search, though) and declare peace with competitors. That will put the company in a position to make deals with other big players and build powerful alliances.
It's already started doing this. Yahoo killed its me-too deals service after a few short months last year, so now might be a good time a partnership with Groupon, which could use the help after that firm's shaky IPO. Yahoo made a strategic deal with Facebook in 2010, and it might be worth expanding that. LinkedIn is another company, at least demographic-wise, that might be a good match. Mobile is clearly an area that Yahoo wants to grow in, and there are some key players (Microsoft, RIM, Nokia, Sony) that would also love to take a bite out of Apple and Google. Time to fire up Yahoo Messenger and ping some others in the CEO club.
5. Exit Asia
Yahoo's stake in Asia has been financially lucrative, but it's still a distraction. Its holdings in both Yahoo Japan (35%) and Alibaba Group (42%) don't give Yahoo enough control to make any difference to its core brand. It's already looking at making a deal to sell off these assets, and Thompson should see it through. That'll give the company more focus and a big pile of cash to help it innovate in the coming (hopefully) years.