Outside the Lines

Prior to a Churchill Club event, I chatted with Kara Swisher about who she believes will succeed the deposed Jerry Yang as Yahoo CEO. From her BoomTown perch at All Things Digital Kara has been all over the story. She thinks that News Corp. Chief Operating Officer Peter Chernin could be the man. Chernin has spent the last 12 years by the side of Rupert Murdoch and may be leaving his embrace. Kara also evaluates a number of other possible candidates in the video below and in this blog post.

Whoever takes the job will have to be capable of spiritually healing a wounded company. Too many talented people have left the tent, and he or she will need to attract and bring in first class replacements. Om Malik phrases what Yahoo needs in a CEO simply: "Look outside for someone with spark." Add to that criteria the ability to be decisive in short order and keep the Yahoo board from further compromising the future of company. Jerry Yang may be a co-founder and now former-CEO, but the board, which has been recently reconstituted with some fresh blood, has been pulling his strings.

Sue Decker

(Credit: Dan Farber)

Kara Swisher of AllThingsD.com puts Sue Decker at the top of her list to succeed Jerry Yang as Yahoo CEO if he returns to his former position of founder and chief Yahoo. She acknowledges that the Yahoo president has been part of the team that put Yahoo in its current position, but that she "might blossom if she had full control" over the company. It seems that she already has a lot of control over the company, based on her performance at the D6 conference and analyst calls over the last few months.

Kara also listed former eBay CEO Meg Whitman (who is busy as co-chair of the McCain presidential campaign), former Yahoo COO Dan Rosensweig, and even Mark Cuban. Check out Kara's complete list.

Whatever transpires, it would be very difficult for Yang to give up the CEO seat. He wants to prove that he can turn around the company, but he may not be given a chance given all the tumult. Since Microsoft pounced on February 1, Yang's purple blood has been in the water, drawing a number of detractors, such as investor Carl Icahn, who would like to see him and the board gone.

Replacing Yang and appointing Decker as CEO or bringing in an outsider to run the company isn't going to dramatically alter the course of Yahoo history. The company needs to focus on products--getting its Yahoo Open Strategy and AMP advertising platform released. With a number of key people leaving and the ongoing drama around Yahoo's future, Yang's to-do list is not getting any less challenging.

With the Microsoft/Yahoo/Google triangle taking a new shape as Microsoft exited and Yahoo and Google connected, the analysts covering tech industry sports are weighing in with their opinions.

Some Wall Street analysts believe Microsoft will take another run at Yahoo if the company can't get back on track or Carl Icahn wins his proxy fight to control the Yahoo board. That may be wishful thinking. Kara Swisher reports that Microsoft is done with its courtship of Yahoo and nothing will bring them back to the negotiating table.

Mike Arrington of TechCrunch called the Yahoo-Google deal a massive destruction of shareholder value, employee morale, and the Interent balance of power:

Yahoo's hatred of Microsoft runs so deep that they were actually, in the end, willing to destroy the future of their company just to keep it independent for a short while longer. They've ignored the wishes of their shareholders, employees and many now former key employees in killing that deal. And apart from Google, CEO Jerry Yang, President Sue Decker and possibly Tim O'Reilly, I don't believe there is anyone in the world that is happy with what has happened.

In a further lambasting post, Arrington called Yahoo desperate and possibly neurotic:

Quite simply, it looks to me like Yahoo is effectively paying Google off to step in and (1) keep Jerry Yang, Sue Decker and the current board of directors in power, and (2) avoid a desperation deal with Microsoft for as long as possible, or longer. It's not even clear to me that Google wants this deal, based on the terms. It almost looks like they're just doing Yahoo a favor, and trying to keep them out of Microsoft's hands.

At the other end of the spectrum, venture capitalist Fred Wilson thinks that Yahoo did the right thing by choosing Google over Microsoft as a partner.

Yahoo! finally woke up and did what they should have done years ago, cede search monetization to Google who simply does it better and will always do this era of search better than anyone else.

Now Yahoo! will do what it needs to do. Clean house, get lean, get out of businesses it shouldn't be in. Focus on what it's good at. And start making money and growing again.

They may need new leadership to do that. But selling this asset to Microsoft just because they had the wrong leadership and probably still have the wrong leadership is a mistake.

From my reading of the events over the last five months, Yang regrets that Microsoft walked away from the acquisition talks. "We all felt and understood a combination done right has a tremendous amount of power and leverage," Yang said during an interview with Walt Mossberg at the D6 conference.

Yahoo CEO Jerry Yang and President Sue Decker have a challenging set of quarters coming up.

(Credit: Dan Farber/CNET News.com)

As a founder, Yang preferred that Yahoo stay independent and that he have the chance to turn the company around as CEO. Microsoft historically was not the kind of partner that Yang considered for a marriage. And his board of directors, led by non-executive Chairman Roy Bostock, seemed to go along with that line of thought.

But the entire affair turned out to be mostly about the money, as Decker admitted. "We never got through the price door," she stated during the same D6 interview. Yahoo's board believed that the company was worth more than $35 per share based on future promise, and Microsoft wasn't on the same page. In effect, Microsoft called Yahoo's bluff.

It also wasn't helpful that Yahoo was negotiating the search deal with Google at the same time Microsoft was pursuing its hostile bid. After months of rejection, Microsoft basically became less enchanted with the potential marriage, and despite the pummeling from the shareholders, Carl Icahn's camp, and the press, Yang and his advisors held out for more money.

Unable to come to terms with Microsoft on a generous deal just for the search business, Yahoo took the less complicated, non-exclusive Google deal that allowed the company to remain in the search game.

As I wrote in my post "The battle for Yahoo's soul," Jerry Yang and Sue Decker have a short runway--about six months--to prove that they can "redefine" the essence of Yahoo in a way that yields more revenue, profit, and positive buzz. With the continuing board room distractions, employee defections, and morale issues that go along with being under siege by various parties, the duo have their work cut out for them.

On this week's EIC Squared podcast, ZDNet's Larry Dignan and I discuss the celebrity interviews at the D6 conference, hosted by Walt Mossberg and Kara Swisher. Unfortunately, I called in from the San Diego airport United Airlines gate area, so you'll hear crying children and the ticker taker coaxing me to get on the plane. Larry gives the lowdown on Dell's earnings and the most recent security issues, patches from Apple, and the Comcast hack.

Facebook CEO Mark Zuckerberg and his new COO Sheryl Sandberg fielded questions from Kara Swisher at the D6 conference. The pair stayed on message. Zuckerberg has learned to simply state the company goals in answer to almost any question. It shows focus and the savvy of a budding politician. Sandberg brought serious chops to the monetization and marketing discussion.

Kara asked Zuckerberg why he chose to be the CEO, even as the company has grown to 550 people. He sidestepped the question and talked about the company goals--helping people share information, building products, and creating teams.

Mark Zuckerberg and Sheryl Sandberg

(Credit: Dan Farber)

Zuckerberg offered up that the Beacon advertising program was a big mistake, but it reinforced the point that Facebook needs to give people complete control of their information. In other words, Facebook takes privacy seriously.

Sandberg talked about value in Facebook applications, including those that are whimsical and fun, such as Slide's SuperPoke. Kara asked how Facebook will change the advertising paradigm in the context of those applications. "The larger part of advertising is in demand creation and traditional brand advertising. Facebook has a really unique opportunity to fulfill that message. Users tell us what they like and what they do, and it provides us an opportunity to work with advertisers to provide things that are great for users. We think we can offer real users engagement."

Zuckerberg thinks of Facebook as a technology company, while Sandberg described Facebook as a media company that connects people and advertisers. The ended up connecting their viewpoints. "Technology can speed up the interaction between advertisers and users, and that's really good for users," Sandberg said. Making privacy and advertising work harmoniously will be a major challenge for the CEO and COO.

Zuckerberg talked about changes to the Facebook platform, especially getting rid of the box mentality--user pages littered with applications in boxes on pages. The net effect of the new Facebook platform is that the more engaging applications and those that users trust more will get more distribution, through feeds instead of boxes, he said.

Kara saved the Microsoft question for last. She asked Zuckerberg if he would sell Facebook to Microsoft for $15 billion. "The goal of the company is to execute on the things we talked about before, become more open, and share more information. The end goal isn't to sell the company or IPO. We evaluate how it will help us along the way," Zuckerberg said. Can they sell company without you?, Kara asked. "I don't think so," Zuckerberg responded. Facebook's VCs may have a different view on Zuckerberg's view on exit strategies, but it is refreshing to talk about building value.

Sandberg, who recently made her first visit to Microsoft, said the two companies had a good partnership. "No company can go it alone. We are a small company with 550 people, four years old and not very big," she said.

D6 co-host Kara Swisher and Facebook's Mark Zuckerberg and Sheryl Sandberg.

(Credit: Dan Farber)

Zuckerberg told of Google's Sergey Brin and Eric Schmidt coming to his apartment for dinner. He didn't have the proper things to make dinner or enough chairs for his guests to sit. Kara asked him about working with Google. He danced around this question.

"They do a lot of interesting things. It would be good to work with them on something. The thing is Google is such a big company and doing so many things. They are also working social stuff. It would be good to talk to them about some stuff." In other words, we aren't really working with them. However, with all the Google refugees at Facebook, that could change.

Regarding the controversy with Google's Open Social initiative, Zuckerberg said that Facebook is watching how it evolves. "It's really just getting started," he said.

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