Digital Media

In the six weeks since Carol Bartz took over as Yahoo chief executive, she's interviewed employees and executives, learned the company's businesses, assessed what's good, diagnosed what's wrong, and now reorganized Yahoo management to set it on a new course.

Now comes the hard part.

Yahoo CEO Carol Bartz

(Credit: Yahoo)

The assertive Bartz expects the new, simpler management structure to produce faster decisions and better accountability among executives. She also ousted Chief Financial Officer Blake Jorgensen, hired Elise Steele to the new chief marketing officer post, and set up a customer advocacy group to make sure Yahoo pays due attention to its users and advertisers.

Those are high-level actions, though. For them to have an effect, they'll have to trickle down to the rank and file who are responsible for everything from selling ads to revamping Yahoo Mail.

Reorg fatigue
And Yahoo has reorg fatigue. Compare the verbiage of Thursday's change with that of Yahoo's last big restructuring in June.

Here's Sue Decker, who agreed to step down as president when Bartz arrived, speaking last June: "The changes we're making today will help deliver superior global products for users and enable faster and better decision-making."

Now here's Bartz in her blog about the reorg: "For us working at Yahoo, it means everything gets simpler. We'll be able to make speedier decisions...and we have a renewed focus on the customer. For you using Yahoo every day, it will better enable us to deliver products that make you say, "Wow.'"

So clearly it takes more than words to address a company's issues.

Cleaner responsibility
The biggest part of the change is Bartz's effort to clean up the chain of command. Earlier, the company had aligned engineering and product groups that jointly worked on the same projects; now those are unified under Executive Vice President Ari Balogh.

With the move, Yahoo is "trying to kill the seemingly indestructible silos that have been a part of Yahoo since the beginning," said UBS analyst Benjamin Schachter in a research note.

However, there still is a joint ownership issue. Balogh oversees the vision and creation of Yahoo's products, but Hilary Schneider and an as-yet-unchosen executive are in charge of delivering them to the world--Schneider in North America and the other executive elsewhere.

If the hand-off is smooth and cooperative, that doesn't have to be a problem. And with one executive rather than three responsible for the world beyond North America, collaboration shouldn't be as complicated.

Neutral to Microsoft
By centralizing power, the reorg might make it a smidgen easier to carve off Yahoo's search and search-advertising business to Microsoft, a possibility that keeps resurfacing. But that's more likely a decision that would be made by Bartz and the board, so it's probably not wise to infer that such a deal is more or less likely after Thursday's change.

And note that Yahoo appears headed in the other direction, with tighter integration rather than isolation between search ads and display ads. For example, people's search queries can be used to help choose which display ads are shown in an attempt to target them at specific Yahoo users.

One thing is clear, though. There's no doubt Bartz is in command and is working to take the initiative.

Replacing the CFO, adding a CMO, and personally installing the other executives into their new posts was the first step to reshaping Yahoo the way Bartz wants. Now she'll be better able to push, prod, cajole, and coax the rest of the company along.

Here's the full text of Chief Executive Carol Bartz's blog post on the latest Yahoo reorganization.

Getting our house in order

Posted February 26th, 2009 at 9:16 am by Carol Bartz, CEO

A month and a half in the saddle and today I have the perfect excuse to get blogging.

I've been on a whirlwind tour for the last six weeks, talking with everybody from executive leaders to the guys who configured my laptop. I've been in student mode, slowly getting smarter about what makes this place tick. And most recently, I've been gathering information on what it's going to take to get Yahoo! to a great place as an organization -- and one that brings you killer products.

People here have impressed the hell out of me. They're smart, dedicated, passionate, driven, and really nice. There's so much great energy and frankly lots of optimism. But there's also plenty that has bogged this company down. For starters, you'd be amazed at how complicated some things are here.

So today I'm rolling out a new management structure that I believe will make Yahoo! a lot faster on its feet. For us working at Yahoo!, it means everything gets simpler. We'll be able to make speedier decisions, the notorious silos are gone, and we have a renewed focus on the customer. For you using Yahoo! every day, it will better enable us to deliver products that make you say, "Wow."

I've noticed that a lot of us on the inside don't spend enough time looking to the outside. That's why I'm creating a new Customer Advocacy group. After getting a lot of angry calls at my office from frustrated customers, I realized we could do a better job of listening to and supporting you. Our Customer Care team does an incredible job with the amazing number of people who come to them, but they need better resources. So we're investing in that. After all, you deserve the very best.

We're also leaning on this team to make sure we're all hearing the voice of our customers (consumers and advertisers). I'm singularly focused on providing you with awesome products. Period. The kind that get you so excited, you have to tell someone about them. Whether on your desktop, your mobile device, or even your TV.

And that takes a real understanding of what you want/need/love/hate, how you're using our products, and what you find simple, intuitive, easy and fun. Who wants innovation for innovation's sake if it doesn't make your life easier, more efficient, more productive? So expect us to hear you better and take better care of you.

Finally, a note about our brand. It's one of our biggest assets. Mention Yahoo! practically anywhere in the world, and people yodel. But in the past few years, we haven't been as clear in showing the world what the Yahoo! brand stands for. We're going to change that. Look for this company's brand to kick ass again.

Big thanks to the many of you who've reached out with positive comments. It's clear people want Yahoo! to succeed. I'll try to pop by here again soon, though probably not too soon. I have a pretty long to-do list.

Carol Bartz

CEO

New Chief Executive Carol Bartz has reorganized Yahoo in an attempt to make the Internet pioneer faster, simpler, and more responsive to those who use its services.

"Today I'm rolling out a new management structure that I believe will make Yahoo a lot faster on its feet," Bartz said in a blog post Thursday. Specifically, Yahoo is getting rid of some fiefdoms and setting up a group to pay more attention to customers.

"For us working at Yahoo, it means everything gets simpler. We'll be able to make speedier decisions, the notorious silos are gone, and we have a renewed focus on the customer," Bartz said. "For you using Yahoo every day, it will better enable us to deliver products that make you say, 'Wow.'"

In one change, Chief Financial Officer Blake Jorgensen will leave the company as soon as a replacement is found, Yahoo said.

The move is the first major one since Bartz took over the CEO role from co-founder Jerry Yang in January. The company has been struggling to become more competitive and profitable for years, and now faces that challenge during a very difficult economy.

Update 10:14 a.m. PST: "The company has initiated a search for a new chief financial officer. Mr. Jorgensen will remain with the company as its chief financial officer through a transition period," Yahoo said in a regulatory filing. Further details on the reorganization weren't immediately clear.

Yahoo has undergone plenty of reorganizations and executive turmoil in the past year, not to mention two major layoffs, but this time the changes are being driven by an assertive new CEO who brings fresh eyes to the challenge. And Bartz has no trouble expressing frustration with the molasses-like pace of change at Yahoo.

Photos: The Bartz gang--a breakdown of Yahoo's reorg

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"People here have impressed the hell out of me. They're smart, dedicated, passionate, driven, and really nice. There's so much great energy and frankly lots of optimism. But there's also plenty that has bogged this company down. For starters, you'd be amazed at how complicated some things are here," she said in the blog posting.

To try to make sure Yahoo personnel listen to outsiders as well as themselves, Bartz established a new customer advocacy group.

"I've noticed that a lot of us on the inside don't spend enough time looking to the outside. That's why I'm creating a new customer advocacy group. After getting a lot of angry calls at my office from frustrated customers, I realized we could do a better job of listening to and supporting you," she said.

Bartz also wants to buff Yahoo's brand.

"Mention Yahoo practically anywhere in the world, and people yodel. But in the past few years, we haven't been as clear in showing the world what the Yahoo brand stands for. We're going to change that. Look for this company's brand to kick ass again," Bartz said.

Update 10:47 a.m. PST: Now we have some details on the changes. One interesting nugget: Yahoo said nobody is leaving the company beyond already announced departures including Marco Boerries, who led mobile and TV work, and Neeraj Khemlani, who led news, and Jorgensen.

Here are more details:

• Yahoo will merge product and technology work into one group led by Ari Balogh, who adds executive vice president of products to his chief technology officer title. His group is "responsible for the vision, strategy, and quality" of all Yahoo's products globally. He reports to Bartz.

• For delivering those products, along with Yahoo's content and services, Yahoo has two groups: North America and International. Hilary Schneider leads the North American group, and a leader for the international group "will be hired soon," Yahoo said. These leaders report to Bartz. Previously, Yahoo had separate groups for North America, Europe, Asia-Pacific, and emerging markets.

• Yahoo hired Elisa Steele, formerly Network Appliance's senior vice president of corporate marketing, to fill a new post of chief marketing officer.

Update 11:03 a.m. PST: Here are some more details:

Ashish Patel, who formerly led products work, now is leader of the product architecture and evangelist group, reporting to Balogh. "His group will focus on mapping out and determining our overall product strategy, architecture, and portfolio," Yahoo said.

• David Ko moves a step up the pecking order by taking over the mobile group and reporting to Schneider. Boerries previously led this area. "Mobile will continue to be a key priority for Yahoo," the company said.

• David Dibble, hired in December and most recently chief technology officer at First Data Corp., leads the new service engineering and operations team responsible for Yahoo's computing infrastructure. He reports to Bartz.

• Yahoo still is looking for a person to lead the customer advocacy group. That group will help Yahoo hear what its two big constituents--site users and advertisers--have to say. This executive will report to Bartz.

• David Windley leads human resources, Michael Callahan leads the legal group, and Joel Jones is Bartz's chief of staff.

Marco Boerries, Yahoo's outgoing chief of mobile and TV efforts.

(Credit: Stephen Shankland/CNET News)

Marco Boerries, the chief of Yahoo's Connected Life division, is leaving the company, Yahoo said Wednesday.

Boerries joined Yahoo four years ago and led its effort to bring its services to mobile phones and more recently TVs. News of his departure was first reported by Kara Swisher at All Things D on Wednesday, and Yahoo confirmed the departure.

Swisher quoted Boerries' good-bye memo as saying it's been difficult for him to reconcile his personal and professional lives, given that his family lives in Germany.

However, one source close to the situation said Boerries' departure had more to do with Yahoo's latest management reorganization under Chief Executive Carol Bartz, which is expected to be announced Thursday or Friday.

In addition, Yahoo News chief Neeraj Khemlani is departing for Hearst.

Neeraj Khemlani, the former vice president and general manager of Yahoo News, has taken a new post at Hearst to speed its newspapers' transition to a digital world.

Hearst announced the move Monday just before an expected reorganization at Yahoo, which is under the leadership of new Chief Executive Carol Bartz.

"Hearst's major operating groups have all made substantial progress towards our corporate objective of fully participating in the digital transformation The creation of this new position is designed to accelerate the progress through greater cooperation and synergy across divisional lines. Neeraj is uniquely equipped to help me and my colleagues realize that goal," said Frank A. Bennack Jr., Hearst's vice chairman and CEO, to whom Khemlani will report when he starts March 23.

Khemlani isn't leaving because of the Yahoo reorganization, All Things D's Kara Swisher reported on Monday.

Before joining Yahoo in 2006, Khemlani worked as a producer for "60 Minutes."

(Via Bloomberg News.)

Here is the full text from Yahoo Chief Executive Jerry Yang about his decision to step down to his earlier role as Chief Yahoo.

From: Jerry Yang

Sent: Monday, November 17, 2008 5:03 PM

Subject: update

yahoos -

i wanted to address all of you on the news we've just announced. the board of directors and I have agreed to initiate a succession process for the ceo role of yahoo!. roy bostock, our chairman of the board, is leading the effort to identify and assess potential candidates for consideration by the full board. the board will be evaluating and considering both internal and external candidates and has retained heidrick and struggles to help in this effort.

i will be participating in the search for my successor, and i will continue as ceo until the board selects a new ceo. once a successor is named, i will return to my previous role as chief yahoo and continue to serve as a director on the board.

last june, i accepted the board's request that i assume the ceo role to restructure and reposition the company as a whole in order to more effectively meet the fast-changing needs of both users and partners. since taking on the ceo role, i have had an ongoing dialogue with the board about succession timing. thanks in large measure to your tireless efforts, we have created a more open, competitive yahoo! and we believe the time is now right to transition to a new ceo who can take the company to the next level.

despite the external environment we face, the fact remains that yahoo! is now a significantly different company that is stronger in many ways than it was just 18 months ago. this only makes it all the more essential that we manage this opportunity to leverage the progress up to this point as effectively as possible. i strongly believe that having transformed our platform and better aligned costs and revenues, we have a unique window for the right ceo to take ownership over the next wave of mission-critical decisions facing the company.

all of you know that I have always, and will always bleed purple. i will always do what I think is right for this great company. while this step will be an adjustment for all of us, i know it's the right one. i look forward to updating you on this process as soon as the board has developments to share, and will continue to do everything i can to make yahoo! fulfill its full potential.

thank you,

jerry

See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Microhoo revisited: Would it be a search-only deal?

Jerry Yang

(Credit: Yahoo)

Updated 5:11 p.m. PST with Yahoo announcement. Updated 5:21, 6:19 p.m., and 6:57 p.m. PST with further detail.

Yahoo, under fierce financial pressure, has begun a search to replace company co-founder Jerry Yang as chief executive, the company said Monday.

"Jerry and the board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level," Chairman Roy Bostock said in a statement. "We are deeply grateful to Jerry for his many contributions as CEO over the past 18 months, and we are pleased that he plans to stay actively involved at Yahoo as a key executive and member of the Board."

Yang will resume his position as chief Yahoo, the company said, the role he had before taking over in 2007 after former CEO Terry Semel departed.

After reporting a 64 percent drop in net income and warning that the advertising market is softening, Yahoo announced a layoff of at least 1,430 by the end of 2008 in October. The cut follows another in which about 1,000 Yahoo employees lost their jobs in February. In after-hours trading Monday, Yahoo rose 47 cents, or 4 percent, to $11.10.

All Things D's Kara Swisher reported the move earlier Monday.

Hitting the reset button
"I think it's the right move for the company," said Eric Jackson, an activist Yahoo shareholder who has pressured the company for big changes. However, he added, "It's really too little too late. This is a board failure more than it is Jerry's failure. These problems have been around at Yahoo for well over two years now."

It's unclear at this stage what changes will come with a new CEO, but one possibility is another shot at a deal with Microsoft. "I would expect Microsoft to come back within the next three or four months," Jackson said.

Yang needed to step aside to give Yahoo a chance to start fresh, said David Wertheimer, the former president of Paramount Digital Entertainment and now the chief of the Entertainment Technology Center at the University of Southern California.

"The problem Yahoo has now is they've got to redefine themselves in a different landscape than they were when Jerry built the company," Wertheimer said. "As much as I like Jerry personally, I think employees, and Wall Street are looking for something revolutionary, a sign that the company is reinventing itself."

Yang patted himself on the back for moving the company in a new direction during his recent CEO tenure. His full statement:

From founding this company to guiding its growth into a trusted global brand that is indispensible to millions of people, I have always sought to do what is best for our franchise. When the board asked me to become CEO and lead the transformation of the company, I did so because it was important to re-envision the business for a different era to drive more effective growth. Having set Yahoo on a new, more open path, the time is right for me to transition the CEO role and our global talent to a new leader. I will continue to focus on global strategy and to do everything I can to help Yahoo realize its full potential and enhance its leading culture of technology and product excellence and innovation.

Yahoo said the search will include internal and external candidates. One leading contender no doubt is President Sue Decker, who has been a close Yang ally. The New York Times reported that other candidates include Dan Rosensweig, Yahoo's former chief operating officer and now with Quadrangle Group, and former AOL CEO Jon Miller.

Struggling for a fix
Yahoo has been struggling for months to improve its financial performance, but things have gone from bad to worse for the company this year, and its stock has sunk to a closing price of $10.63 on Monday. First, the company thwarted Microsoft's unfriendly attempt to acquire Yahoo outright, and later just its search business, though Yahoo appeared to grow more interested in a deal even as Microsoft grew cooler. At one point, Microsoft offered to acquire the company at $33 per share.

The next blow was the economic collapse, which is hurting the advertising market on which Yahoo depends. Even though many expect online ads to fare better than those on TV or in print, Yahoo relies more on graphical "display" ads that are expected to be hit harder than the search-related text ads that supply the vast majority of Google's profits.

Finally, a search-ad partnership with Google fell apart in November when Google decided it didn't have the stomach to fight the Justice Department's threatened antitrust lawsuit.

Is the fix in?
Yang can't claim credit for righting the company, but he has certainly changed it.

One major component, just now launching is the Yahoo Open Strategy, which is designed to rewire Yahoo's computing infrastructure. The goal is to link Yahoo users with social networking elements, enable others to energize Yahoo properties with new applications, and build Yahoo activities into other sites on the Internet. Ultimately, the company hopes for new users and more activity from existing users.

The company also is trying to overhaul its advertising business. Part of that effort involves improving the profitability of its search ads, but a higher-profile element is the Amp technology for display ads. With Amp, Yahoo hopes to make it easier for advertisers to find places to run ads, easier for publishers to find advertisers, and easier for all parties to track just how well ads are doing.

CNET News' Elinor Mills and Greg Sandoval contributed to this story.

See also:
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Jerry Yang memo to staff about stepping down
• Microhoo revisited: Would it be a search-only deal?

Yahoo is under financial pressure this year, but it's shaking up management of its mobile phone group as part of a plan to make its phone and TV division profitable next year.

The company on Monday named David Ko to be senior vice president of the mobile group, which handles software, advertising, and partnerships in the mobile phone market. He reports to Marco Boerries, executive vice president of the Connected Life division, which is trying to extend Yahoo's business to mobile phones and Internet-connected TV sets.

David Ko

(Credit: Yahoo)

"I am very happy to introduce today Connected Life v3.0, which is designed to take our leadership in mobile to the next level," Boerries said in a memo about the changes. Version 2.0 was about laying foundations with technology development and distribution deals, but 3.0 will be about money.

And it will be the phone group that's carries the profit burden, he added: the TV effort is still in an earlier development and distribution stage so far.

"Our goal is to become a contributor to Yahoo's bottom line in 2009," Boerries said. In other words, to make Yahoo overall more profitable, not less.

That mobile revenue comes from text and display ads, and partnerships, Ko said in an interview. Though Ko sees competition from Google and others, he's confident of Yahoo's position in mobile Internet services: "We are absolutely leading in this."

Google is aggressively expanding into the mobile market, though, with advertising, software, the Android operating system, and services. And the threat is real: earlier today, Cowen and Co. analysts said Google Maps will help lead it to dominance in mobile search.

The phone group will carry the Connected Life profit burden initially, Ko added: the TV work is still in an earlier development and distribution stage so far.

Ko replaces Steve Boom, who "after 10 years at Yahoo has decided to leave the company to pursue other opportunities," Boerries said. A Yahoo spokeswoman said Boom was leaving voluntarily. Ko was general manager of Yahoo's mobile work in Asia, a post now held by Matthias Kunze.

Also leaving Yahoo are Geraldine Wilson, who handled Connected Life business operations in Europe--her work included ousting Google to become T-Mobile's preferred search mobile search provider--and Bruce Stewart, who worked on business development in the United States.

AOL is scrapping some online destinations but will push others harder in an attempt to improve its finances, according to internal memos.

Among those products to be shuttered are Bluestring, a site to share videos, music, and photos; Xdrive, a general-purpose online storage service; and AOL Pictures, where people could store and share photos, according to a July 14 memo from Kevin Conroy, AOL's executive vice president of products and marketing. The memo was published Thursday by TechCrunch.

Kevin Conroy

(Credit: AOL)

"These consumer storage products haven't gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation," Conroy said in the memo. Also to be closed is MyMobile which repackages various AOL services for use on mobile devices.

AOL is likewise paring back some of the blogs it hosts, according to a different memo obtained by PaidContent.org. The DIYLife blog is being shut down, according to that report, and bloggers there and at the Unofficial Apple Weblog and DownloadSquad, who are paid by the post, have been told to stop posting until July 31 to cut costs.

It's not unusual for companies to cut products to improve finances, but AOL has a particular incentive: corporate owner Time Warner is trying to prepare the once-powerful subsidiary for sale or other strategic alternatives.

AOL will push several other products harder in an attempt to boost revenue. Those products include AOL's browser toolbar, its desktop software, its e-mail service, and its Truveo video search site, according to the July 14 memo.

Update 8:41 a.m. PDT: A source within AOL has confirmed the authenticity of the memos and a plan Conroy mentioned to sell the Xdrive division.

The source characterized the cuts as part of AOL's standard procedures to maintain profitability. Last year, the company cut 50 online properties, including its video download service. As with that change, AOL will provide users options such as partnerships with competitors or archival CDs and DVDs to preserve their data, the source said.

Packaging for sale
Time Warner is separating AOL's two components, audience and access, the former being its online properties and the latter its dial-up Internet access business. The company is doing so "to increase the accountability and operational focus of each of those businesses, and...to enhance our strategic flexibility," said Time Warner Chief Executive Jeff Bewkes earlier this year.

Splitting off the dial-up business is important. With broadband increasingly ordinary, dial-up is going nowhere but down, and selling access to the Internet is an operation most content and advertising companies would be loath to absorb.

Some of the cuts at AOL are of divisions that are aligned with the old dial-up business. For example, Xdrive is offered as one of the perks of premium subscription plans. And AOL Pictures was an early online photo option for subscribers.

So AOL is trying to transform itself into a modern Internet company, with high-traffic properties and online advertising. The question is who might be up for a deal with AOL?

There are two obvious candidates: Yahoo and Microsoft. Both have significant cash, significant online operations, and significant troubles keeping up with Google's rise to prominence. They would love the extra Web site traffic: each page viewed is an opportunity to sell advertisements, and adding all that extra ad inventory expands the clout of the companies' ad networks during a time of consolidation.

It should be noted that AOL's ad network, Platform-A, delivers advertisements to a larger fraction of U.S. Internet users than any of its competitors, according to ComScore's latest statistics. Its reach of 90 percent is ahead of Yahoo, at 83 percent, and Google, at 81 percent.

Online ad growth
Here's why, even with the current economic troubles, AOL is potentially desirable, despite its troubles: U.S. spending on online ads will increase from $25.9 billion this year to $41 billion in 2011, analysis firm eMarketer projects.

But AOL specializes in display ads, the graphical variety that cost advertisers when they're put on Web pages. Google minted its billions of dollars in revenue chiefly on textual search ads, which are paid only when users click on them, a structure that makes it easier for advertisers to measure performance and justify the expense of ad campaigns.

With the economy gone sour, it's these display ads that are under more pressure.

Cowen analysts Jim Friedland and Kevin Kopelman on Friday lowered their forecast for display ad spending in the United States, saying that search ad spending is stronger. "We believe paid search spending is much less exposed to ad budget cuts than other media, based on our previously published analysis of the historical spending patterns on direct mail during recessions," the analysts said.

And display is a smaller part of online ad spending: eMarketer projects that U.S. display ad revenue will increase from $5.5 billion in 2008 to $7.9 billion in 2011, while search ads will increase from $10.4 billion to $16 billion.

For search ads, AOL relies on Google's technology and shares the resulting revenue. Yahoo and Microsoft, though, could swap out the Google ads with their own, adding significant heft to their search ad operations.

Other buyers?
Who else might be interested? Google is showing more signs of interest in diversifying to traditional Internet portal activities such as e-mail, news, finance, and shopping, but it also appears to have the patience to build its own properties using its staggering cash flow. It's got its troubles, but it completely lacks the odor of urgency that emanates from Yahoo and Microsoft.

Another possibility is IAC/InterActiveCorp, a conglomerate of many online properties. However, while IAC wants to expand its advertising network, it also looks not to be in the mood for consolidation. It's seeking to spin off operations such as LendingTree, Ticketmaster, and HSN.

Probably more likely would be a more traditional media company such as or , both of which have shown interest in hitching their carts to the online bandwagon.

The New York Times' advertising revenue decreased 17.8 percent in its most recent quarter, the company said Wednesday, "because of weakness in print advertising," so online advertising could help even if it's not a miracle cure. The Times also announced a partnership with online contacts management site LinkedIn and runs the About.com site.

News Corp., meanwhile, operates MySpace and has an investment in online video site Hulu and has a strong interest in online advertising.