Tag: Scott Thompson

Yahoo!: Tactics Masquerading as Strategy

Last week on Yahoo!’s earnings call, CEO Scott Thompson outlined six points the company would pursue to return the company to a proper focus. When I looked at the list, they all made sense as operational principles or even action items. The big problem is that unfortunately, operating principles or action items aren’t a strategy, and this does not bode well for employees, stockholders, advertisers and even end users. The best strategies are set in the context of a strong mission and vision, neither which Yahoo! has communicated to anyone.

My Personal Yahoo! History

I remember telling a colleague that I invested my entire life into Yahoo!. I had Yahoo! Mail, had all my contacts, my calendar, read all my news through My Yahoo, all my notes in Notepad, and even got weather and movie times from them. I would even start at My Yahoo! for search as My Yahoo! was the first place I started in the morning. Now, I start my day at Pulse News on a tablet or phone over coffee, listen to podcasts while taking my kids to school then then go to Twitter and Facebook for “cultivated” news. I rarely go to a Yahoo! property with the exception to check out stock prices on Yahoo Finance. I’m not alone as Yahoo users have fled to Google for search and mail, Facebook and Twitter for social media, and vertical, specialized sites like Instagram, Pinterest, Foodspotting, and Goba. It all makes sense, though, the story of a big company’s downfall.

Being the 800 lb Gorilla Difficult

Being the largest kid on the block is great at times. I know; I worked for AT&T and Compaq at their peaks. I worked for companies who created and took markets. It was fun as I worked for the more entrepreneurial divisions. I saw IBM in the late 80’s and early 90’s almost left for dead before they became untouchable as they appear at least today. Then there’s AOL who keeps fading farther into the background, buying content brands that are full of conflict. The jury is out on Microsoft and Google if they have already peaked or can move to where they are perceived as the leader. Net-net, being the 800 lb gorilla isn’t an easy thing because of three primary reasons. First, large, successful companies when they get large, become slower and bureaucratic. The inventors are replaced by people who are great at process and but light on vision. Secondly, these companies are concerned more with playing defense and protecting their ground and less out about winning in new markets. Third, these companies face the innovator’s dilemma, where they incrementally improve their services as opposed to investing in disruptive exploration. It’s hard being the 800 lb gorilla. So how does Yahoo! intend to deal with this?

Yahoo!’s Six Points of “Strategy”

On the Q1 2012 earnings call, Yahoo! CEO outlined six “essential elements of [the] plan.” This was after layoffs and after a reorganization. Most companies let strategy dictate organization, but I don’t believe that’s not the case here. Here are the six strategy elements verbatim:

  1. consolidating technology platforms and shutting down on transitioning roughly 50 properties that don’t contribute meaningfully to engagement of revenue
  2. defining our core media connections and commerce businesses, including News, Finance, Sports, Entertainment, Mail and a handful of others. Those properties that generate the majority of our engagement and revenue.
  3. moving engineers into our commerce businesses to put them closer to our user and dedicating some of our best and brightest Yahoo!s to meaningful innovation in those core businesses.
  4. accelerating the deployment of the platforms and technologies we’ve built to make each of our properties more scalable, nimble and flexible, and therefore, less costly and time consuming to run.
  5. making better use of Yahoo!’s vast data to personalize user experiences and dramatically improve advertiser ROI.
  6. refocusing our R&D on Owned and Operated properties and stopping development of a number of initiatives, including platforms for outside publishers and theoretical science that were outside of our core.
These are great tactics and action items but don’t provide any insights into what matter first and foremost.

Where Does Yahoo! Intend to Win?

The tactics above are great in the context of a solid mission, vision and objectives, but Yahoo!’s says nothing about where it wants to win. You see, getting every Yahoo! employee working in a single direction is the right thing to do, but what if it’s the wrong direction? This would be catastrophic and at least what I see communicated this is exactly where Yahoo! is headed. The first question is, “where does Yahoo! want to win that is uniquely valuable to consumers and to advertisers?” That piece is a mystery for Yahoo!. Yahoo! needs to lean into something, and they have a lot of choices as they are still in the large growth segment:

  • local
  • deals
  • mobile
  • social
  • photos
  • living room
  • specialized verticals

I’m not advocating for any one of these at this moment, but Yahoo! needs to choose something, anything, to get the remaining 12,000 employees focused on. I won’t be enough presumptive to say Yahoo! doesn’t have a strategy floating around on the Executive Staff’s desks, but it certainly isn’t being communicated to stakeholders who need it.

Yahoo! Next Steps

Yahoo! needs to regroup after the last few weeks and in the next few months, decide where they want to win,communicate this broadly, then create a supporting strategy, then organize to deliver on that strategy. The last month has been nothing but triage, and if they need to quickly reorganize again to support a real strategy, most of the few weeks will have been a waste of time for the employees. Yahoo! has two paths they can go as a former 800 lb gorilla; the Apple/IBM way or the Excite/DEC way. I’d like to see Yahoo! make a comeback for more than the nostalgia; I’d like to see a Yahoo! comeback to inspire everyone in the industry that comebacks can happen and employees and key leaders can make it happen. That’s good for everyone. Who doesn’t love a comeback?

Why PayPal Is a Bigger Challenge Than Yahoo

 

A month ago The Wall Street Journal had a big story headlined “War Over the Digital Wallet.” “The subhead: “Google, Verizon Wireless Spar in Race to Build Mobile Payment Services.”

Article mentioned AT&T, T-Mobile, MasterCard, Visa, Citigroup, Sprint, and Apple, among others. The word “PayPal” was never mentioned, which is curious because eBay’s PayPal division is by far the global leader in electronic payments.

But not all of the media were ignoring PayPal. TechCrunch the next day carried a story that began, “Hey PayPal, do you realize people no longer trust you?” It continued: “The public’s perception is that there’s a risk in keeping money with PayPal. If something doesn’t change, startups, causes, and merchants will start processing donations and payments elsewhere.”

Something changed. PayPal’s president, Scott Thompson, quit to take over the CEO job at Yahoo!, a media company. When top executives quit, it’s usually because they want a shot at running a bigger or more interesting company. Yahoo is interesting, in the same way that train wrecks are interesting. He will be the fourth CEO of Yahoo in the past five years, not counting those who held the job on an interim basis. None of the previous CEOs, including Carol Bartz, who was fired unceremoniously in September, were able to reverse Yahoo’s seemingly inexorable slide into oblivion.

It’s hard not to chuckle at the highly respected Thompson’s statement that he was leaving PayPal to seek new challenges. “I like doing complicated, very difficult, very challenging things,” he told Reuters. There are challenges galore right under his nose at PayPal’s headquarters in San Jose.

Being ignored completely by the nation’s leading business newspaper in a major story about digital payments, when you are by far the market leader, suggests a nontrivial problem of public perception.

When a major tech blog (itself criticized recently for potential conflicts on interests) scolds that “people no longer trust you,” that stings. Do people really think that AT&T and Google are more trustworthy than PayPal to handle their electronic banking? When I look at my monthly AT&T wireless statement and ponder AT&T’s craven and almost enthusiastic cooperation with the government’s warrantless eavesdropping on American citizens, I can’t imagine ever trusting my digital wallet to a phone company.

PayPal grew impressively under Thompson’s watch at PayPal, doubling its user base to more than 100 million. PayPal in the third quarter of 2011 processed $29 billion in payments. It operates in 190 countries and 24 currencies and has 15,000 bank partners. Revenue was expected to top $4 billion in 2011, and margins were solid at close to 20 percent. PayPal has grown to the point that it now accounts for more than a third of eBay’s operating profits; I would not be surprised to see the tail wagging the dog before too long. John Donahoe, eBay’s CEO, said last year that he expected PayPal to be bigger than eBay two years from now.

Thompson, who is quite savvy about technology and commerce (“e” and otherwise), is credited with the idea to push PayPal out of the cloud and into retail stores. But Google beat him to it, in part by poaching a couple of Thompson’s top lieutenants. (PayPal’s parent, eBay, is suing Google, alleging that PayPal and Google spent two years developing a partnership, then hired PayPal’s point man, who departed with a laptop full of trade secrets; Google denies the charges.) Google then launched its own “Google Wallet” application, beating PayPal to the punch. PayPal still hasn’t articulated its “wallet” strategy.

PayPal’s push into brick-and-mortar retail stores does not appear to be going well. On a visit to PayPal headquarters a few months ago I tried to buy a cup of coffee from the café that operates in its lobby. Sorry, cash or credit cards only. PayPal was not accepted in PayPal’s own headquarters.

Ouch.

Naturally, everyone wonders what Thompson will be able to do in the Augean stables of Yahoo. It is astonishingly hard to revive a declining Internet company, and the task is made more challenging because Yahoo is a media and advertising company very different from PayPal. Both companies recognize, however, that the future belongs to the company that can harvest and sift and parse data, and that’s an area where Thompson has strong chops.

PayPal’s Donohoe said he was shocked by Thompson’s sudden departure; Thomson resigned Tuesday and starts his new job at Yahoo on Monday. Donohoe himself will act as PayPal’s interim president, and promised a “seamless transition.” The person who eventually takes the big chair at PayPal has huge challenges ahead, starting with getting PayPal accepted in its own building.