When TechCrunch, ZDNet and other notable online publications and blogs trash a company or an individual, techies and people who spend a lot of time on the Internet will invariably take notice. But when it’s the venerable The New York Times that does the lambasting, virtually nobody will miss it.
In a recent article in this bastion of traditional journalism, NYT’s Joe Nocera published a scathing "open letter" addressed to Yahoo! CEO, Jerry Yang. It’s entitled "Oh Jerry, It’s No Longer Your Baby" and alludes to Yang’s incomprehensible behavior during the months when Microsoft Corp. was batting for a Yahoo!-Microsoft merger.
Yang co-founded Yahoo! 14 years ago and, before the emergence of Google, it was the coolest outfit that hackers and users alike idolized. Perhaps Yang just couldn’t let go of his paternal sentiments for his company, even after it went public in 1996. Which was to his detriment, because it would seem (as NYT put it) that he never made the transition from owner to caretaker (i.e., servant to his stockholders).
Yang made two bizarre moves that were clearly predicated on his desire to avoid being merged with Microsoft. First, when Yahoo!’s board was already ‘forced’ to sit down and actually talk to the software giant, Yang put in place a generous but wacky severance package for full-time employees who would opt to leave the company in the event of a corporate takeover. Basically, it stipulated that employees who walked out after Microsoft takes over Yahoo! would be free to leave and pocket a hefty sum for their trouble.
Second: Yang got in bed with Google for a search ads deal that would surely bleed the Yahoo! search business dry. And good old Jerry publicized the deal as a means to ensure a healthy Internet. Who was he kidding? Serving Google’s ads in Yahoo! search engine results pages… and his business model was what again?
Let’s put things into perspective here.
Google revolutionized — and subsequently dominated — Internet search, Web-based email and other online services. Let’s tackle email, because I’m sure everyone can appreciate how Google became a household name because of its search engine.
When Google launched its email service, Gmail, it offered an unprecedented amount of inbox space as well as a cleaner and faster interface. As soon as I got my Gmail account, I completely abandoned my Yahoo! email address. Many of my friends did the same thing. Today, it’s much more hip to have an @gmail.com address.
It took awhile before Yahoo! and Hotmail could catch up, but history had already been made, and Google was already the biggest cahoona of them all. So, by this token alone, isn’t it extremely obvious that Yahoo! and Google are competitors?
And yet, Yang was willing — no, eager — to strike a losing bargain with the Big G, just so he could avoid being devoured by "the Evil Empire" (which was how Silicon Valley types viewed MS way back when).
He had a good run… but he botched it. Yang failed to keep his company in the lead and let Google overtake Yahoo! in the search space, not to mention in the search advertising business, among others. Yang botched it when Microsoft walked out of the merger bid, which could have given Yahoo! the chance to be competitive again.
Now his stockholders are irate and feeling betrayed. It’s not going to be long before he’s forcibly replaced or he opts to step down, preserving what little dignity he’s got left. What a waste! What a way to end one’s formerly brilliant career.
I’d like to quote Nocera, who laid it out quite succinctly when he said:
Jerry, you’re a billionaire because people all over the world bought your stock, and trusted you to do right by them. That’s the compact you make when you take a company public: you get to be really rich, but in return, you have an obligation to do everything you can to ensure that shareholders get a healthy return on their investment. It doesn’t matter that you would like Yahoo to remain independent, or that you can’t stand Microsoft. Your feelings aren’t supposed to get in the way of your fiduciary duty.
