Yahoo’s Troubles

Can a company, even a popular and much-hyped one, get too big, get too corporate? (No, I’m not talking about Google.) Back in high school, during the late 90s, a computer geek friend introduced me to Yahoo. At the time, Yahoo was the best way to search the web. It also seemed to have a funky, non-conformist vibe. Yahoo was hip, the poster child for the Silicon Valley.

Over 10 years later, a post on CNET pointed me to yesterday’s story in The New York Times on Yahoo’s latest issues:

  • A grass-roots campaign to remove CEO Terry Semel and several company directors
  • Questions regarding Mr. Semel’s large pay package
  • A large numbers of employees, including long-time personnel, have left since the company reorg last December
  • Two of three operating units lacking permanent leaders

I compare this to the mood about Yahoo in 1998, before Google entered the world:

“Yahoo doubled Wall Street’s pleasure today by posting earnings that were twice as strong as expected.” (link)

“In terms of vision, branding and execution, it’s hard to fault Yahoo,” said analyst Keith Benjamin, of Robertson Stephens in San Francisco. “They have created one of the two most well-known Internet-related companies, next to AOL.” (link)

“The upstart does have a few advantages: It has created a brand that’s synonymous with the wackiness, optimism, and growth potential of the Web. And it has been a winner in the portal market so far by being the first — after America Online — to add new features, such as chat, or by quickly catching up to competitors, as it did when Excite added free E-mail in mid-1997.” (link)

What Happened to Yahoo?

How did it go from THE search engine on the web to fending off questions about executive pay and employee exits? And are other currently hot companies going to end up in the same place?

“In general, there is a pretty big morale problem internally,” said an executive who left the company earlier this year. “There are a lot of frustrated people who may not leave tomorrow, but if the right offer came along, they’d jump.” (link)

Yahoo seems to have joined the ranks of companies like Microsoft and Dell who’ve gotten so big they miss opportunities and fail to live up to earlier expectations. Recent concerns over Google and privacy are perhaps a sign that Google, for all its current popularity, may face the same battles.

Jerry Yang and Dave Filo, like hundreds of other entrepreneurs, started out with a bold idea. But even the boldest ideas can be consumed by other concerns like meeting payroll and appeasing stockholders. And the ideas that are embraced by early audiences can be betrayed down the road when those other concerns take priority over the original idea.

Slippery Path

I keep coming back to this idea: when a company tries to make every individual a customer it steps onto a slippery path. Is Microsoft inherently evil? Hardly. Its products blanket the earth, creating a large pool of potential discontent. The more customers you have, the greater the risk that you’ll make somebody mad.

This idea isn’t about arbitrarily limiting your audience. Rather it’s about figuring out who you want to be, remaining consistent, and appealing to the audience that values the same. To answer my original question, yes, it’s possible to become too big and too corporate. At some point, you’ll trip up and betray your bold idea. Perhaps I’m underestimating Yahoo. It’s shown some signs of life in the last few years (e.g. purchase of Flickr). But other actions (e.g. giving names to the Chinese government) leave me shaking my head.

I watch these big companies trying to be everything to everyone, and I wonder if future entrepreneurs will learn the lesson: big isn’t always better.


UPDATE (6/18/07): Yahoo CEO, Terry Semel, steps down and is replaced by co-founder Jerry Yang.


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June 2007
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