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Shareholders upset about Yahoo's (Nasdaq: YHOO) lagging performance -- compared with Google's (Nasdaq: GOOG) market dominance -- forced CEO Terry Semel to defend the company's market strategy 
, even as he and other company-backed officers were re-elected to the portal's board of directors.
Yahoo shareholders defeated a proposal to change the way executive pay is determined, but a third of those who cast votes supported the move -- a sign that a growing number of investors are upset about hefty bonuses being paid out to Semel and others as the company's stock has drifted sideways.
Semel himself took home about US$71 million in pay and bonuses in 2006, while Yahoo stock fell nearly 40 percent during the year. About 38 percent of shareholders who voted supported the executive compensation overhaul proposal, while 66 percent voted to re-elect existing board members, including Semel. Semel and the rest of the company-backed slate received 99 percent of the votes for re-election just a year ago.
Time to Work
Investors should give the company's new Panama ad platform time to work, Semel told shareholders at the New York meeting.
"Yahoo will definitely get a fair share of a much larger marketplace," he predicted. "Before we had Panama, we couldn't compete effectively."
In fact, Semel tried to get investors to focus on how Yahoo compares to other Internet portals, such as Microsoft's (Nasdaq: MSFT) MSN unit and Time Warner's AOL, which -- like Yahoo -- focus more on content than on search.
As for Google, Semel maintained it has a "different model" in terms of content, product, number of users and amount of time they spend on site.
Still, "our basic business is advertising," he said.
We're No. 2?
Shareholders also voted down a proposal that would have forced Yahoo to take a stronger stance against censorship on the Internet and another that would have created a human rights commission within the company to delve into Yahoo's role in spreading democracy in places such as China.
However, the portal's competitive future was the main topic of discussion. Though Semel was careful not to mention Google by name during his comments, the company was clearly on the minds of some shareholders.
One suggested Yahoo had become comfortable being a "strong No. 2" in the search and advertising category. Semel responded by saying the shareholder was being "cute."
Others clearly wanted Yahoo to borrow a page from Google's playbook when it comes to aggressive deal-making. Google has made splashes with its buys of YouTube and DoubleClick (Nasdaq: DCLK) over the past 18 months, moves that dramatically broadened its potential to reap future advertising revenues.
Yahoo pores over myriad possible deals, with an eye on buying, building or partnering to advance the company's goals, Semel said.
Floating on Panama
The shareholder activism that resulted in a third of voters backing challengers to the existing board may be a warning shot to Semel and Yahoo management. While companies often respond to such grassroots efforts -- Motorola (NYSE: MOT), for instance, cut jobs and increased stock buybacks after investors agitated for change -- Semel seemed to suggest Yahoo was comfortable with the course it is on.
That could change, however, if Yahoo is unable to show results from Panama relatively quickly, American Technology Research analyst Rob Sanderson told the E-Commerce Times. Investors have high hopes -- stoked by the company itself -- that Panama will enable it to reap more revenue and profit from each user that visits its family of sites.
The fact that the search technology business unit lost its top executive last month has led to speculation that Panama will not pay off as hoped.
If Panama doesn't work, Yahoo will be forced to take "drastic actions," including considering partnering with another company -- even Google -- with better search technology, Sanderson commented.
Keyword Search
As a portal, Yahoo operates in far more areas than search and related advertising, but with the bulk of Web marketing dollars going to keyword search, that's where investors are focused.
When it comes to search, Yahoo also has to look over its shoulder at a rejuvenated and revamped Ask.com, which relaunched recently with a new interface and a results page that integrates video, images, news and text onto a single page.
That move may not win Ask market share overnight, though. Yahoo's number No. 2 position in the market appears safe, but the Ask gambit may force the other major search sites to re-evaluate their search interfaces, Sterling Market Intelligence principal analyst Greg Sterling told the E-Commerce Times.
For Yahoo, meanwhile, recent alliances with newspapers across the country may hold promise for the future, though the portal could be doing more to exploit possible synergies, such as tapping into the local search ad marketplace.
"There is a perception that Google goes aggressively after opportunities when it sees them, and investors might want more of that behavior from Yahoo," Sterling said.
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