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Will a Different Yahoo Be Good Enough?

Will a Different Yahoo Be Good Enough?

Yahoo CEO Scott Thompson is finally getting down to brass tacks with a reorganization plan, but it doesn't seem to be drawing much enthusiasm. What is required of a CEO in these circumstances is a bold vision, said Trip Chowdhry of Global Equities Research -- a bold promise of increased market share and a visible path the company intends to take to get there. "Investors do not want to see a band-aid approach from a company like Yahoo," he said.

By Erika Morphy
04/11/12 3:37 PM PT

When he announced plans to lay off 2,000 employees, Yahoo CEO Scott Thompson said it was a necessary step in the company's strategic plan to move forward. Critics noted, however, that Thompson had not explained exactly what that plan was.

Now, via an internal memo made public, Thompson has obliged. Beginning May 1, the company will be divided into three core divisions.

The Consumer division will be divided into several subgroups, including what Thompson characterized as "connections" -- that is, Flickr, search and email, and e-commerce. This group will be led by Shashi Seth.

Another sub-unit of the Consumer division will be the media group, led by Ross Levinsohn. It will include Yahoo's global media channels such as Homepage, News, Finance, Sports and Entertainment.

The commerce subgroup will not only focus on e-commerce, Thompson said, but also close the loop between user interests, advertiser spend, consumer intent and purchase behavior. The company plans to announce a leader of this group shortly.

There will be a Regions division devoted to advertisers and agencies, and staffed by regional sales teams. Regions will also be divided into three subgroups: Americas, APCA and EMEA.

A Technology division will address Yahoo's infrastructure and platforms. It will be divided into core platforms and central technology.

Underlying this structure will be an emphasis on the customer -- Yahoo's users and the advertisers that want to connect with them.

All Things D posted the internal memo in full. Yahoo did not respond to our request to comment for this story.

Missing: A Global Vision

At face value, the plan makes sense, Trip Chowdhry, managing director of equity research at Global Equities Research, told the E-Commerce Times. "He has put the company's core functions in three buckets and essentially is creating three corresponding business units responsible for their own profits and losses."

However, such a structure is not enough for a company in Yahoo's straits, he continued.

What is required of a CEO in these circumstances is a bold vision, Chowdhry said -- a bold promise of increased market share and a visible path the company intends to take to get there.

"Investors do not want to see a band-aid approach from a company like Yahoo," he remarked.

A former PayPal executive, Thompson's background is in mobile commerce, Chowdhry noted -- a lucrative market niche that is just barely emerging.

Staking an M-Commerce Claim

Thompson should declare something along the lines of 'Yahoo plans to capture 10 percent of the (US)$4.5 trillion mobile payment market within the next two years,' Chowdhry suggested.

"This is entirely doable," he said. "Yahoo has a global footprint and a global brand and has the technology in place."

The Trouble With Finance-Oriented CEOs

The "vision thing" is still missing for Yahoo, said Rob Enderle of the Enderle Group. He has other issues with the reorganization plan as well.

"Finance-based CEOs have a nasty habit of being overly tactical and killing their companies because they can't think long term," he told the E-Commerce Times.

"This has a tactical feel to it, making the need for an articulate vision even more critical," he said. "Clearly, Yahoo will be different -- but you can't yet tell if the difference will strengthen or kill the company."

Also, the elimination of the new products group suggests Yahoo has killed R&D, Enderle pointed out. If so, the company has no long-term future.


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