Among its many provisions, the deal — officially announced in late July of 2009 — called for Microsoft to pay Yahoo $50 million annually, for three years, for implementation costs.

The mutual fund manager, Reema Shah, formerly of Ameriprise Financial Inc., had heard rumors that a deal — what became The Search Alliance — was in the works, and called Kwok to find out. Despite Kwok’s responsibility to keep confidentiality, he told Shah about the soon-to-be-announced agreement.

Afterwards, the mutual funds she managed bought more than 700,000 shares of Yahoo stock that were later sold for profits of around $389,000. Shah also pled guilty to securities fraud in the case.

Kwok may have talked to Shah because she previously did a similar favor for him, tipping him to that Autodesk intended to acquire Moldflow Corporation. He traded on that information, and made $4,754. The two met in January 2008, and the Securities and Exchange Commission (SEC) says they began a relationship in which Kwok provided Shah with non-public information about Yahoo — including about its quarterly financial performance. In return, she told him information she learned in the course of her work.

“Kwok and Shah played a game of you scratch my back and I’ll scratch yours,” said Scott W. Friestad, associate director in the SEC’s Division of Enforcement, in a statement.

Both Kwok and Shah have agreed to settle SEC charges and have also pled guilty in parallel criminal cases. Under the settlement agreement, Shah will be barred permanently from working in the securities industry. Kwok will be barred from serving as an officer or director of a public company. Penalties and sentences haven’t yet been announced.

Thompson’s “personal reasons,” as we all know, are: misrepresenting that he had a computer science degree. Yahoo EVP Ross Levinsohn is reportedly set to become interim CEO, with the apparent hope that he could take the helm permanently.

Swisher adds that the situation is still in flux and could change. The board is apparently meeting this morning.

Shareholder and hedge fund manager Daniel Loeb aggressively pushed for Thompson’s ouster and kept pressure on the board. It’s seems relatively clear that the ethics issue was an opportunity for Loeb to push his agenda.

He stoked a public-relations crisis at Yahoo that gave him more leverage in asserting demands and extracting concessions from the board. Indeed, as part of a Yahoo “settlement” with Loeb, he is “set to get three board seats from a slate proposed by him as part of a proxy fight aimed at Yahoo,” according to AllThingsD.

When the news first broke that Thompson didn’t have the computer science degree he claimed I didn’t believe it would result in his ultimate resignation. After all, he had many years of experience as a successful tech executive in Silicon Valley. In other words, he had the desired experience; the paper was a technicality of sorts — not to minimize the ethics issue.

Yet the scandal refused to go away and had become a major PR headache for Yahoo and a distraction for employees. Yahoo announced Thompson’s appointment as CEO in early January of this year. The Yahoo director who was instrumental in Thompson’s hiring, Patti Hart, resigned last week. But that didn’t put the matter to rest or satisfy Loeb.

Yahoo has endured a remarkably tumultuous period over the past three or so years. It has seen multiple CEOs, the disruption of the Microsoft search deal, waves of layoffs and executive departures as well as multiple reorganizations and strategy shifts. What an amazing and sad spectacle.

Thompson had begun to execute on a new turnaround plan, including reducing headcount at Yahoo by 2,000 employees. Levinsohn came in under previous CEO Carol Bartz and is well regarded inside the company and in the industry. His background is very different from Thompson’s. It’s not clear whether he’ll now want to put his own stamp on the company or will proceed with Thompson’s plan.

Before coming to Yahoo, Levinsohn was president of Fox Interactive Media.

Out earlier today came the Yahoo release announcing Levinsohn’s appointment and that of Fred Amoroso as the new Chairman of the Yahoo Board.

Postscript, 11:15 pm PT by Matt McGee: The Wall Street Journal is reporting that Thompson told Yahoo’s board of directors that he’s been diagnosed with thyroid cancer, and that his decision to leave the Yahoo CEO post was influenced “in part” by the diagnosis.

Photo credit: Wikipedia Wikimedia Commons

Shortly after announcing Q1 earnings yesterday, new Yahoo CEO Scott Thompson dropped a bomb during the analysts’ call when he said the company will be “shutting down or transitioning roughly 50 properties that don’t contribute meaningfully to engagement or revenue.”

He went on to say that Yahoo’s focus will be on its “core media connections and commerce businesses,” such as Yahoo News, Yahoo Sports, Yahoo Mail and a few other successful Yahoo properties.

But what about the 50 properties that are destined to be shut down or transitioned soon? Let’s take a look at what might and might not be on Thompson’s list.

Flickr?

Would Yahoo shut down one of its most beloved properties? As a user since 2004, I shudder at the thought. Flickr is still one of the most popular photo-sharing sites on the web — it had almost three million photo uploads per day in March, according to Yahoo’s own figures.

So that would appear to meet Thompson’s standard for saving properties with strong engagement. But does Flickr make any money for Yahoo? It sells inexpensive “pro” memberships and shows ads to non-Pro account holders, but the income from those is probably minimal. Yahoo reportedly fired at least some, and possibly all of Flickr’s customer service team earlier this year. But the product is still being developed — witness yesterday’s Android app upgrade as evidence.

My guess is that Flickr stays alive, at least temporarily. But that may be more of a hope than anything. It may be a stronger sale candidate than most other Yahoo properties mentioned below, especially since Instagram was worth a billion dollars to Facebook.

Yahoo Answers

Like Flickr, Yahoo Answers is an extremely popular site that gets high marks for engagement but probably doesn’t make much money for Yahoo.

It’s an active product, at least judging by today’s announcement of changes to its level system (changes that its most active users won’t like, ironically).

My gut feeling is that Yahoo Answers, despite the high engagement, is a more likely shut down candidate than Flickr. But it’s not as likely to be chopped as the next eight Yahoo products I’ll list.

8 Yahoo Products That Could Be Shut-Down Candidates

1.) Yahoo Upcoming

Once a popular event guide, Upcoming seems to be a ghost town these days. The most recent post on the Upcoming News Blog was back on December 15, 2010. It announced a beta version of Upcoming’s new site design. You can still see the beta design at beta.upcoming.yahoo.com, but the main site hasn’t been touched. Knock, knock … is anyone home?

2.) Yahoo Directory

Once a must-use site for link builders, the Yahoo Directory is largely an afterthought now — including for Yahoo. Some years ago, the company stopped posting a list of daily directory additions.

In 2010, Yahoo shut down directories in France, Germany, Italy and Spain; the UK and Ireland directory followed soon after.

At the time, Yahoo said the U.S. directory was safe. That’s probably not the case now.

3.) Yahoo Pipes

Pipes seems to be a fairly popular site in some circles, and offers some interesting tools for collecting and curating web content. But it may not meet Thompson’s credo of focusing on high engagement and high revenue services, and it’s not at all consumer-facing.

4.) Yahoo Groups

Yahoo Groups is almost in the same place that Flickr and Yahoo Answers is. It has a huge userbase, but it’s probably not making the company enough money to justify keeping it alive. Yahoo Groups hasn’t seen any significant development in years — at least nothing’s that plainly visible to its users.

5.) Yahoo Clues

This is a pretty cool service that reveals search trends and also serves as something of a keyword research tool. But with Yahoo already having shut down Yahoo Site Explorer, we have to wonder how committed the company is to products like this that are perhaps geared more toward online marketers than Yahoo’s general consumer audience.

6.) Yahoo Fire Eagle

Yahoo’s location sharing service never seemed to catch on, at least to me. It stores your location so that other sites and services can use it. But the app gallery isn’t exactly a who’s who of social/local/mobile networking.

7.) Yahoo Babel Fish

Google Translate seems to own this niche, and Babel Fish probably doesn’t have enough user engagement to justify its existence at this point. (It also looks like Yahoo hasn’t touched its design in years, for whatever that’s worth.)

8.) Yahoo Koprol

Koprol is an Indonesian site that’s similar to Foursquare. Yahoo acquired it in 2010, and there were recent reports that its entire developer team was fired. So long, Koprol.

There are literally dozens of other Yahoo products and services that could be on the chopping block — like Smush.it and Yahoo Avatars, for example. Many are services you’ve never used and perhaps haven’t even heard of.

But what Yahoo products do you think should be on the chopping block? Or what products do you hope survive Yahoo’s upcoming cuts? Comments are open.

Total search revenue was $470 million, up 3 percent vs. last year. Search revenues (ex-TAC) were up 8 percent to $384 million (vs. $357 in Q1 2011). Total display ad revenues were down 2 percent, however, to $511 million.

The search gains came notwithstanding a decline in overall query volume last quarter, according to comScore.

New CEO Scott Thompson said in a blog post, “These results are clearly the right direction for our business and I am very excited about our opportunities ahead. I know we can deliver even more with our new structure, business priorities and clear focus. I am more convinced than ever of the value of our assets and the potential of this business.”

Thompson also announced other positive metrics for the company:

• Worldwide visitors to Yahoo! properties and branded sites increased 7%
• Media properties page views increased 10%
• Minutes spent on communications and communities increased 14% and 8% in media properties

This is a little bit of a gift for Thompson, who will make his first quarterly appearance before financial analysts on the 2pm/5pm earnings call coming up.

Two weeks ago Yahoo announced that it was restructuring and laying off 2,000 employees. Yahoo is retaining search (at least on paper), elevating former Yahoo Search head Shashi Seth to lead “Connections,” one of the company’s three new consumer divisions that includes the search group.

An improving economy has given Yahoo earnings a bit of momentum it appears. However it will be up to Thompson and his executive team to build on that and make sure it continues.

Postscript: According to TechCrunch, Yahoo CEO Thompson seeks to impose some Steve Jobsian product simplification on the company. He said that he would be shuttering as many as 50 properties to generate more focus on core products. The particular sites weren’t identified on the earnings call however.

Related Entries

• Yahoo’s Re-Organization: Search Stays Alive, At Least On Paper
• comScore: Only Search Engine To See Drop In Queries In March Was Yahoo
• Yahoo In A Fight For Its Life
• Yahoo Confirms 2,000 Employees Getting the Axe
• Will Pending Layoffs Put Final Nail In Yahoo Search?

Yahoo’s new corporate structure will take effect on May 1st and have three primary divisions:

• Consumer – this will have three units: Media, Connections and Commerce
• Regions – this is the division that serves Yahoo advertisers and is “accountable for all Yahoo revenue”
• Technology – the infrastructure and platform division

AllThingsD has posted the full text of Thompson’s memo, which lists Yahoo’s search product as part of the “Connections” unit in the Consumer division:

Connections will be led by Shashi Seth, and include consumer businesses that connect and inform our users including Search, Communications and Social properties such as Mail, Messenger, Flickr, Answers, and more. The highest priority for Shashi and his team will be to think well beyond how users search, communicate and share online today. The Connections team is charged with fundamentally re-imagining how we design and deliver the next generation of these foundational Yahoo! experiences.

There were reports in recent weeks that Yahoo was at least considering ways to get rid of its search business altogether, a business that — quite remarkably — still has about 1,800 employees (according to a recent Reuters article that cited an unnamed Yahoo executive).

Thompson’s memo at least gives temporary reprieve to that group of Yahoo search employees. But given the company’s ongoing troubles, the layoffs and the fact that Yahoo doesn’t have its own search engine anymore, Yahoo Search may be alive on paper, but there’s no guarantee it’ll live a long life.

Following the announcement of 2,000 layoffs earlier this week Thompson sought to reassure Yahoo employees in a company memo. A streamlined organizational structure will better enable Yahoo to compete in the future, he reportedly said.

That new structure will apparently not include Yahoo Chief Product Officer Blake Irving, who has resigned. His organization took a disproportionate hit in the layoffs and is being “blown up” according to AllThingsD.

Reuters reports that Thompson’s plan will focus on three areas: “core media and communications,” “platforms” and “data.” We’ll see how that impacts what remains of Yahoo search and other products. Notwithstanding the search outsourcing deal with Microsoft, apparently there are still a remarkable “1,800 staffers for search,” according to an anonymous Yahoo executive quoted in the article:

The fate of several Yahoo businesses remains uncertain, particularly the search business, according to the source, who wished to remain anonymous because the comments involved company matters. While Yahoo struck a deal with Microsoft Corp in 2009 to outsource much of its search operations, Yahoo still employs roughly 1,800 staffers for search, the executive said.

My view has been that Yahoo made a strategic mistake in doing the search deal with Microsoft and has “paid” for it ever since it in lost talent and revenue.

Earlier this year the company shuttered a bunch of mobile apps that were underperforming. The Next Web said that Yahoo’s Asian Foursquare lookalike service Koprol is one that may also be in jeopardy. Undoubtedly there will be other Yahoo products that suffer or are entirely shuttered in the forthcoming reorg.

Whatever Thompson says next Tuesday it will be met with skepticism by the tech community, unless or until the attempted turnaround demonstrates real results. There have been too many Yahoo CEOs announcing too many comeback strategies over the past several years.

While Yahoo still has three of the top 10 US websites according to Hitwise, it has entered a kind of negative spiral that it may not be able to escape. Its value as a company and a brand has steadily eroded.

The recent layoff notices have no doubt created a kind of numbness internally among the employees that remain. They’ll be working under conditions of stress and uncertainty — not the kind of upbeat atmosphere that fosters creativity and innovation.

Stock image from Shutterstock, used under license.

]]> http://searchengineland.com/yahoo-in-a-fight-for-its-life-117618/feed 5 http://searchengineland.com/yahoo-comfirms-2000-employees-getting-the-axe-117310 http://searchengineland.com/yahoo-comfirms-2000-employees-getting-the-axe-117310#comments Wed, 04 Apr 2012 14:01:27 +0000 Greg Sterling http://searchengineland.com/?p=117310 After several days of rumors, first reported by AllThingsD, Yahoo confirmed this morning that it’s restructuring and laying off 2,000 employees:

Today, the company will begin the process of informing employees about these changes. As part of that effort, approximately 2,000 people will be notified of job elimination or phased transition.

Yahoo! expects to realize approximately $375 million of annualized savings upon completion of all employee transitions. The company currently expects to recognize the majority of an estimated $125 to $145 million pretax cash charge relating to employee severance in its second quarter financial results. The company may incur additional charges in connection with this action . . .

Yahoo currently has about 14,000 employees. The company hasn’t indicated where the axe will fall. However AllThingsD’s Kara Swisher (based on her inside informants) speculates that layoffs will be across the board but hit several areas in particular:

The layoffs, which will touch all units of the company, are expected to hit hardest in the product division, which is headed by Blake Irving . . .

But the fate of two key parts of the soon-to-be-blown-apart unit — Yahoo’s advertising technology businesses, Right Media and APT, and its search business — is still being contemplated . . . Also set to be hard hit are Yahoo’s local businesses, as well as its marketing and research divisions . . .

Swisher further speculates that current Yahoo search chief Shashi Seth “is likely to run consumer products,” which will house whatever remains of Yahoo’s search business. It’s pretty clear, however, that whatever efforts Yahoo had been making around search innovation will be greatly diminished now if not entirely eliminated.

We’ll have to wait to see what remains of Yahoo after the dust settles — but it’s looking like not much. Oh the humanity.

Public domain image via US government archives. 

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• Yahoo, Microsoft Close Search Deal
• Yahoo, Once King Of Keyword Research Tools, Now Recommends Others (Including Google’s)
• Revisionist History: Bartz Claims Yahoo Was Never A Search Engine

At AllThingsD today, Kara Swisher is reporting that Yahoo is planning substantial layoffs as early as next week, with a company restructuring to be revealed the week after that. Swisher, who’s been correct on things like this in the past, mentions “a half-dozen sources” in reporting on Yahoo’s impending plans.

Of note for Search Engine Land readers is the discussion of what might happen to Yahoo Search. AllThingsD says that Yahoo has been in talks with both Google and Microsoft.

“[Yahoo CEO Scott] Thompson and others are still trying to figure out how to dispense with its ad technology org and, potentially, its search business. He has been in discussions with both Microsoft and Google about this, although there are other possibilities, too.”

One of those “other possibilities” appears to be Yahoo holding on to at least some of its search business, which AllThingsD says could be rolled into a “global media” division with Yahoo’s communications business.

Yahoo got out of the core search business when it outsourced its search results to Bing in August 2010. That 10-year agreement calls for Bing to power Yahoo’s search results and Microsoft’s adCenter to handle self-service search ads (while Yahoo continued to service “premium” advertisers).

Former Yahoo CEO Carol Bartz promised that Yahoo would “continue to innovate” on the user interface/experience side. While there have been a few changes here and there, Yahoo’s share of the U.S. search market has been sliding consistently.

So, while my headline asks if the final nail could soon hit the Yahoo search coffin, I’m sure Danny Sullivan would argue that it already happened three years ago.

Yang co-founded the company in March 1995, and has been on the Board of Directors since. 17 years later, he has officially stepped down from its Board of Directors and all other positions with the company. And he has done so effective immediately. In addition, he stepped down from the Boards of Yahoo Japan Corporation and Alibaba Group Holding Limited.

This news comes only a couple weeks after Yahoo announced their new CEO Scott Thompson.

“I am grateful for the warm welcome and support Jerry provided me during my early days here,” said Scott Thompson, Yahoo!’s Chief Executive Officer. “Jerry leaves behind a legacy of innovation and customer focus for this iconic brand, having shaped our culture by fostering a spirit of innovation that began 17 years ago and continues to grow even stronger today. Jerry has great confidence in the future of Yahoo!, and I share his confidence in the enormous potential of Yahoo! in the days ahead.”

As for why Yang is leaving? He told the Yahoo board:

My time at Yahoo!, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life. However, the time has come for me to pursue other interests outside of Yahoo! As I leave the company I co-founded nearly 17 years ago, I am enthusiastic about the appointment of Scott Thompson as Chief Executive Officer and his ability, along with the entire Yahoo! leadership team, to guide Yahoo! into an exciting and successful future.

Yang replaced Terry Semel as CEO back in 2007. Then a year later, in 2008, Yang stepped down as CEO, leading to Carol Bartz becoming the new CEO in 2009. Now, in 2011, Bartz was ousted and eventually replaced with Scott Thompson a couple weeks ago. Now we learn that Yang resigned completely from Yahoo.

To read the full release, see Yahoo’s investor site. Also see a special recollection of Yang’s early days helping marketers, in this story on our sister-site Marketing Land: As Jerry Yang Steps Down, Remembering The Yahoo Priority Queue.

Related Stories:

• It’s Official: PayPal President Scott Thompson The New Yahoo CEO
• Yahoo’s CEO, Terry Semel, To Be Replaced By Jerry Yang
• Jerry Yang Stepping Down As CEO; Resuming Chief Yahoo Role
• Confirmed: Bartz Out As Yahoo CEO
• Autodesk’s Carol Bartz Named New Yahoo CEO; Sue Decker To Leave As President
• Yahoo CEO Jerry Yang Grilled By Congress On China, Offers Apology
• Jerry Yang & Friends Called To Testify On Chinese Dissidents Case
• Yahoo’s Jerry Yang Donates $75 Million To Stanford University
• Insurgent Yahoo Shareholder Carl Icahn Seeks CEO Jerry Yang’s Ouster

In appointing Thompson, Yahoo is choosing a leader with a deeper technology and product background than prior CEO Carol Bartz who was abruptly terminated last September. In the interim Yahoo CFO Tim Morse has been serving as CEO.

Not going to sell itself now

There had been an expectation that Yahoo was going to sell itself or a significant minority stake to a private equity buyer or another company (perhaps even Microsoft). However the appointment of Thompson would seem to contradict that scenario. (Update: Yahoo Chairman Roy Bostock said in the Thompson press release that the company was still considering a sale of assets.)

Thompson was PayPal’s CTO prior to being named president. Before that he worked for a technology subsidiary of Visa. And before Visa he was CIO of Barclays Global Investors. The Yahoo board undoubtedly likes Thompson’s resume, which offers a diverse mix of skills and capabilities.

PayPal has been eBay’s most successful business unit of late, outshining its parent. Thompson’s departure from PayPal will be something of a blow but probably only a temporary one to the payments platform, which is seeking to establish a leadership position in mobile.

The larger and more important question is whether Thompson has the capacity to bring new vigor and focus to Yahoo, the company and the brand — both of which badly need innovation and energy. Another question is whether he’ll seek to bring in his own team or do any sort of reorganization. Numerous personnel changes and reorgs over the past few years have been damaging to Yahoo morale and momentum.

Confronting a range of challenges

Thompson and a renewed focus on product could help stabilize Yahoo. But what we might call “structural” changes in the online ad market (including the rise of Facebook and Google in display) have perhaps irrevocably eroded Yahoo’s once dominant leadership in its bread and butter segment: display advertising. Thompson is also going to be inheriting a search deal that has underperformed and failed to live up to revenue expectations for Yahoo.

What Thompson is not is an advertising or media executive. However current Yahoo EVPs Blake Irving and Ross Levinsohn can more than compensate in those areas, provided that they’re retained or stay, as the case may be.

Mobile is another area that Yahoo badly needs to focus on. While it had an early leadership position in mobile product development and advertising that has been entirely erased by Google in the past two years. Thompson’s knowledge of and experience with the mobile market may also be extremely helpful to Yahoo.

Does he have the right mix of skills?

I had earlier written that Yahoo needed to find its own version of Steve Jobs. That may be too much too ask. But perhaps in Thompson Yahoo will get a fresh start with a new CEO who has the right mix of knowledge, skills and temperament to pull the company out of its protracted slide.

Below is a video from the 2009 Web 2.0 conference in San Francisco at which Thompson spoke about PayPal and mobile payments.

Postscript: Yahoo has officially confirmed Thompson’s appointment as CEO. Yahoo Board Chairman Roy Bostock also indicated in the press release that the company is still considering a sale of some of its assets:

“Scott’s primary focus will be on the core business, and as CEO and director, he will work closely with the Board as we continue the strategic review process to identify the best approaches for the Company and its shareholders. As part of this process, Yahoo! is considering a wide range of opportunities for the Company’s business, as well as specific investments or dispositions of assets,” added Bostock.

Postscript II: Now a couple of reactions from financial analysts who cover Yahoo. They’re consistent, seeing Thompson as a positive hire but expressing some concern about his lack of experience with digital advertising.

Mark Mahaney, Citi:

We Are Marginally Positive On YHOO’s CEO Hire – Mr. Thompson was with PayPal for the past five years – he has been CEO of PayPal since 2008 and before that he was SVP and CTO of PayPal . . . We believe Mr. Thompson has strong technical and organizational skills (like Carol Bartz) and should bring that rigor to Yahoo!. His track record at PayPal was excellent. However, we are somewhat concerned that he does not have strong media/advertising experience, which we believe Yahoo! needs, given the structural issues surrounding the company’s Search and Display initiatives. And by selecting Mr. Thompson, Yahoo! is explicitly pursuing a Growth strategy, whereas we believe a Value strategy might be more appropriate.

Ben Schachter, Macquarie Capital (USA):

We’ve always been impressed with how Scott Thompson led PayPal, and believe that his experience and track record of execution rank him amongst the Internet sector’s more capable executives. YHOO should benefit from Thomspon’s leadership, but we must admit that we find the appointment somewhat surprising given Thompson’s background as a specialist in the online payments/technology space. YHOO has been in the midst of an identity crisis, unsure of its place on the Internet. We look forward to seeing how Scott defines Yahoo, but at this very early stage that vision remains unclear. All else equal, we would have preferred to see the Board hire a candidate with deeper experience in the online advertising/media space, but Thompson could surprise by defining and executing YHOO’s vision in an unexpected way.