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.

The offer a somewhat cleaner design, with tabs showing related content and navigational filters that allow sorting by date and related searches.

All the changes discussed in the Yahoo Blog post aren’t live for me but they appear to be generally incremental or modest improvements. Most of the changes appear designed to provide suggestions for related searches and generate additional search volume accordingly.

Last month comScore reported that Yahoo’s US market share had grown by 0.2 percent. It’s basically “stable” or “stuck,” depending on your preference.

Bartz’s legacy is cost containment; and her chief “accomplishment” is the Microsoft search deal, which Wall Street wanted but which sent lots of engineering talent out the door. While the search alliance has generally been good for Microsoft it has not yielded the anticipated dividends (literally and figuratively) for Yahoo.

Low Employee Approval

The task of both chief executives was to turn around a their respective enterprises. Obama has not been able to do it and may face an electoral ouster next year. And after a number of flat or down quarters Bartz was removed over the phone yesterday. That followed several months of rumors that she would be fired.

Bartz’s employee approval rating had sunk to 33 percent, according to Glassdoor, Obama’s numbers are in the low 40s. Among the Yahoo-employee comments on Glassdoor,”execution” failures were cited as a major reason for disapproval of Bartz.

Bartz confirmed the termination herself (from her iPad) before Yahoo itself did in a press release. People are now reading between the lines of that press release for signals as to what Yahoo may do next. The particular line drawing scrutiny is Yahoo’s Chairman Roy Bostock’s statement, “We are committed to exploring and evaluating possibilities and opportunities that will put Yahoo! on a trajectory for growth and innovation and deliver value to shareholders.”

Carve It Up, or Sell the Whole Hog?

That statement, together with the fact that CFO Tim Morse is now the acting CEO, is being seen as a suggestion of a sale of some or all of the company. However a carving up of the company’s assets seems less likely than a sale of the entire company. But that in turn seems less likely than an attempt to find a new CEO and try again. A merger of AOL and Yahoo would probably be a disaster.

Bartz’s ouster has prompted many to say again that Yahoo made its first mistake by not selling whole hog to Microsoft for $45 billon several years ago. Many people also believe that selling search to Microsoft was a mistake. I agree, but Bartz followed a certain kind of cost-cutting logic in doing that deal as well as other “outsourcing” deals at Yahoo.

Others are speculating about who the next CEO might be or should be. GigaOM’s Om Malik likes Jason Killar (of Hulu) as a strong, product-oriented CEO. Yahoo is bidding for Hulu. Mike Shields in Digiday lists numerous current and former interactive and media company CEOs as possibilites (including Michael Eisner), arguing that Yahoo’s next CEO should be from New York and fully position Yahoo as a “media company” rather than a Silicon Valley based tech company.

Yahoo Needs to Find Its Steve Jobs

Yahoo needs a master marketer and visionary to help focus and market the company to employees, investors and consumers. Effectively it needs its own version of Steve Jobs.

Yahoo has already given co-founder Jerry Yang a try, without success. And finding a person with the leadership skills, charisma, vision and overall capabilities of a Steve Jobs is impossible. But if it is going to regain momentum the company still needs someone almost as inspired to help lead the company out of the wilderness.

Yahoo is still a powerful brand with considerable traffic and assets. The company has not fallen as far for “regular people” as it has for technology journalists and insiders. If it is going to avoid being carved up and “sold for parts,” the company will need to find the right CEO who can reinvigorate the company, create a product vision and restore growth. Yahoo isn’t going to get more than about one more chance to “get it right.”

Postscript: Kara Swisher at AllThingsD has compiled a list of potential CEOs for Yahoo, including names such as Facebook’s Sheryl Sandberg, News Corp’s Jon Miller and Microsoft’s Yusuf Mehdi. Most of the candidates, however, are unlikely for one reason or another.

Postscript II: From the WSJ: “One of these people said Yahoo is open to selling itself to the right bidder.”

All Things Digital reports that current CFO Tim Morse will take over the CEO spot on an interim basis.

Speculation raged earlier this summer that Bartz’ days were numbered when Yahoo announced weak Q2 financials.

She’ll be remembered for brokering the Yahoo-Microsoft search and ads deal that effectively put Yahoo out of the search engine business (aside from display; Yahoo’s search results have been powered fully by Microsoft).

We’ll have more on this as information becomes available.

Postscript: Yahoo has now confirmed Bartz’ departure. The company has issued a news release saying that Yahoo’s Board of Directors removed her from the position, and appointed Morse as her interim replacement, effective immediately. There’s also a new, six-person Executive Leadership Council that will help Morse with day-to-day management and contribute to “a comprehensive strategic review that the Board has initiated to position the Company for future growth.”

Roy Bostock, Chairman of the Yahoo! Board, said, “The Board sees enormous growth opportunities on which Yahoo! can capitalize, and our primary objective is to leverage the Company’s leadership and current business assets and platforms to execute against these opportunities. We have talented teams and tremendous resources behind them and intend to return the Company to a path of robust growth and industry-leading innovation. We are committed to exploring and evaluating possibilities and opportunities that will put Yahoo! on a trajectory for growth and innovation and deliver value to shareholders.”

On a related note, Glassdoor — a site where employees can share information and opinions about companies anonymously — says Bartz’ approval rating was at 33% for the 3rd quarter of 2011, and had dropped as low as 24% during Q2 (based on those employees who chose to speak out on the site).

For more background on Bartz’ tenure at Yahoo, see the related articles listed below.

Google’s latest earnings report had Google’s headcount at 24,400 full-time employees as of December 31, 2010. Adding an additional 6,000 employees will put Google at over 30,000 employees.

Alan Eustace, Google’s SVP Engineering and Research, said “I am excited about 2011—because it will be our biggest hiring year in company history. We’re looking for top talent—across the board and around the globe—and we’ll hire as many smart, creative people as we can to tackle some of the toughest challenges in computer science.”

Meanwhile, Yahoo is laying off an additional one-percent of their staff today. Yahoo told AllThingsD:

The personnel changes we are making are part of our ongoing strategy to best position Yahoo! for revenue growth and margin expansion and to support our strategy to deliver differentiated products and experiences to the marketplace. We’ll continue to hire on a global basis to support our key priorities.

Today’s action impacts approximately 1% of the global employee base.

Related Stories:

• Yahoo Search Engineers, Google Wants To Hire You
• Amongst Google Layoffs, Google Continues To Hire
• Google Changes Hiring Process To Meet Job Opening Needs
• Google’s Hiring Again
• More Yahoo Layoffs Coming Soon
• Updated: Yahoo Layoffs Happening Now
• Search Biz: AOL Spin Off, Yahoo Layoffs, Google Losses, IAC Spoons …
• Yahoo Layoffs Happening Live Online
• Yahoo Laying Off About 600 Employees
• Yahoo Cuts Positions, Shifting Search Emphasis

Mayer joins the company as its Chief Strategy Officer, and will oversee sales, marketing, product development and operations. Ben Wright, another ex-Yahoo, is also joining Trada as its VP of Service Delivery and Marketplace.

For Mayer, this latest position expands on a lengthy career that’s seen him work at several of the web’s early search engines. As Danny Sullivan detailed last summer when Mayer left Yahoo, that career began at RealNames and included stops at Inktomi, FAST Search, Overture and eventually Yahoo. He was one of Yahoo’s most public search employees over the past seven years.

Trada’s paid search marketplace matches advertisers and its community of more than 1,000 freelance search marketers. The company formed in late 2008 and launched its marketplace publicly last March.

Reuters is reporting that most of the cuts affect about 600 employees, or 4% of Yahoo’s workforce. The layoffs, as expected, will come from Yahoo’s product division.

This week’s rumor mill had suggested the layoffs would hit about 650 people, or 5% of the Yahoo workforce, so it appears that the actual numbers are slightly lower. Rumors that circulated a month ago pegged the cuts at between 10%-20%.

Yahoo confirmed today’s cuts in a statement, saying they’re “part of our ongoing strategy to best position Yahoo! for revenue growth and margin expansion and to support our strategy to deliver differentiated products to the marketplace.” Yahoo says it will continue to hire worldwide “to support our key priorities.”

This is the second time in the past three years that Yahoo has laid off employees during the holiday season. An estimated 1,500 employees were let go in December 2008. Last year, Yahoo reportedly compelled employees to take time between Christmas and New Year’s Day by using up vacation days or unpaid leave.

Postscript by Barry Schwartz: AllThingsD has a copy of the internal memo sent to Yahoo employees over the 4% layoff. Here it is:

Yahoos,

I want to share some tough news with you. Today, we began notifying some Yahoos that they will lose their jobs. Most of the reductions will come from the Products org and, when completed, will affect about 4% of the company.

I know this has been rumored for some time. It’s disappointing when things like this leak, and it certainly doesn’t make it any easier for anyone involved. This was a tough call, but a necessary one. We need to make these changes now to ensure that Products is structured and running the way we want as 2011 begins. And that means we need fewer Yahoos in some areas, and different types of Yahoos in others.

There are several reasons for this. First, we’ve found a lot of duplication in work between Products and the regions. Second, it’s no secret that we’re cutting investment in underperforming and non-core products so we can focus on our strengths (like email, the homepage, search, mobile, advertising, content and more). And lastly, we need to get the Products cost-structure in order so it aligns with our development plans for next year and beyond.

You’ve heard me say before that I didn’t come to cut Yahoo! to greatness. That’s still true. This decision is about more than cost savings. The changes are meant to get us into a position so we can invest more in the kind of products and technology we know we need to be successful. The process that begins today–along with Blake’s past org changes and new Products operational plan–helps to get us there.

It’s never easy to say goodbye to Yahoos we know and work with, especially before the holidays. Please know that we’re helping those affected with severance pay and benefits, plus services to help them find other jobs.

One last thing before I go: It’s important to put this in perspective, and remember that we’re making good progress on our turnaround. Margins have expanded. Revenue growth has stabilized after a long period of decelerating trends. Product rollouts are accelerating as we modernize our infrastructure. Our Search alliance with Microsoft continues on schedule, and more.

We’ve got a lot of potential, but there is still a lot of work to be done. Let’s stay focused and not lose sight of that.

Carol

Yahoo reportedly didn’t receive any formal offer or proposal, however, so it’s hard to know how serious any of this is or was. The article goes on to document some of AOL’s ongoing challenges in the market, though it has had some successes under new CEO Tim Armstrong.

Meanwhile the Wall Street Journal is reporting, consistent with earlier speculation, that Yahoo is about to cut about 5 percent of its workforce, or roughly 650 people:

TechCrunch believes there will be a 20% layoff across the board, although Yahoo denied it. Kara Swisher said it is more like 10% and only impacting the product group at Yahoo.

The product group has about 6,500 people, so a 10% layoff would mean about 650 people out of a job. This is as opposed to laying off 20% of 14,000 people, or 2,800 people.

Yahoo told TechCrunch:

Yahoo! is always evaluating expenses to align with the company’s financial goals. However, a 20% reduction in Yahoo’s workforce across the board is misleading and inaccurate.

So there is no doubt layoffs are coming and they will be big, but how big?