MicroHoo: Boon Or Bust For Yahoo?

Yahoo has had a morale problem for some time, according to anecdotal reports from company insiders. Jerry Yang and other executives at the company have been trying urgently to fix that and restore the company’s former, dare I say it, esprit de corps. I had been told by one Yahoo engineer informally last week that the most recent attempt by Jerry Yang to rally the troops (via video) conveyed a sense of fatigue and near defeat. Of course that’s just one perception, but it’s reflective of a mounting cynicism and detachment among Yahoos.

The recent bid by Microsoft for the company raises questions about whether it will create more disenchantment and send more people out the door or whether it ultimately represents a new opportunity and new direction for the surviving Yahoos. Two pieces from Wired and CNET capture the mood inside Yahoo.

From Wired:

One Yahoo engineer confessed his apprehension at trading in his Sunnyvale purple for Redmond’s muted hues this way: “The shareholders will be jumping for joy. But, for us, this is the frosting on a giant double-layer suck cake.”

From CNET:

“Most people want to win and something bold needs to happen, so this could be the catalyst to make that happen sooner one way or another,” said a source inside the company. “Either Yahoo steps up and does something bold, or Microsoft takes over. If Jerry’s smart he could use this as a rallying cry.”

I was told on Friday by a former Yahoo executive who had left that “People at Yahoo, despite the recent problems, still see themselves as innovators” and that Microsoft “isn’t looked at that way.” Such attitudes put Microsoft in a tough spot. The company needs to provide reassurance to Yahoo employees that the deal will help them and their company regain its former glory – or exceed it. But before a formal acceptance of the company’s bid, it’s tough to address Yahoo employees directly.

Yusuf Mehdi, senior vice president of strategic partnerships for Microsoft, told Search Engine Land last Friday that the company would put incentives in place to retain Yahoo employees and particularly engineers.

A prolonged fight for control of the company – a hostile takeover bid – potentially exacerbates the problem of generating goodwill among Yahoo rank and file. And it appears that Yahoo is trying to resist Microsoft. A Microsoft takeover may ultimately be inevitable, however, given the company’s potential capacity to outbid everyone else, and its willingness even to borrow to do so.

The question of whether the two companies’ cultures will mesh or, perhaps more accurately, whether Microsoft can preserve some cultural autonomy for Yahoo, will be a central issue in the potential future “integration” of the two entities. Yahoo itself had some trouble integrating Overture for a couple of years. Integrating Yahoo into Microsoft will be orders of magnitude more complex.

The ability to retain Yahoo employees and make them feel positive about the “new opportunity” will be at the heart of whether this marriage will be happy and ultimately successful — or its opposite.

In a related article, the New York Times writes about some of the potential recruiting challenges that might confront a combined Microsoft-Yahoo.