Case 43

Yahoo~

III the Jall of 2003. Yahoo! begen to Il.dd tools to, help Inlerncl surfers make beuer 5~.dc-by-li.idc ,oornpl:lriwJ1$ of products aClCQn:lingto criteria such as brand. price, lind features, The firm, based in Su.nnyvale, CaHfomia, W::IS re-

v<ln:lpin_g its online shoppin,g services to mJike ia eas ler for

users to fmd merchandise. Yahoo!'~ latest .move was pillIl! of (he basic ,~rumtegythat CEO Terry S. Semel has OCeIl punnlling to build the Web site ][It.o .. digital Dis[leyland, 11 souped-up theme park for Ihe lnternet age, His goal is to Ibal

]11<1.)1 . still fall far below the .a1l-liIrnc hig,h of $127 l:)il][ol1l that l( boo. climbed to in earl" 2000, bat i~:s, currearprice-earaings ratio of 79bcll~ that of '[lie highly saecessful ,eBay and is triple thai: of heavyweight Mlcroscft, Yel th ere are some naggun.,g questions about Ya-

capitalizatloll.

hoot's fUlllre.WHJ Semel be able to maintain the rnomelll·

that he has .~~nernlC.d~ Can Yahoo r coruinue to make gllin~ against established n.v,a]s sueh liS AOL. MSN • and Google? Are Semel's Olmbi~ions to make Yllhoo~ a digital
'[111[1

build the Yahnol si~,e iruQ a, self-comaiaed

1Is(i;hie o'fi'erlng:s

world of irrewould grab an.tI keep surfersglueJ

m take over '~e

theme park realistic? IR'em alklin 9 lil'nle C !.!IiltJUre U~ lTIilllLy orner [lI1l.Crn'c(fi:rm.s.
WTS

to il. [or hours ,aTa lime.

When Semel was perSuaded by Yahoo~ co{oliIlider

Jerry YIlii,g to CQ:m~ OLl~.of renremsnt

Yahool had: am:ru:ted visi-

Hmmdering firm, he fared am unenviable task, Adverti sl ng r-evt:lIues !!IIthe Internet icon had been pll1l'r11l1leling, ~ead· illg to ::IpreC'ipitous decl lne in ~t:s sroek value. Semel replaced IDe well-liked Timothy Koogle who bad be~1l

by d!gve~o'ping 11 silt: 1ih1l[ would offer iI variety of servicesfor free, Those who logged on were able t:o obtain, arn.orng ether 'thing~. tlIe latest sroc'k quotes and news headlines" Theil mil l[\eHed on online advertisi n~ fnr ,:IS

pushed aside

by the compa.ny's oorud, To fllaltJe tltiillgs

mlJcb .0i.S 90 peroe"Jlt of its revenue. Yahoo1 fOllnde;; David Filo flindlJerry Y~n.g were con1idelil.t that advertisers would
eostince to. ~ay in. mtlcr re rciic:h its you ng;eJjand, tcchn.o· JogicaJ:Jy S;JiVvy surfers. ][1 (act, Yanoo! ofk:n camsacross lIS arrogwn. to most of its advertisers 0'31 the height of the Net bubble, ]ts nmirudle. recalled Jefil' BeU. a mnrksting vlce-president at D,aum~erChn'8Ier, was "B~y Ol!llf stuff, and ssut up.'':! By the s~ri['lg of 200 L Yahoo! 's .advemsing lievenue wasl'ilIling precipi~O'I.!sly. its stock was IQsing most of its vahle, and some observers were questiolil:ill,g the firm's business Model, With me collapse of th.e dot-com adverrisers. lila finn's reveJ.litit:was down. by almost 11 tnirtl from
(he p.reviou~ year, Semel was asked to help turn the ffiml
arol!llld., bu,t he agreed to take on lihe task on Iy after Koogle

worse, leery employees quickly SfLW that Semel, a retired HOUywooCl exec lIlivCl, did net mllil.lyknow much about blternet l'eChno~.ogy and Iooked Miffl.y out of place at Y:I· hool's playful, eg:a~ itaeian heedqaartets.

Two yean; after taking control as chairman ;1JU;! CEO. Semel has si]enced the dmllbters. During ~he short time h~ has been there, Semel has, done not!uflIg l>e&~han remake t the culture of the qu nlltessell.~i:!:1]'l'Iternel company. The sPOllt~lleilY that drove the firm's decisions duri.ng its go-go days has been replaced by a. strong sense of order. By impof.ing his butrnned-down mafmgernem approac.h
o[IIl!

Yahoo!,

the 60-year-old

hall em.gi.neered one of lfue most

remaskable

revivals of" beleaguered

dot-com,

Once llaroJYl.ied by management gridlock <lnd wriuen off ~ another QV'e:I'hyped has-been, Yaltoo! has been rearitLg back" The compilllllY earned $43 .miUion on

had agreed. to ~tep d.Qwl'I all chauf'm.~l'1_Semel's style i1'I stark contrast lathe relaxed, laid-lD<l,{;l appm:!ch
.Koogltl. Wi~h Kooglc om of Ih~ way. work on replacing Yarnool'sfreewheelll1g

wall

of
1:0

$9S3miUionil'l 2002, c~m~ared 2(1)1 on $717 I'I'lilliO:f1I in sales. And Yanoo!'s .n10melJltIJrn is growing. Analysts predicted tha.t prolhs, for 2003\1l'ould qll,~dJl'Uple.to more than $2.00 million. whlJe ssles would climb by :330 percent, ro Sl ,3 billion .. "Whm he has done ]$ just phenomeaal," sm.itl Barry DiUL:T, ("EO of USA Interactive, :!I Y:dlOO t competitor, I, Exlhibins I lind 2 show Yahoo! Inc.s income statement and balance ,sheet for diu~

of with a S9'3 million los~·in

re.'eIlIl.IlS

Ser.ru:i. started

cu~ture with a

much more deLiberote sense of order, The ch~J'Igeslh;!l Semel has made m;!:ji110t 'he evident to i:he casual ebserver, VisiwrsU) Yahoo!'s heildq!.l<lJ1e.l's
wiH stiJi see Uile purple. COWUI'l. the lobbY, be confronted witH. acres of cubicles, and me~t wor"!s clod in jeans,
compantes

ye:rrs 2001 W 2Dtln Sel'llel's !1eW st[',;:lJte.gy Yahoo! ha~ ,also been gainfc¥r ing fans on Wall s.~l\ee,tand stoking new fears of a mini" In~etne~ oolbb~!C, The ccmpany's shares have soared 200 perol::nt in the Jl31>t eight months ((;I $26. Yalll,oo! market 's
Th~ case WUlipl'ejJJRIlI or Pl7l;ifCl5_ JikII1[]J SbilI1m~ of MI~tJi:.g:L~ S!:;!I~ 'U~l"er;I!\)",1It~~ case l!ia~ d""l0!~ {"",n p1Ibli~hed ~_~ as. a basts for elass di!lC~~s.:iamr;Btl1.o:'r IIHI!!tG illlfi.lrale ejlbi:r ~~ti.\IC IIr il)i!lfccti'll: h:mtlll.lD8 (if all adl'fllii~O'!:II\II!! iil!:Ja.tO.i1. CQp~i:sh[ e ~004 J~o'fl81 ~])sCl<!l""_

But S erne I. 1:1IIIl~ dispE:nsedi with the h'y~ th.iIi Once: va!Jl1red: sUJ::.h as Yailloo! into the stratosphere. He moved swiftly l'O chop dow[I the 44bll5illless UIIits heinheritBd to 5, strippillg m,:](IUY executives {:If petpmjects .. He

didnot care much fOJ rhefirm's, "cubicles-only" policy, finally localjl~g. his own office 111a cebe adjacent ro a cooterence roOo.m he eoutd m~k:e phone calls in private, so. Semel has even chang.edl Yahoo!' s old freewheeling
approach ro decision making, WhE'n Kooglc
W'a!;,

in charge.

executives

would brain:swmI h.liIlilches wi~h newmitiarives,

fOE

ofteflfollowi ng UIJ.der Semel. managers

hours

9012

Case 43

Yah ool

Exhibit 1

YahoD! 1[lIlome St,Hement IAIII fig ures in tlious,andsl

--

_:_",!_.

Periollil IEndi~QDecember 3~ 2,002 2Ll01

ZIl03 lio.ilil Rev',elj'UJ{!!

Cost of rsva nue Gross, Piro:l\i~ Operating expenses Re sa a rcn and developm e nt Sell~ngr genera!. and administrative Nonrecurring
Others Tate I o'p EWaftil'lg Dperaliin,g
HX pen SIl S

$1,,625,.097 358,HI3
1.2ijlEi.994

$:953,061' 162,8B1
791), 186 14!3AElS 537.34~

$717',422 157,001 560,4,21 1121),OaO 466,195 62,221 64.0B5 71S:,'IiBl

,t 1 5'6,270)
1

2.07,285

109.669
54,374

:21,'111!6 88,1138 9U:aB 178,225 178,2.25 71,290

(1,5511)

IllIJc,ome er Lo<ss

295.666 9'5,,158

Income from continuing operations Total other inccrne/expenses, net Earnings befoule interest and taxes Pretax. income Income' tax expense Minority inta rest Net income hom continuing oparatiens
Eflfe'ct of
,1li ccounti

77,138
~811,82.5'1

3M,SOl
31l4,903
147,,024

IB1.B25 1 110,963
Iltl93j

15;921) 2371879 231',879 S 231,B79

]06',935
(64, ~2tH

'92,788~
(92!7l38) S (92, 1&B),

n g c h a n'ges

IN',iiI: Inco'me
IN'B~lnea me Ap,plicabl e til Gtlmmolil Shares

42,S'115 42..8]5

The group sizes up

business piaru; to make sure all new projects hril1g benefits to Yahoo" ... cxilltillg businesses. "We need [0 work within a framework," said Semel. "If it's a free-for-all . . . we won't take advantage of tile'

have tomake formal presentations of any new ideas in weekly meetings of a group called the Product Council. Championed by Se.mel and his chief operating officer, D"flie~ Ro~ensweig.the Product Council ayplc11lHy ineludes nine managers from nll corners of the company,

happy the di.rec~.iJon there," said is age.r who requested .anonymity_.!

111

current Yahoo)

man-

R'ethi nlki n 9 th,e Business, 'Miodel Semel. begai1turoing'Yahoo~ around by wooing traditional
advertisers, making ge;s.mres to ad~'ertising agencies tbal had been ang,ered w.ith 'the company's arrogance during the boom. Traditional advertisers such as Ceca-Cola, General 1otor5, and the Gap have beeu flockmg LO Yahoo!'s sites, They say tlley have gra.vitilted to Yahoo! because: it has been using tcchaology ~l1:ltgoes beyond static banner' adlvel'thilllg, offering eye-cetchlng animation, vi:deos, and oilier rich-media formats. As a result of these efforts, Yahoo! generated more advertising n:vtl'iue tI1::mAmerica Online during th.e last year. Exhibit 3. shows Internet adverti~] ng reveaucs frem 19'98 to 2001But Semel does not want Yahoo! to [ely 011 advertls'ing revenues ..He 1;'8S been trying to add services thai. con-

strengths of Ollr company.")

There <liresome [adications that Semel's changes may already be starting to payoff. With the focus OIJ1di discipline that he has imposed on the firm, Semel appears to 'be making someprogress in gening Yahoo! to grow agail1.
Most: of the emp·loyee-s. wno have been anxious to. see' the
value of their Mock rise again. have begun to support Semel in hi~ efforts to remake Yahoo! "People don't always agree with the direction they're gc[[ing, but they're

Case 43

Yah ool

903

Ibhi b it 2:

Yal'!00 r Bal'ancl!!' :S11~ct

lA1il1fi

~lI!rn

il] 1hlllu!slImls)

..
I Assets

Ii:!Ufl'iem Assets
Cash snd cash
!!

q IJlva'l ents

s J~:Un:m
!595;!J71:1 28Z,415 1'J!a,777

S 3l0.912
463,2®4!
113.612 82,216 97101~fJ4

S 312,632
583,lH!n

Shon'-'te nn

~rllVe stm e nts

Net r8cewa bles

Other ,cum'!fU essats llOtall Cunrenlt ,Assets La n'g":le rm i nve stm ents

138,648
56,45B

1,721,U!l
1,452JEi29'

l,!l81}533
967.3if1D

Pro IP~

nv, p·~alilt a I'1d equ ~p,meflit

9M,:m7
371.272

GlJo(iwili Ilntangitl'le assets

I[)th ar <lIS!; sts

449.5]2 1,005.561 445,640

56,003 5,93']'654

131.648
19UW

415,225, 90;252
2'3,,22.1 2.7SO.1181

2.1,9il2

13,aSil
2,,379,346

Total

ASIH!m;

CUlITellllt Iliabflilies

.A,ccolJnu p~rvalble

Othe r C u rwlH'It liabili~ies

10ltllil CU~l'Ie~~ a'b illtli as U Lollig -term dlebt

515,51,8 ]92.1'1,8

276,313
136)5iDll

225.5416 ] 32,9i71

707,700

411,8l4

358,5n
23.8{16'

750,000
516

Othe r ~iab i!itill's

Deferred
IOl'lgl"WBrm Ili!lbiJity ch.llrges Minority intemst

72,374
37,478

84,540 31.5151

30,0[16
4l2.329!

lotaW ILiabi~i"ti,e~;

U)58,164 078

527,911
611

S,1DCkh:ul II e:rs' E,qu i~ Common :smck. Rela ined earnl n g.s; lreasurv stock Call1ita I SLJ rplas (lilh e Ii S;lrl ckhoJd sr iflquity l~m~ Stu c!klh,g.I':h;:1I' iEqt!!ty IN'et Til n 9ilJ~e Assets

581

2lil,386
~1159.900~

f7.iI.9!3l
jlI5S,9.Bal 2,43IJ~m
(1.oa;2~

100 . 3013,1
1.59,98131 2..007,410
'9;322

4;288,8,16
3,59B:

4,3&3.490

2.,262.270
1

SZ112.289

:S:1;75UOO

U61.0H 81,152,09B

SUIrle'1S

quires lime ~{1pm into place. Two former executives said Ltilal",,;he:[1 Semel look over, he was shocked 1.0 fi:nd out that Yahoo~ did not have the lechnology in place to ha!!dle ~llL'gi"g dernand for paid services such a~ online PO::CWl1-

would be willing to

~Jy

for.

OJ M:!,\l~eg:y mO:l re-

to

als He had ro crack down on me firm wwhip ililllo !>tmpe handle the addiiio.n of sud'! prerniu,m services,

Semel then ILISOO. fue deal-making skills ~hatmade him a lege no' illl the movie 'Imsill~ to land Clruci ill m;qHisilioillS
and partl1e~hiJls that could produce rich ncw revenues for

904 IExhi b,it J

Adllenising

Case' 43

'(OliMo! customers 5q!Jt:c.a1l!!: through Ihe turnstiles at Disllleyland in Anllileim. Instead or being an impartial [Our guide ro ~_ Web, Y<lhOQ! should be able to entice surfers to stlly Ill5lde us walls as long 115fJOssib !c. This vision (OJ Yahoo·~ represented 11 drastic change from Ghe model developed b)' lts origjnal fOl!lllldiers. FolD and Y<rng, Koogle had [et his executives deve!O'P verious offerings that opermed relatively independently, Managers had built up their own niches wound ilit: main YahOQ~site. No one had thought about developing the portal as a whole, much If'S:!> how the varieus bits and pieces cOlllcl work together_ "Manager.; would beg, borrow. and stem from tlte llIetwQri;; to help their own properties," said Greg Colemcn, Y",hoors executive vlce-presldent for media and sales. ~

IntJei~[Ier
hven!les

•
Y€lar $IBimolllis

2.002:

:mm
2lJOO

S6.3
],,5

1999
1998,
StilE",,,,: Ii'r1t1:"'''I .......

8.5 4.1 :2:.1 ''.=C''''1~

Ilu~u.

[nl=~'M: A.d"crtI&~

Semel has
Yahoo ~The buyout of Hotlobs.corn in 2002 moved Yahoo! into the onli ae job-hun ti ng buslnesa, adding $80 ml 1lien to the firJn'~ revenue, Semel also rnnde a: deal \\\.'ith phone gia!:ll SBC Comrnunicetions to launch tile Jioo into the bus .iness of selling broadband aCoCJ;S to millions of Ameri~lIn homL:~. Under lhe.tc..nns of Ihe' deal. SBe pays Yalhoo. about $~ of .$40 1:0 .$60 customers pay each month for service. Y:lhoo!'_" revenues 'from thls deal were pmjeCl.ed 'to jump from $70 milllon ill 2003 to $ ~25 mil-

been

plIsltinil to stitch it

rul W.go;::ffie'r; e H

has demanded [hat YIII:uJor'~ myriad t)r offerings from email aCCOIIIT1Jt.~ sDOC'kquotes to job ~.i8ting.~ interact wllh to

each Ol[le.r. Semel has called this cOIIIC'~pl "network optimization"nnd regards this cosa key goal for his fum. To
make this concept work. every ini'tlati.\'c ~houl;J 11m onlv make money but also feed Yahoo ! other businesses. Mo;t 's of 'the foc-us of the Product Council meetings has. been on the paillstaking job of ,e-s[abli~hing lhese interconnections between the van O1,:tS services lhm ::r.re offered .on the slte. With these constrai nts, it has become much harne r

me

lion in 2004.

Of all or Seme I's deal s, none shines 'nighter than the ()i11!"Inersrupwilll Overture Services, which is expec ted [0 add $230 million ro Yahoo!"s revenues in 2004. The COmnear Yabool's search TCSUUS. 1.1 rosiness known as "paid search," ]f a user searches for "cookware," fur instanee, advertlserrs mngillg fr~m T\!IaC'y's to Sur La Table are able to bid i.o showcase their 1m [lear the results. Overture delivers the advertisers and forks over roughly two-thirds of the revcnue. While Yahoo] had debated such a parmers!hip for years under Koogle, Semel managed to pu:~h it through in less than ;t year. By makjn,g such sman dea~s,Semel has oomlt Yahoo!

fo:r new projects to gel appoo\'ed. Semel has been deermined to bave any new offerings lied j n with wl"la:t is :iiIready bci.n~ ol:fo.:red 0.11 Yahoo! He claims this makes Ih~m
easier for eu stomers '10 find, increasing their chances of success. Of the 79 current ideas for premium services at ~me stage (If pl:ln~illg inside Yahoo], onl~ a fe-w are

panies have teamed up to sell ad vertisements

likely

ill

be Iaunehed over the:next year.

imo a sue thatcan offer surfers mJny differem service», seve:a.l of which require the customer to pay IiJ small fee.
The iden has been DO coax Web surfers to spend hard cash o.n everything from digita] music and online games to job li!\tLngs and premium e-mail accounts wtth loads of ex.ira storage. Fe~s from such offerings already .U;COU1U for abou] one-trued ofY;;tllool's annual revenues. Semel hopes

on broodband. Us IllliaiiCe with SBe Commullic'U.ioJ1S alIows .it 10 reach only about a [rurd of the cOllmry. MSN's
deals with VL"1izon eomm~niC'alions and QWCM -Communications give it farg reater access In customers, arou nd the country. Semel's efforts tn lund other broadband deals

A key demerit of SCluers strotegy to bl!l:i1d Yahoo! into [I digital Ib~mc park also lies inni.s ::lbiLdy to push customers into broudbaad, lot, of the services that he is banking on, such as musk and interactive g:~:me,~.are data ,hogs that appe~1 mostly to surfers dul't have high-speed Ii.nh. Ftm:tu:m1ore. since broadband. is at ways, on, mrlny of Yahool's cusromcrs arc mOre likely to be ling1::ri[f,g in Semel's theme park forhuurs 011 end. dAy after day. "The more ti me yoo spend an Yahoo r, the more apt you are to sAlllple' both fre-.e- and paid services," he ~aid_7 nut Yahoo! is not well pesitioned to push its services

truu

tion .from suea paid services will rise w 50 percent of (he firm's revenues duri'ng 2004. "We the
colnribu

planeed a. lot o·fseeds a year and a half agO', and some are begi nn ing 1Ogrow," he said, i

An IllI1terr'n~tThem e Palrik In order to build upon the Joundanen iliat lim has a]re~.dlJ'
laud, Semel envisions ooiMill1lgY:ihoo~ into a dligitaltheme park where Web surfer would log on ttl YaI111o!'~ sill! like

have come up short, 111LS represent a seriQu~ drnw~ can back, g;i~'ellthe fm,gile nature of these par!Jlen;hips. If sse concludes Lhfli.tne Yahoo! brand docs not dlllw in suflicient
customers. il could cut Yahoo ~ out: and save itself milICons_

If Semel calli overcome these challenges and pull it ott, the new Yahoo: could become mil: uf the few endur-

ease 43

Yahoat

005.

ing powerhouses

011 tile Internet. nused OIl aaalysts' predictiolls. custemers who pay for i.LS services could more than tripLe in number, to 10.0 mjllion in 2005 from th~ 2.9 miU1011 that it p.r,e.'SlI:nl1y d:!aws. TIns oould cause profits to SlOW' 75 percent. over me next two years to $350 million, and sales ~ol1id surge 30 PCiI'CE>lIt during the same period to I .7 bi lhon, "¥ahoo'llas emerged 11.~ a dllrobl e digita~

franchise:'

:s

said AlberilQ W. Vilar, president of Ameriindo

lnvestrnent Ad".-jsors. which bas an Imdisdos(';d stake, "If you take the IOlilg view, this stock could still. double or

lriple:··s IR UnlrllingliiflitQ CompetiUon BUl Yahoo! is not the only player wilh aspirations 10 become: 11 digital m.emel'ark. Borh Time Wamlir's AOL and Microsolt's MSN hare the sarae goal i.1Imind and they can boo~t of substantial ad.vantag.es ov.e·r Yahoo! AOL, despite its merger head;;iChes, can tap into' popular con~nt from Lhe world's. largest media company, from CNN to Warner Music. MSN can derive substantial. benefits From the sof'tware muscle and cash reserves of Microsoft. as well as broadband partnerships thai cover '1.1 percent more lines into homes and businesses man Yahoo!'s SHe de aL Yahoo! may' iii 0 have a more difficl.lh time than AOL or M SN in getting a sllffic ient number of surfers ro pay for its new on~rings_ 10re or its ClIsWmen. ffiilY have become used to gcHing services with.out any charge .. ··YEl.boo!'s brend is bllill. on free imfom:lat~on services," sa:h1. MS group p"~IlC [ malllager Usa Gllrry.~ She believes [hat coaxing Y:l.hoo! customers to ]:IU 11 out Lheif W;ll'lelS is Hke]y to present a formidoble dml1cnge. FIJJrth.erm.orn.Semel's dream of a digi~llbeme park may be threatenoo by growing popuJarity of selli'Ch engines. In Ihis regard., Yalloo! may have to deal with areecnt rise of 3 newer eompetitor, Google. mjllst four years. Google has turned 11l·tO a global sells:nioli and is tiOW widely regarded as the most prominent search ellg;lIIl in most parts of lH~ wor~d. U search eng lnes continue to attract surfers, they mil:,' s~l turning to Googli!'s uacburered search on:eri'ng'~ to fi!1d evcrydung me)' need instead of Aockin__g to flashy theme parks such as (me one Yilhool

beef up Yahoo!'~ search capabilities •. indutliilg the ability to inoorpurate infonnaHon sucll as weather forecasts [!'ItQ se.arcli results, eltminating the need to jump 'lO addiiiotlal Web page~- He closed a $290 Jill itIiOIl deal for search comran)' Inktom:i in M.a!'CH2003 because he realizeJ that it was important to own Ihe tc:dlnologybchilld iliis and to murn.age it irr:temllliy. With tne sear-ch capabBilies in place, Semel and ~he res! of his team have bee n trying to P!ll!;TI Ymoo! as a search engine. The film lllllst 1:1)' W bui Id !lip i~ brand ill order to overcome the established reputations of MSN and GoQgle. Anal)'s!:l; claim that in terms of technol0tlY. mktomi offers a search engine Ihat is better than mO:St. To cOmlllunicfile lhis, Semel kicked off a natlonal mm'keling campaign in MOiY 2-003 in New York.'s Time-s SqullfC with the unveililllg of a l1ugt.: compurer-sereen ad ffeoftlJlnng live searches on IDe Yahoo' site,

IF.... Iflined

(I r Shattel'led D1rean,s? h is har'd to displ!lt~ Ih~l Seme] hal"i. clearly pulled off a stunning ~evi'lflli] f a H01.1Il.deri linn by clluing costs, imo ug posing discipline. and making deals, Despile the advantages of AOL and MSN. Yahoo! has k_ept its pos:ition as Olle of the most popuhir sites 011 llIe Web, .according to NielscrnllNetRa'tiIi,gs (see Exlribil 4) ..Semel has used all of

his ~lciLIsto boos ling its cl.Istomerroullt eightfold from the 375,000 thaJ it drew wben he ~mved in 200 l. But Y<ilioo" sti II'has a long way to go be fom it call be-

come the digital D:~s!1eyl.!l'l[l thart Semc~ has ell\':isiolled.

AllhO'ugh. YilihoQ t has been [Jrnfiti[lg lr-{Jlll its delll with Overture, semel ~hollldi be concerned nhm ~~crw.oft' s M SN also 1111.'>siml] ar deal, He may have to fork over II a hefty sum of money to make a bid for Overture in Older to prevent MiCl'-mloft from acquiring it, Se~] is also still looking ro go beyond Yal1oo'!'s deal willi SDe 10 iili'ellglhen Ib.e company's position in b~oodballd- Ami while its acqui. silion of Inkromi has provided Yahoo! wiLliI search capabilities Ibm he could 'lise lO battle MSN ~ml. Google, Sc::mel is still pushing (Q build the brand as [I search engine_

me

is 1I11~mpDng to develop. [II any case, Semel may not be a;b!e to re;lli2iL'l hi diream ()if transforming Yaboo! into a. digital. uiemeperk wi.lhol,lt doing better in the booming Internet search market, where it ranks third behilld, MSN am:.!Google. Industry ano.lym say that as Web surfers gain expertise, they vi~it getler-a[·in~emsl sites such as Yahoo" less and instead cut to U1echase by typing ill keywords on a search engine.

Viisi,to rs

TIme Spent per Person

·1 I

Un millions)
Go I) Qh:1
'{shim)1 Search MSN Slflarci1 4(1.3 36.5 35.1

lin minutes) 25

Acc:o.rdirr,g(0 analytics linn WebSideStm)'. the percenmg_e

of Web s.ite visitors arriving via. search engines rlm.:lb'lecl.in the past year, to 'I] percent. Semel has understood the import.'l:nce of anractillg surfers who have been turning to MSN and. Gocgle for

!Ii 34

AOL Search Ask JE!8VeS

23.7
13.01

their huerner searches, He has been moving swiftly to

906

Case 43

vahoot
Equities. "It's well-posjtioned to leverage its massive globaillser base and dornjnaut bmml."lo 13m it is sr:i.1l ot n clear whether Semel's efforts will build Yahoo~ into a brand ~hal will be ab 1e to hold its ow 11 agalnst formi dable rivals.

Critics also worry that under Semel's careful and laborious screening process for neW projects, Yahoo I may run the risk of losing its innevarive edge, Semel has [Cspondcd by pointing to the ad ... ntages that he has proa vided Yahoo! hy the reduction of clutter am! the focus on . a handful of iligh.pe::rt'Ctmlance ser vices fum feed each other; For a success srory, he points to the company's recently relaunched search capabilities. Ally consumers who search for "pizza" and! Lype ill their area cede end up on Yabcol's Yellow Pages which pro ... de them with return i addresses lind maps showing how to drive [0 nearby pizza restaurant s, Semel boasts ~hat Yaheol is the only heavyweight portal that integrares content ~11is deeply into its search features. Yahoo! is elearly back ill the running alollg with the other lenders thal have sur v ived from the Il1ternet-driven ern. Its acccmplishments under Semel have attracted DOJlsiderablc attention. ""{:;U1OO ~ h as reemerged iI!S a potel1t force," said Derek Brown, an analyst at Pacific Growtb

Endnotes
l. Elgin, Ben, & Gro v er, Ronald, 2003, Yahool: Act two. Busirte'~'J Week, J nile '2: 11. 2. lbid., 76. 3, [bid., 74.

4. Ibid.
5, Ibid." 72. ,(i. Ibid." 74, 7. ]lJid., 17., 8. Thid.

rn Ibid,,73.

9. Ibid.