Dissecting the Yahoo Sandwich
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Written By Kate Zimmermann | November 20, 2006 | Share This
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On Saturday, the Wall Street Journal published an internal memo by Yahoo Senior VP Brad Garlinghouse, explicitly outlining the company’s internal disorder. Labeled the “Peanut Butter Manifesto“, the document called for a massive organizational restructuring of excessive projects that have created a “thin layer of investment spread across everything” - like peanut butter on a slice of bread. The leaked document, not surprisingly, was picked up almost immediately by the media. Here’s a selection what’s been said in response to the memo:
“A Series of Embarrassments”
Reuters pulled selective quotes from the memo to highlight it’s “plan to reshape the current business unit structure and eliminate the bureaucratic duplication of functions that exist across Yahoo.” Reuters ties the memo’s detail of HR issues back to Yahoo’s poor 3Q earnings, indicating that Yahoo’s misappropriation of resources is likely due to their failing arms race with Google. From Reuters, “The call for restructuring follows a series of embarrassments that have caused Yahoo shares to lose 31.5 percent of their value so far this year. It is struggling with a slowdown in parts of its advertising business while racing to keep pace with far-faster growing rival Google Inc.”
“A Call to Arms”
Ars Technica picks up the “Jerry Maguire” factor of the manifesto, pointing out that Garlinghouse has since been put in charge of a “task force” that will conduct a 2 month internal investigation of Yahoo’s organizational inefficiencies. This is not Yahoo’s first restructuring effort, however, as Ars Technica writes, “CEO Terry Semel already carried out a major restructuring of the kind Garlinghouse describes… He reduced the company’s 44 reportable segments to 4, laid off about 10 percent of 3,300 employees, and moved more people into the core search and advertising divisions.” Evidently to little effect - “the headcount stood at 9,800 in the company’s latest annual report.” By pointing out previous restructuring efforts, Ars Technica seems to cast doubt on the long-term impact of the memo. Nevertheless, they write, “the impassioned plea doesn’t come one moment too soon.”
Kill Flickr, Keep the Mainstream
Read/Write Web takes the “peanut butter” metaphor to the extreme, comparing how Yahoo’s PB consumption has made it “flabby”, whereas Google’s has “resulted in bigger forearms and more chiseled abs”. RWW notes the disproportion between Google and Yahoo’s respective assets to revenues. Yahoo has more web assets, Google has more revenue, thus Yahoo should follow Google by “refocusing on improving and integrating its current products”. Interestingly, RWW argues that Yahoo needs to shape up by cutting out their social media products. RWW says that Yahoo’s largest and most profitable audience is the mainstream, not the early-adopters, thus Yahoo should integrate it’s 2.0 properties with their more generic counterparts - merge Flickr with Photos, del.icio.us with myweb, etc. The article points to Yahoo’s integration of RSS into email as an example of a successful “early-adopter” product turned mainstream. RWW concludes, “I love to see the latest in web technology being integrated into products that real people actually use. That has traditionally been one of Yahoo’s biggest strengths, so I can’t see any reason why they shouldn’t continue to do that, even if it means killing off the individual web 2.0 brands they acquired. Notice I said kill off the brands, because it’s the technology in Flickr, del.icio.us, etc which is of most value to Yahoo now.” (My initial reaction is that RWW is underestimating Flickr’s brand value — but then again, I’m a rather biased “early adopter”.)
Alternative Motives and Points of Interest
ZDNet questions the WSJ’s acquisition of the source, concluding “One thing is certain, the WSJ is using the “document” to tease an uspell to WSJ paid subscriptions”. TechCrunch attacks the other side of the memo’s PR - believing that the doc is “so critical of current leadership at Yahoo that it was clearly not written to be voluntarily leaked.” TechCrunch anticipates a stand-off between Semel and Garlinghouse in its wake, predicting that “Semel may be the one to lose.” Breakout Performance supports firing Semel, citing his age, lack of support from investors, and lack of support from Yahoo employees as the main reasons for his needed departure. They also request that Dan Rosensweig get fired, Susan Decker become the next CEO, and that Jack Ma, Caterina Fake and Brad Garlinghouse all get promotions. The lone supporting voice for Yahoo came from Tabblog, “we should all take a moment to be clear on the fact that it would be a much worse world for all of us little startups if the big purple giant was to disappear.”
Last but not least, I wanted to give credit to the Motley Fool for writing the most entertaining analysis of the memo. Motley Fool comes to peanut butter’s defense, and requests that we instead refer to the conflict as a less enjoyable Boysenberry Fruit Spread. He suggests that local search, new revenue sharing models, and digital video could all be leveraged to make the Yahoo sandwich a little more delicious. Motley Fool concludes, “Once that smooth peanut butter becomes chunky peanut butter, it’s going to be pretty tasty. It’s all about substance, my friend. It’s all about substance.”
Topics: Yahoo! |