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Why Carol Bartz was fired

Occasionally I write articles titled “Why CEO X was fired.” You can read one here, and here and here.

These are allegorical stories. I don’t base the opinion on evidence but on perception of what’s wrong with a particular company’s strategy and then try to trace the point of strategic failure which should have triggered management change. Of course, the reasons are often something else, probably mundane or “political” in nature.

The objective therefore is to analyze strategy and more precisely strategy failure.

So, Yahoo! What went wrong?

Before we answer that, we should know what went right. Yahoo, like Google, depends on advertiser revenues. For that, it sells the behavior of its users. It processes over 25 billion events every day and builds a database (estimated to be in 10s of petabytes) to mine for information that is, hopefully, worth something to advertisers.

But in order to get user behavior it needs to provide compelling reasons for user participation. For that, Yahoo licenses content and offers communication services (among other things.)

This sounds like a reasonable business model. So what could go wrong? As always, we begin by measuring performance along a prevailing basis or axis of competition. Has Yahoo’s product been improving in ways meaningful to its customers? Is that improvement beyond what buyers value or can absorb? To answer, we need to be careful in recognizing that the customer is the advertiser, not the user. Like in all advertising business models, the user is the product.

So when seen in this context, the problem becomes clearer. We have to determine whether the product (user behavior) is good enough or too good. We have to compare it to alternatives which might offer better price/performance for a given customer need.

There is little data we can draw upon, but my initial hypothesis is that the behavioral product that Yahoo has been delivering is over-serving while search and social data is what customers are increasingly looking for.

Part of the reason is that Yahoo’s raw material is licensed content. The value of that material has decreased as users turn to either social media or seek out filtered, niche information sources which are outside the generic feeds Yahoo provides. Therefore, as Yahoo’s traditional raw material has commoditized, so has its user behavior data. The patterns that are emerging from the data are “unactionable” by advertisers. There is little insight that can be gained from data on patterns of reading generic news. People are differentiated through their reading of niche sites and that data does not reside with Yahoo!

Thus customers (advertisers) have felt that the product (user behavior from reading licensed content) is commoditized. There is much more value in looking at patterns in Facebook or search. But those rich fields of data are under the control of competitors.

This is the core problem with Yahoo’s business and it’s been a problem for a long time. The question for a CEO should be how to fix this. The remedy is not better administration but either a change in the core business or innovation in terms of content sourcing (away from big media and toward blogs and niche media.)

Sadly, the steps required to get there should have been taken years ago. And perhaps the required changes imply so much displacement and disruption in the operating and financial structure of the company that it would just not survive the operation.

Which is why Bartz was fired. There is no evidence that she tried to engage in surgery or that there was any therapy process under way during her tenure. The patient, I’m afraid, is still dying.

  • Joules98598

    I wonder whether bartz knew this was a problem because none of her actions indicates this awareness. That’s the sad part. The board waited too long to make a change so it too is complicit.

  • Joules98598

    I wonder whether bartz knew this was a problem because none of her actions indicates this awareness. That’s the sad part. The board waited too long to make a change so it too is complicit.

  • Andreas

    Great post.
    The AMP box on the lower right does not appear to have any sort order.
    Why not put the companies in order of current AMP score?
    This would provide additional, “glancable” information.

  • Anonymous

    10th paragraph down. typo. It reads ” The patters that are emerging”. it should say “The patterns…”

  • Anonymous

    Change in core business or innovation. But unfortunately the former CEO of Autodesk was brought in to streamline operation. She knows nothing about core business or innovation. Hence the axe.

    Question is why did it take so long? and what transpired for it to be done over the phone while she was in transit? Inquiry mind wants to know!!!

  • Anonymous

    Back in 2007 research showed that Yahoo! had huge authority in the social aspects of search. But they fumbled that advantage, failed to integrate delicious, flickr, failed to figure out how to turn their thought leadership into commercial success. They had great techies, but siloed product lines and distracted management. Too bad.

  • Anonymous

    Board isn’t doing its job either. They fire the CEO but do not appoint a successor. They haven’t even picked the headhunter firm to look for one.

    Now they are going to hire some consultants to give them strategic advice. Really? What are the rest of the executives there for? Hasn’t Yahoo done enough soul-searching in recent years to not have alternative plans, especially those that some executives wanted, but Bartz stopped?

    Basically the board fired her for not doing a good enough job, but say nobody else in the company can do it, or even knows how to do it well enough. Yahoo gone in a year, or completely irrelevant.

  • Anonymous

    Board isn’t doing its job either. They fire the CEO but do not appoint a successor. They haven’t even picked the headhunter firm to look for one.

    Now they are going to hire some consultants to give them strategic advice. Really? What are the rest of the executives there for? Hasn’t Yahoo done enough soul-searching in recent years to not have alternative plans, especially those that some executives wanted, but Bartz stopped?

    Basically the board fired her for not doing a good enough job, but say nobody else in the company can do it, or even knows how to do it well enough. Yahoo gone in a year, or completely irrelevant.

    • Bobestes

      Doesn’t take a rocket scientist: CFO and CEO were in a struggle whether to sell company or not, board sided with CFO and fired CEO, now it’s the CFO’s job to sell the company.

      • Anonymous

        I doubt even Microsoft would want them now, although Ballmer hasn’t been shy about putting cash to use, no matter what the price or strategic fit (cough, Skype).

        Antitrust regulators and competitors may be less worried about the acquisition now, given Google’s dominance (and domineering), and the likelihood Yahoo will fail anyway. Might as well let Microsoft fight Google.

        Any other potential acquirers?

      • Anonymous

        Baidu

  • OpenMinde

    What about HP’s CEO? Does he know HP core business or HP has a core business?

    • Anonymous

      Yes. Weirdly enough, it is not PC’s. That is only 1/3rd of their revenue and less than 1/10th of their profits. So he wants that 1/3rd of revenue to result in 1/3rd of profits. Very sensible.

      As the largest PC maker, HP was always going to take a stock hit when the Windows PC market collapsed. They will regain that when the market realizes that the Windows PC market has collapsed, or when HP is out of PC’s, whichever comes first.

      In other words, what HP is doing right now only looks wrong if you mistakenly think that making Windows PC hardware is a good business. Once you realize it is not, once you see the numbers, you say, why didn’t HP get out years ago? It is already seen as too late by many analysts. They are not expected to get even $10 billion for their PC business, and they paid $20 billion just for Compaq a few years ago.

  • OpenMinde

    What about HP’s CEO? Does he know HP core business or HP has a core business?

  • Anonymous

    Let’s face it, Jerry Wang made a huge strategic error back when he rejected MSFT’s advances, Yahoo has been on a decline since then. Losing eyeballs as other more compelling web offerings appear, almost completely irrelevant in mobile, the ugly sister to Google from an advertiser’s perspective.

    Doubtless Yahoo will continue its gentle slide into irrelevance whoever is at the helm.

  • http://www.richsblog.com Richard Meyer

    What went wrong was a failure to communicate her vision of what Yahoo was and where it was going while competitors were moving forward. In addition she also had the mouth more representative of a street person than a CEO.

    • ghost wunder

      “street person”….sounds like condescension masquerading as business rhetoric (the culture of wall street is steeped in urban/agrarian/tribal colloquialisms). tomorrow try tea.

    • http://profiles.google.com/marcosmalo Mark Mayer

      What vision? I never got that she has a vision for the company that might save it if she executed on it.

      As for her foul mouth, who cares? She’s not kissing me with it. I’m sure there are plenty of male executives with foul mouths, but it’s not worth mentioning until it’s a “lady”.

      • Anonymous

        Shrug. Maybe it is mentioned, but people just don’t listen. Regardless, cursing, IMO, is surgical. You use it to make a point or to get attention. Overuse makes you look like a clod, male or female, and people don’t follow those that they think are clods.

      • Anonymous

        It’s a cultural thing, where I grew up cursing isn’t surgical, expletives aren’t even really words, they’re punctuation – phattc and used for effectively metrical purposes to improve the flow of sentences.

        Personally I’d rather work for somebody who inserts the f word into every sentence than somebody who inserts a meaningless buzz word into them.

      • Anonymous

        I’d like to think there is happy medium between an empty suit and a merchant marine.

        To me, if you can’t think of any other way to express your ideas than dropping the F-bomb like commas, then I can’t respect you. If I can’t respect you, I’m out.

      • Anonymous

        Sure there is, but my point is that the more socially acceptable fault is the more egregious. The fellow dropping the buzzwords may actually believe that they have meaningful content, or he may bamboozle his listener into thinking it, but the fellow speaking Liverpudlian and his audience are under no illusions that various interjections of the f-word (pronounced to rhyme with the scots ‘loch’ ) is content bearing.

        If I tell somebody to sedulously eschew obfuscatory hyperverbosity and the prolix use of the sesquipedilian then I may demonstrate that I own a copy of the OED, but if I tell a somebody to talk f-ing plain english then I’ve actually communicated.

    • Anonymous

      No. It was a failure, not a failure to communicate.

      We swear in northern California because we are grown-ups. If you have been infantilized, that is your problem.

      And street person is above CEO in the hierarchy of good-hearted people.

  • http://www.informationworkshop.org Mark Hernandez

    To add to “wondering about the reasons why” I still haven’t seen much to dispel my long-held belief that “people wearing suits (or pant suits) always tend mess things up. There’s a detachment from reality that seems to go along with that kind of business wear. Like all stereotypes, there’s a bit of truth to it.

    Another thing I wonder about is how world-views slowly drift, get reshaped and distorted inside companies and then mismatched with reality. It would seem that a successful company is sure to have regularly scheduled authentic “retreats” designed to see things from as many different outside perspectives as possible, in order to prevent them from suddenly finding themselves caught with their [suit]pants down.

    • Anonymous

      If you listen to your customers’ needs, that provides all the outside perspective you need. Suits are always separated from the customer. Talking to the customer is for low-paying retail and customer service employees.

      Also, if you are your own customer, then you can get the customer perspective from within. For example, Steve Jobs obviously builds computers primarily for himself. He is Apple customer #0, it does not get to customer #1 if Jobs doesn’t think it is the best product ever made. But suits are not their own customers. To a suit, the customer is a mark, a sucker, not someone you would want to be.

      • John

        There is a lot of truth in that. Many CEOs are so caught up in finance and profitability they hardly know what they are selling.

    • Anonymous

      I call it the pink shirt effect.

  • Anonymous

    Horace, not sure if your post today rings true regarding the behavioral product being part of the problem.

    The big money is in big brand advertising. Big brands pay a premium simply to be visible on the day’s fashionable sites/social networks. Yahoo fell out of fashion before Bartz arrived, but even if Yahoo had the most sophisticated ad targeting imaginable, I don’t think big brands would pay a premium to be there. It’s not the place to be seen.

  • Anonymous

    Horace, not sure if your post today rings true regarding the behavioral product being part of the problem.

    The big money is in big brand advertising. Big brands pay a premium simply to be visible on the day’s fashionable sites/social networks. Yahoo fell out of fashion before Bartz arrived, but even if Yahoo had the most sophisticated ad targeting imaginable, I don’t think big brands would pay a premium to be there. It’s not the place to be seen.

  • Anonymous

    Horace, not sure if your post today rings true regarding the behavioral product being part of the problem.

    The big money is in big brand advertising. Big brands pay a premium simply to be visible on the day’s fashionable sites/social networks. Yahoo fell out of fashion before Bartz arrived, but even if Yahoo had the most sophisticated ad targeting imaginable, I don’t think big brands would pay a premium to be there. It’s not the place to be seen.

    • NurseGirl

      Yahoo was out of fashion by 2009, but Flickr was still popular and Delicious was thought of fondly as something that could have been great. If they had really jumped on those two properties, things might have been different.

      • Anonymous

        I would also add Yahoo! Groups. To me, these have been a potential Facebook-killer since before Facebook was around. Niche-focused social sites where the niche is often a specific product or category (a type of car, computer, or hobby) and the users are people with disposable income looking for mutual support of their obsession. Too bad that Yahoo! has never seen fit to give these groups more than basic life support, or to interconnect them in any significant way. Instead, the groups limp on with painfully outdated interfaces, feeble and slow search, no targeted advertising (which, I suspect, would be welcomed by many groups) and storage / bandwidth limits set dog years ago. Yet people use them anyway, because they’re still one of the best options out there, and because many of the groups have become canonical meeting points.

      • Anonymous

        Indeed, it seems someone at Yahoo had a clue about what would be important to users, but they weren’t able to gain traction with that vision. Perhaps they lacked the perspective on how to make that direction relevant to the actual customers, the advertisers. Or maybe they had it, but couldn’t sell it internally.

        It’s not hard to see why. Yahoo started by cataloging the nacent web, but they really grew by licensing professionally created content. Professional content creators have long been contemptuous of “amateur” content. Even today, as people make a living writing for blogs while traditional media trudge on with a skeleton crew of “professionals,” some of those professionals still sneer about bloggers. Similarly, traditional advertisers were reluctant to have their carefully cultivated brand identities appearing on amateur content.

        I don’t know what happened internally, but the pattern is a familiar one. Market leader focuses on its best customers, meanwhile a much larger market grows in the space it ignored, and eventually it starts loosing its best customers to the market it ignored.

  • Andy

    I guess it has something to do with Alibaba

  • Anonymous

    Yahoo brought in the wrong CEO. Carol was an operations person. But what Yahoo needed (and still needs) is a visionary, someone who can see past the current clutter and fog and find that theme that made Yahoo important to users. They still have a tremendous brand and people will try out any new thing they put out there. If they get the right stuff in, and make it work well out of the gate, they will do just fine. This soul searching predicament is similar to what Apple had after the non-Jobs era. Yahoo needs a similar clear thinker, but they are incredibly rare and nearly impossible for conventional people to recognize even when they are standing right in front of them. HP is in the same pickle.

    • Anonymous

      Apple got lost without Steve Jobs, then found their way again when he returned. Yahoo lost their way with Jerry Yang, stayed lost without him and when he returned. There are two ways to fail at business – sticking with Plan A too long, and not sticking to Plan A at all. Yahoo started with search then, when Google sewed that up, switched to a portal. But most people have abandoned portals, since they essentially attempted to brand a ubiquitous product like air or electricity (but, curiously, not water). Yahoo had a chance to innovate when Flickr was a leader but they failed to find a way to synthesize something new with it and their other properties. The probability of Yahoo regaining relevance is near zero.

  • http://twitter.com/ankleskater Ankle Skater

    Good analysis. Nothing in Carol Bartz’s background suggests she could lead such a surgery. To be blunt, she did not demonstrate any savvy knowledge about search or social media, or the internet industry overall.So the conclusion must be that she was ill-qualified for the job from the onset.

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  • Anonymous

    The Horacle,

    Can I ask another question? It is almost ubiquitously reported that Carol Bartz performed well as CEO of AutoDesk and was therefore expected to perform equally well at Yahoo!

    Was this expectation justified?

    AutoDesk was founded around the same time as Microsoft, with the intention to develop something, anything, for the emerging PC. The name implies some kind of desktop organiser, but instead they found and exploited a CAD software for the PC, which meant a product many times less expensive than the alternatives.

    As an architect I have used AutoCad and other CAD programs for many years. I believe that AutoCad is over-priced and technically inferior to its competitors, but has maintained a monopoly position since being first to market by many years. As a CAD user I would say AutoCad has a greater monopoly and much greater technical inferiority than Microsoft enjoys with Windows and Office.

    So AutoDesk had an almost guaranteed position, but a very disfunctional staff of whom no-one was in charge. All Carol had to do was organise the staff to all work together and let the profits flow.

    Yahoo! was a totally different case. The staff were all equally focussed, their product was not. So what did Carol reorganise? She tried to reorganise their staff, just like she did at AutoDesk. What needed reorganising, or an adjustment of focus, was the product itself. I suspect that that was also Jerry Yang’s failure, to recognise that Microsoft did not want to buy the company he had created, it wanted to buy the company’s product, portal, status, in essence its spirit, not its people.

    In that sense, Carol was right, and the people that hired her fcuked up because they hired her to do the wrong job. If so, we can expect them to make the same mistake all over again and hire a deal maker when they should be looking for a visionary.

    • Anonymous

      Yahoo is still a relatively popular brand among a large audience (many mainstream people get their news and email from there) and still have the tech and assets to compete if they could create some great products. Unfortunately, people with a complete lack of vision like Blake Irving are entrenched in key positions at Yahoo and they will not prosper as long as this management is not cleaned up.

  • Anonymous

    The Horacle,

    Can I ask another question? It is almost ubiquitously reported that Carol Bartz performed well as CEO of AutoDesk and was therefore expected to perform equally well at Yahoo!

    Was this expectation justified?

    AutoDesk was founded around the same time as Microsoft, with the intention to develop something, anything, for the emerging PC. The name implies some kind of desktop organiser, but instead they found and exploited a CAD software for the PC, which meant a product many times less expensive than the alternatives.

    As an architect I have used AutoCad and other CAD programs for many years. I believe that AutoCad is over-priced and technically inferior to its competitors, but has maintained a monopoly position since being first to market by many years. As a CAD user I would say AutoCad has a greater monopoly and much greater technical inferiority than Microsoft enjoys with Windows and Office.

    So AutoDesk had an almost guaranteed position, but a very disfunctional staff of whom no-one was in charge. All Carol had to do was organise the staff to all work together and let the profits flow.

    Yahoo! was a totally different case. The staff were all equally focussed, their product was not. So what did Carol reorganise? She tried to reorganise their staff, just like she did at AutoDesk. What needed reorganising, or an adjustment of focus, was the product itself. I suspect that that was also Jerry Yang’s failure, to recognise that Microsoft did not want to buy the company he had created, it wanted to buy the company’s product, portal, status, in essence its spirit, not its people.

    In that sense, Carol was right, and the people that hired her fcuked up because they hired her to do the wrong job. If so, we can expect them to make the same mistake all over again and hire a deal maker when they should be looking for a visionary.

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