Saturday, February 24, 2007

Yahoo PR Spin


It was predictable that the Yahoo! corporate PR department would shift into high-gear to defend Terry Semel in the wake of yesterday's finalized "Plan B" which was submitted to them.
When they were able to finally get back to Riva Richmond of Dow Jones last night at 11:03pm with a response to her question about their reaction to "Plan B," they stated that the company has:
"a clear strategy to create shareholder value," through aggressive pursuit of its ongoing efforts to improve its ability to make money from search advertising, expand its lead in display advertising and secure leads in emerging areas like social media, video and mobile services.
"Under Terry Semel's leadership over the past five years, Yahoo! has achieved tremendous growth, consistent profitability and impressive returns for shareholders, with our stock price rising four fold, " she said. "As the Internet continues to grow and evolve rapidly, Yahoo! is in a strong competitive position to be a leader in this transformation and to capitalize on the huge growth opportunities ahead for the Internet. We intend to do just that."
Yahoo!'s stock price is up 4 times from its $7 all-time low. However, that low was hit under Mr. Semel's leadership. To be completely accurate, Yahoo! should acknowledge that, from Mr. Semel's May 1, 2001, start date, Yahoo!'s stock is up 229% through yesterday's close.
Here's an excerpt from the finalized "Plan B" on why that 229% is not acceptable, given what return Yahoo! shareholders should have received:
Terry Semel and his defenders will argue that Yahoo!’s stock price has gone up 227% since his start date of May 1, 2001 through today. However, if you properly analyze his tenure, there have been three distinct periods:
May 2001 – December 2002: Yahoo! drops 7% in value.
January 2003 – December 2004: Yahoo! grows by 355% in value.
January 2005 – Present: Yahoo! drops 14% in value.
There has only been one period in which Yahoo!’s valuation has increased under Terry Semel’s watch and we would argue that this had to do with a general recovery in the Internet Advertising market, which benefited Yahoo! and its two main rivals – Google and Microsoft – during this time. The rising tide lifted all boats/companies which were dependent on the ad market for the majorities of their revenues. As Yahoo! also had amassed enough cash before Mr. Semel’s arrival, it had the fortitude to go through the Internet Advertising drought which claimed the lives of many pre-Bubble competitors (e.g., Excite, Lycos, etc.). The only credible remaining search players post-Bubble were Yahoo!, Google, and Microsoft and advertising dollars could only go to these three players after the general market recovery began to happen. Yahoo! benefited from this rising tide (especially in display ads), for a while.
Yahoo!’s market share has been flat and steadily eroding over the past 4 years, while Google’s has dramatically accelerated. Yahoo! had a 28.9% share in February 2003 (according to Neilsen NetRatings[10]), compared to 29.5% for Google. However, Yahoo!’s share had dropped to 19.5% as of December 2006, and Google’s had increased to 65.4% (according to Bank of America Equity Research). The total ad market has increased from $1.4B in 2002[11] to $15B annually today (and growing at 50% per annum)[12]. Had Yahoo!, under Terry Semel, been able to grow its share to even 30% today, Yahoo! shareholders would have received an additional $1.6B in revenues last year – or 25% higher than their reported $6.4B in revenues, but still well below Google’s $10.6B in revenues last year.
The bottom line is that – in the most relevant and direct comparison to its arch-rival, Google – since Google’s IPO in August 2004 through today, Google’s stock price is up 336% versus Yahoo!’s stock price being up only 16%. Google has grown its shareholder value 21 times more efficiently than Yahoo! over this time period, when the Internet ad market has been booming. We don’t believe that any CEO should keep his/her job when your #1 competitor is 21 times as successful as you over an extended period of time.
Conclusion: Yahoo!’s board needs to immediately remove Mr. Semel – who is 64 – and begin a search process to find a new Chairman and CEO. This Chairman and CEO search should examine all qualified internal and external candidates.

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10 comments:

Anonymous said...

I think your mention of Mr. Semel's age serves absolutely no purpose and weakens your hand. Is he somehow incapable of leading Yahoo because he is 64 years old?

Eric Jackson said...

Anon: Thanks for the comment. This is a very important point you're bringing up.

I'm certainly not an agist. Age is a state of mind. Sumner Redstone, Alan Greenspan, and Rupert Murdoch certainly don't act like most 75+ year olds that I know. They are all -- whether you agree with all their strategic moves or not -- men of action. Terry Semel is not.

I do not object to the fact that he is 64; I object to his inaction. His inaction suggests that -- given his age and given the litany of other facts you can examine in the sum total of his record -- he is biding his time, waiting to leave.

Why should Yahoo! shareholders wait for him to finally deign to leave? Let's bring in a 75 year old who takes some action -- or any other qualified candidate -- rather than continue on in this exhausting state of limbo.

Anonymous said...

i can agree with you that the burbank campus is worthless -- 2 brand new huge buildings and you walk around and go into the cafeteria and just see a bunch of young people in jeans -- nothing i see as serious business people trying to make a better company.

Eric Jackson said...

Thanks for the comment. That's quite a visual you paint. :)

Anonymous said...

AGAIN- BASED ON WHAT? INTUITION? YOU OFFER NO SUPPORT FOR YOUR CLAIM OF "NO MEANINGFUL OUTPUTS...". YOU'RE SUGGESTING NOT ONE THING CREATED BY THE MEDIA GROUP AND THAT CAMPUS CREATE VALUE FOR YAHOO! IT'S NOT JUST A VIDEO-CREATING CAMPUS. IT ALSO HOUSES $100-MILLION DOLLAR PROPERTIES LIKE YAHOO! NEWS AND FINANCE AND SPORTS IS SOON TO JOIN THOSE RANKS AS A SUPER-PRODUCER OF PROFIT TO YAHOO! SO, COULD YOU PLEASE EXPLAIN THE FAILURE OF THE CAMPUS - SINCE YOU DECIDED NOT TO BACK UP YOUR CLAIMS WITH FACTS.

3. Shutter the Yahoo! Media Group and campus in Los Angeles.

The Yahoo! Media Group has been a failure. There are no meaningful outputs from the group to speak of which have had any positive shareholder value-creating impact. Yahoo! shareholders should not incur additional investments in this group and repatriate key employees back to Sunnyvale, while eliminating other positions.

Eric Jackson said...

Anon: WE CAN HEAR YOU. If you want to share your facts, be my guest. I'm speaking on behalf of Yahoo! shareholders who are looking for a return on their investment. I'm sure any talented Yahoo! employee can continue to work effectively out of their homes or Sunnyvale.

Anonymous said...

"I'm sure talented Yahoo! employees can continue to work effectively out of their homes or Sunnyvale."

Yup, you're an idiot.

I guess you must think YouTube is really all we should strive to be.

Don't create quality content- just have people show off their webcams and lipsyncing abilities and post lame-ass homemade videos of their "plan B" ideas.

Because it's obvious you know nothing about producing quality video or multi-media content for the web... or you just don't believe it is where the money lies online.

Please, please, please tell me how you think a legitimate, ground-breaking media company can be run by people who work from home...or who try to create content in Sunnyvale. This is not Wayne's World. Nor is it Eric's world.

What you mean to say is "Yahoo! should not try to be a media company...at least not a creator of original content".

Because that's what the company will be resigned to if you walk away from this campus, this investment and this idea - put your tail between your legs and head back to Sunnyvale.

You want the safety of the past. Just collect and distribute content created by others. The idea of being a creator, of being a media company, the first one to operate online is a risk. No doubt about it.

So why not grow some onions and just say you don't believe in the idea at all. Stop patronizing those of us who create original content and program it for public consumption.

You know very well, that can't be done from home or from Sunnyvale, or you are just - as previously stated - an idiot - with no background in the area from which to speak.

You rail against Yahoo! leadership for not make progressive moves to carry it into the future and think the answer is to retreat to the past.

Nice investment strategy. That and buying 45 shares of Yahoo! stock is all the committment you need to show to try to decide our future?

Why don't you go buy 40 shares of Boeing and tell them how to make better airplanes. I'm sure they're all ears.

Eric Jackson said...

Anon:

Thanks for the stock tip. I will take it under advisement.

Lose the insults and name-calling. They do not make your arguments any smarter.

There is nothing is what I've said above or elsewhere that leads to your conclusions. In fact, your comments are a bit of a slap in the face to the folks in Sunnyvale - suggesting that it is impossible to truly creative there. I would beg to differ. That's how this company was built into what it is today.

Anonymous said...

eric, what price did you buy at? you talking about a return on your investment, do your research before you buy -- i found the only smart time ot buy was last november at 23 -- what price and at what time did you buy your 45 shares?

Eric Jackson said...

Hi Anon:

I bought in early January for around $26.

The total shareholder return percentages that I report on the right-hand sidebar on YHOO, GOOG, and Nasdaq are since we launched our "Plan B" campaign on 1/7/07.

Cheers.