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Weekly Column

Not Enough Indians: Chief Yahoo Jerry Yang's -$20 billion legacy

Status: [CLOSED] comments (118)
By Robert X. Cringely
bob@cringely.com

There is no joy at Yahoo, for mighty Jerry has struck out.

This week Yahoo cofounder Jerry Yang announced he was stepping down after 17 turbulent months as CEO of the big Internet portal -- a time in which the company rebuffed a buyout offer from Microsoft, flubbed an ad sales agreement with Google, and ended up being worth a third of its former self when the rest of the market is down only 40 percent.

Jerry blew it.

And rare in the annals of public companies, JERRY blew it, nobody else. There is no blame to be shared because the Chief Yahoo took his anti-Microsoft stand pretty much single-handed, having bounced Terry Semel from the job in June 2007. Semel, who was more Hollywood than Silicon Valley and never well suited for the job anyway, had backed the Microsoft deal. Freed from his duties at Yahoo, Semel also voted with his brokerage account, selling a large number of company shares while the selling was good.

If there is a lesson to be learned here it is not so much that Jerry was wrong, but that Jerry was Jerry and that wasn't the right thing for Yahoo shareholders.

There are three seminal ideas that guided Jerry Yang, who is, after all, a diverted graduate student who got on-the-job training in business. To understand these three ideas is to understand Yahoo under Yang:

1) Microsoft is evil. Yang came of age in the Netscape era and saw Microsoft break the law to destroy that company and try to control the Internet. Whatever its motivation, Microsoft did all the bad things they were accused of and more and Yang could never forget or forgive that, even at the cost of his own company. He took it personally.

2) The power of "no." There was a time in the 1990s when venture capitalists Kleiner Perkins and Sequoia Capital were trying to get Excite and Yahoo -- their respective portals -- to merge in a forced marriage designed to benefit only the VCs. It didn't feel right to Jerry, who put his foot down and scotched the deal. It worked that time, so saying "no" became for Yang the default position, especially after Broadcast.com.

3) Don't get screwed. When Yahoo bought Broadcast.com for $4.7 billion and it became clear that Yang & Co. got almost nothing of value for their money, they resolved never to get screwed on another deal again. That was the moment Yahoo embraced bureaucracy. They never made a quick decision again and in many cases hardly made any decisions at all.

Mix these three concepts together, add independent wealth and a personal golf course, and you get the Jerry Yang of today. He was inclined to say "no," couldn't embrace Microsoft's evil, and sure as heck wasn't going to be screwed by Redmond, which he knew could never be trusted. As long as Jerry was in command the deal would never happen -- and didn't.

Given all this it's a wonder Yang can remain with the company as he says he will. I couldn't do it. He must feel like Ralph Nader. Or maybe that's exactly it; Jerry Yang, like Nader, still doesn't get it.

The best thing Yang could have done for Yahoo shareholders was to sell the company to Microsoft. He chose, instead, to do what he thought was best for the Yahoo COMPANY, which is weird given that it no longer feels anything like it did back in those glory days. He threw away $20+ billion just to preserve a memory.

Comcast's Cap
Hey, I have been thinking about Comcast's new 250-gigabyte monthly download cap and what to do about it. Comcast, of course, is just trying to keep its top 2-3 percent of P2P gonzos from ruining things for the rest of us. If a tiny minority of users are taking half the available bandwidth, well they have to be somehow crushed (that's the theory). Comcast first tried slowing down the miscreants, you'll remember, denied the company was doing that, then got busted by the AP of all outfits. So now they'll try this new cap.

As a guy who sees a GRAND PLAN nearly everywhere, of course I see one here. Comcast says the new cap will affect less than 5 percent of its users, but that's now. What happens in five years as connections get faster and faster, Internet movie and video distribution explodes and the cap doesn't rise comparably?

Remember wholesale bandwidth costs are dropping by 50 percent per year and have been for the last decade, so Comcast's costs get cheaper and cheaper while at the same time more and more users will impinge on the bandwidth cap. If 5 percent are in violation today, that will be 10 percent a year from now, 20 percent two years from now and 40 percent three years from now, unless Comcast raises the cap.

I think they won't raise the cap but will rather introduce paid bandwidth as an alternative tier and get us to start paying a la carte for those parts of our Internet experience that Comcast might presently view as under-compensated entertainment products. It's just a way for Comcast to benefit financially from third-party and user-generated content.

So maybe a little civil disobedience is in order.

That 250 gig bandwidth cap, while more than 95 percent of current users require, only comes down to 3-4 days of wide open bit-pumping on a cable modem. Why not build a utility that takes all participating users to 249 gigs per month? Even a 5 percent participation rate among Comcast users would take the network to its knees and possibly force a more respectful attitude from the cable company.

But hey, it's just an idea.

Cringely's Future
Finally, readers have been asking what I'll be doing after this gig ends on December 15th. Frankly, I have no idea, but as a guy with kids ages six, four, and two, I can assure you I'm not retiring. Guys like me don't retire, we just get lots of life insurance and work until we die.

It might not make sense to hurl myself unemployed into the worst financial crisis in 80 years, but sometimes a guy just has to do what a guy has to do. Besides, as someone who has been fired from EVERY JOB I'VE EVER HELD, this might be my last and only chance to actually quit something.

I'll land somewhere, you can be sure, probably with NerdTV and my Moon shot in tow. And I'm open to ideas. Just nothing very illegal, okay?

Comments from the Tribe

Status: [CLOSED] read all comments (118)

I don't get why anyone would pay cash for Yahoo. What is it? News, but we can get the news from elsewhere. An Web email thing. That's it. Not like they're even relevant anymore. When I want to find something, I go to Google.

Dave | Nov 25, 2008 | 9:18PM

Bob,

Where do we send money to get access to NerdTV Season 2? :-) Your interviews and industry insight (and alliteration?) are that enjoyable. Please, please give us a hint about when Season 2 will surface.

Derek | Nov 26, 2008 | 8:00PM

Don't forget that the same factor that blocked the Google deal would also have blocked the MS deal, had they really tried. That factor is the DOJ and it is waking up from a long slumber and starting to enforce anti-trust law. That can only be good for consumers, if not for Yahoo, MS, or Google.

Even if another laizzes-faire economic dufus had been elected, these deals would still have been blocked by the EU.

The real issue is not finding a buyer for Yahoo, it is still the second best positioned company to take advantage of new Internet-based tech. No, the real issue is why Yahoo can't execute (or innovate). That this issue exists at all is due to Semel and his lack of tech knowledge. Internally Yahoo is a mess, and nobody is responsible. This is a forked company that can only be rescued by a major, and I mean major, shakeup of internal management, from the top.

Roger | Nov 26, 2008 | 9:09PM