Jerry's Guide to the World Wide Web

November 18, 2008 6:48 AM

Jerry Yang, founder and CEO of Yahoo, has stepped down. He recently turned down a $31 a share offer from Microsoft, and with Yahoo shares hovering around $10, some say he was forced out.
posted by plexi (27 comments total)

Reading the blogs this morning, public opinion seems to be oscillating between "Thank FUCK he's gone" and "Well, what could he have done?"
posted by slater at 6:56 AM on November 18, 2008

Of course he was forced out. He thought he could resurrect a failing company in a failing economy.
posted by parmanparman at 7:02 AM on November 18, 2008

Turning down Microsoft's offer at the time struck me as being a pretty lame move, driven by ego rather than the idea that he was there to enhance shareholder value. Their offer was well above market and Yahoo has performed like dogshit for quite a while.
posted by sfts2 at 7:03 AM on November 18, 2008 [1 favorite]

To be fair, dogshit is an aggregator.
posted by cashman at 7:13 AM on November 18, 2008 [1 favorite]

I love it how all the pundits are going "now microsoft has to buy them!"

No, they don't, actually. But time will tell whether they do so.
posted by DreamerFi at 7:28 AM on November 18, 2008

“all of you know that i have always, and will always bleed purple,” Mr. Yang wrote in the memorandum, a reference to Yahoo’s corporate color.

Typical of founders whose identity is wrapped up in their success they can't let it go because it would cause an existential crisis. I think this is why MBA's have an advantage because they are taught to make decisions based on the bottom line and not get too emotionally wrapped up in a company. Otherwise you might as well open a barber shop and work there for there rest of your life, it will never go out of business.
posted by stbalbach at 7:46 AM on November 18, 2008

At some point the value of Yahoo declines enough that the deal will almost certainly be done. The ad revenue combines with the value of a large proportion of the net pushing MS tech (such as Silverlight) to make Yahoo more valuable to MS than to anyone without a platform to push.

But what is making a large proportion of the net dependent on Windows for full functionality worth to MS? More than $10 a share, I'd suggest.
posted by jaduncan at 7:52 AM on November 18, 2008

I love it how all the pundits are going "now microsoft has to buy them!" No, they don't, actually. But time will tell whether they do so.

The main obstacle to your buying Yahoo leaves, and the company's trading at less than 1/2 your previous offer? I can assure you, this monkey is dancing.
posted by mkultra at 7:53 AM on November 18, 2008 [1 favorite]

It's unfortunate that we've built for ourselves an economy and culture where a company's merit is defined in total by its dollar value in stock to shareholders, most of whom are just sharks.
posted by xmutex at 8:10 AM on November 18, 2008 [9 favorites]

If he hadn't said that Microsoft was undervaluing the company with the offer, he might have been able to stay. But, as far as I understand, he didn't really want the job anyway.
posted by krinklyfig at 8:12 AM on November 18, 2008

Greed wins!
posted by Thorzdad at 8:22 AM on November 18, 2008

why is it i feel bad for these guys? "poor bill gates...", "poor jerry yang...".
posted by JVA at 8:27 AM on November 18, 2008

He recently turned down a $31 a share offer from Microsoft, and with Yahoo shares hovering around $10, some say he was forced out.

Greed wins!

On both these points: duh!
posted by Pollomacho at 8:35 AM on November 18, 2008

Do you have a better system, xmutex?
posted by matthewr at 9:27 AM on November 18, 2008

Greed wins!

That's just not true. If anything, greed lost and common sense won.

Yang was a distraction. All of the press about Yahoo in recent months has been about Yang and his obstinate refusal to listen to his shareholders and those around him, clinging desperately to keep control of what he saw as his company, even though it effectively stopped being so long ago. That this desire didn't dovetail with financial gain doesn't make it any less greedy- it was his.

Let's not forget that Google just backed out of a huge ad deal with Yahoo, making everyone that much uneasier about (a) Yahoo's finances and (b) Yang's effectiveness.
posted by mkultra at 9:28 AM on November 18, 2008

why is it i feel bad for these guys? "poor bill gates...", "poor jerry yang...".

Here, let me fix that:

Bill Gates — Net Worth: US$56.0 Billion (2007)
Jerry Yang — Net Worth: $2.2 Billion USD (2007)
posted by Dr-Baa at 9:45 AM on November 18, 2008

It's unfortunate that we've built for ourselves an economy and culture where a company's merit is defined in total by its dollar value in stock to shareholders, most of whom are just sharks.

I disagree. Yahoo chose to go public- they invited the general public to invest in their company to raise capital to pursue more revenue. This means that they placed themselves in the position of valuing the company in terms of what their future performance is likely to be. Yang, and yahoo in general was a huge beneficiary of the stock runup prior to 2001.

There are many large, successful, valuable companies that are not publically traded, and they are certainly thought of as meritorious. Forbes publishes a list: prominent members include Cargill, GMAC, Chrysler, M&M Mars, and PWC.


I believe that shareholders should be sharks; they should weigh the value of this quarter's results as an indicator that next year will be better. A failing company that has taken my money is squandering my cash. If they didn't want to be valued this way, they shouldn't have taken my money. They made this bed, now they are lying in it.
posted by jenkinsEar at 9:50 AM on November 18, 2008

I still think, as I posted months ago, that Yahoo has serious potential to outdo Microsoft in relevance and potentially even value over the long term. Two principles:

1) Look at Google's value. Which companies are in any position at all to grab any significant share of what they're doing in the market? It is not a long list. Yahoo's on it.

2) The web as a platform is open and expanding. Windows as a platform is closed and stagnating. Which do you want to be invested in for the next 10 years?

If you want, you can combine these things under the header "Why did Microsoft want Yahoo so badly?" It's possible that it was sheer desperation of some kind, but in all likelihood, MS really thought Yahoo was worth more to them than the asking price.

So I don't see any of this as a repudiation of Yang's recalcitrance in the face of MS's offer.

That said, it might still be an accurate repudiation of Yang's leadership in general. I think it's entirely plausible to read from the company's current state that Yang isn't the guy to lead Yahoo into a place where they grab more of Google's market share and increase their general relevance. It's certainly clear that while Yahoo has made some progress and taken in some great people, that they're stuck on a lot of execution, that they've actually suckified some things they've taken in, and have other problems.

I have my doubts, however, that the shareholders will have the ability to pick anyone better, and for that reason alone, it wouldn't surprise me to see them go to MS.
posted by weston at 10:30 AM on November 18, 2008 [1 favorite]

2) The web as a platform is open and expanding. Windows as a platform is closed and stagnating. Which do you want to be invested in for the next 10 years?

Windows server is, at least as of 2007, expanding faster than Linux. They've got a mature, scalable platform in .NET. Yahoo's got, what, some UI libraries supported through corporate goodwill? If you set aside O/S prejudices, the purely financial answer to your question is "Microsoft".

Wow, I never thought I'd be defending Microsoft, of all things, so vigorously.
posted by mkultra at 10:49 AM on November 18, 2008

Yahoo's got, what, some UI libraries supported through corporate goodwill?

Yahoo also has a number of long-cultivated open-source-based serving technologies (especially Apache), and was/is an active contributor to the open-source community.

Disclosure: I work for Yahoo!.
posted by potch at 11:58 AM on November 18, 2008

As a former Yahoo employee I would just like to wish the company luck in their search for the next Chief Incompetence Officer to continue piloting them into a deep well of irrelevancy.
posted by influx at 12:02 PM on November 18, 2008

Windows server is, at least as of 2007, expanding faster than Linux. They've got a mature, scalable platform in .NET.

I had not seen these stats (I guess I still haven't ;).

I agree .NET is a decent platform with promise to put Microsoft in a position to eat an increasing portion of the lunch of players like Sun, IBM, Oracle, etc, and consequently, also compete with the open source offerings. But this also doesn't take away from the fact that their desktop OS (what I mean by Windows as a platform) is decreasing in relevance, and so even if they're moving to a position where they offer a successful web/service app stack, a good number of the competitive advantages they've enjoyed will be lost.

Yahoo's got, what, some UI libraries supported through corporate goodwill?

The javascript libraries are an interesting bid, as are some other things they have under the hood, but particularly, Yahoo has some of the highest trafficked web properties out there. As I said in my earlier post, despite the increasing dominance of social networking sites, they still rank near or at the top of web destinations. Things like Flickr and Yahoo Groups tend to be pretty sticky because they're a pain to migrate away from. That's not the half of the huge range of info services they developed in their bid to be king of the "portal" heap, even as they fell down as a search utility. Some of that stuff is mediocre, but if the company could pull themselves together, improve their search, interface, and interoperability, they could be a force to be reckoned with by even Google. There's some indications they understand this. The big problem is there's only limited indication they can actually execute.
posted by weston at 12:03 PM on November 18, 2008

About the failed Microsoft buyout of Yahoo: The best analogy I heard was "It's like tying the Titanic to the iceberg. It'd keep you from sinking just long enough to freeze to death." Deja vu.
posted by Pronoiac at 12:16 PM on November 18, 2008 [1 favorite]

In terms of their properties, their management of profiles, groups, chat, and the like has been atrocious. Yahoo continues to fetishize partnering at the expense of keeping the userbase happy. And when it comes to advertising, your userbase is what you sell to the marketers.
posted by adipocere at 12:55 PM on November 18, 2008

I believe that shareholders should be sharks; they should weigh the value of this quarter's results as an indicator that next year will be better. A failing company that has taken my money is squandering my cash. If they didn't want to be valued this way, they shouldn't have taken my money.

An excellent illustration of the attitude (an attitude that in and of itself is perfectly rational, of course) that has led to the blinkered, short-term thinking of companies focused on 'delivering shareholder value' through any means necessary -- including 'downsizing', outsourcing, pension and health-care reductions for employees, and more -- that has hollowed out the American economy (and others, of course) and been one of the factors that has brought it to its current dire straits.

Slavish devotion to shareholders at the expense of employees rewards the rich (relatively speaking) and destroys the middle class and those who aspire to it. It's abhorrent.

I own shares in companies. I do not own shares in companies who pursue short-term growth at any cost.
posted by stavrosthewonderchicken at 4:20 PM on November 18, 2008 [1 favorite]

I have heard that the big trouble with Yahoo is that their technical infrastructure is put together extremely badly, that they've had various failed projects to rewrite parts of it in other languages that haven't gone very well.

If so, they might be in dire straits which no quantities of cash could fix. The longer these sort of practices go on, the more difficult it will be to ever fix what they have. Their engineering productivity could literally be reduced by a factor of ten or more by this.


A Yahoo-sized piece of software is a large number of hacks bolted onto a chassis.

Many of these hacks are "business logic"; a discovery that one version of Internet Explorer needs to be coddled in a certain way, that some sources of data are formatted slightly differently, this is useful information about the world and your users that you obtained through the sweat on your brow and have formalized into this code segment.

The rest are system hacks. No matter what you're doing, there's some sort of mismatch between this lovely crystalline thing in your head and the actual system that implements your ideas. In many cases, there are some pretty dramatic mismatches, particularly if your chassis is poorly designed. So you write code that doesn't really "do anything" except glue your idea into their framework. Sometimes when you don't understand their framework, you do far too much work here; sometimes when the framework sucks, you do far too much work here; sometimes it's a combination of both (sometimes you don't want to learn their framework, because it sucks).

Lots of pointless time goes into this "system hack" section which doesn't make anyone any money nor cause us to be wiser people (nor handle any sort of universal function that might be useful to a user). Often the system hack is used to bolt the business logic onto the chassis; often the system hack and the business logic are inseparable...

Now, it's rare that it's any specific "hack" that makes your system start to become frozen and difficult to maintain; and if it is, it's usually pretty easy to fix that hack.

Instead, what happens is that your chassis starts to show the weight of all the hacks that are put upon it.

Now, if you have a strong chassis, this will be a cheerful time for you. There's nothing like the feeling of finding out that you're running out of resources, putting some more machines into service, and having everything work. This means your sweat before pays off now.

But if you have a weak chassis, then you'll start to see systemic problems appearing where you can't just turn it up to 11.

For example, some of your servers might constantly be overloaded, others idling, and adding more servers doesn't fix it. There's some issue in your underlying algorithm - perhaps your "keying" (attaching a textual "key" to route your data) or your "sharding" (splitting that data amongst many servers).

Often, the only way to fix such systemic issues is to re-bolt all your hacks onto a new chassis. But if the old chassis were truly br0rk3d, its badness might have leeched onto everything it touched. You might not even be able to tell "business logic" (which you want to keep) from "system hacks" (which you want to throw away). You might have to bring in a lot of the bad ideas from the initial system into the child system. You might do all this work and find out that you brought the badness with you from before.


Or even worse, your bad chassis can cause purely abstract, developmental issues that completely prevent any progress from being made.

"Build" is the process of turning human-written, textual instructions ("source files") into executable code that your collection of computers can run ("binary files"). Programs these days routinely consist of millions of lines of source and a mistake in any one of them can render the whole build inoperative, or worse, introduce gross or subtle errors.

If too many people are working on the same code at the same time, you can get into a state where it's very hard to "push a new build"; people are doing conflicting work, or changes that seem to be right in small tests but are wrong over the whole system, so you cannot build a new version of your system. There are all sorts of automated tools to help prevent this. But.

Terrible, terrible things can happen. If the build stays broken and emergency bugs appear, managers might be forced to go back to a known previous good version, "branch" from there and make changes from the "known good version". More work might be done on the branch. People might start to "port" their work from the "main branch" onto the "working branch". Hijinks ensue.

The astonishing result might be that there are hundreds of engineers working, yet it's difficult or impossible for any of them to actually accomplish anything. It's not like "the assembly line has stopped" but rather "the line is very slow and sometimes even goes backwards".


Now I have no internal knowledge whatsoever, but I've heard that Yahoo has such problems in some key groups (though there are also some fine engineers there too). If so, this is a huge hidden liability that might make the acquisition a risk at any price.
posted by lupus_yonderboy at 6:04 PM on November 18, 2008 [3 favorites]

lupus_yonderboy just blew my mind.
posted by xmutex at 7:24 PM on November 18, 2008