Chapter 49 Section 3 Success is also Xiao He, defeat is also Xiao He

Two people played a key role in Yahoo's recovery—new CEO Terry Samuel and chief financial officer Sue Decker.Although Ms. Decker is young, she already has a reputation on Wall Street. She can be called an expert in controlling budgets. In 2001, Yahoo was losing money.This year, more than 90% of Internet companies could not survive.Yahoo's prospects are slim if it doesn't turn around soon enough.Decker pulled Yahoo through in a simple but effective way.She ranks all the projects of the company according to the input-output ratio, and turns those projects that are ordered to lose money into wins on schedule.During this period, the company has no new investment in those projects, which is actually letting those projects die.When the deadline came, Decker didn't hesitate to kill those projects.Yahoo's online payment, auction, shopping and other projects were abolished at that time.Decker's shock therapy immediately controlled the company's budget and completed the closure.Next, the idea of ​​open source was handed over to the newly appointed CEO Samuel.

Samuel was originally one of the two co-CEOs of Warner Bros. Pictures, a subsidiary of Time Warner Corporation. From the perspective of qualifications, he was not qualified for the post of CEO of Internet leader Yahoo, as it later proved.However, Yahoo's board of directors took a fancy to its experience in traditional media companies and hired him to run Yahoo at a high price.For a long time, Yahoo has seen itself as a media company, rather than a simple Internet company (becoming DotCom in the US).Generally speaking, Samuel's thinking basically stays in the traditional media industry.When he first arrived at Yahoo, he didn't have a clear direction on how Internet companies could increase their revenue. He just followed the practice of traditional media companies charging for all services, and began to design charging methods for Yahoo's various services, such as 100M paid e-mail.Even in 2003, when Yahoo was already profitable, he tried to charge for sites indexed by Yahoo.Fortunately, his idea of ​​undermining Jerry Yang and Filo's original intention of making the Internet open and free did not materialize in the end.At this time, Samuel seized an accidental opportunity and opened up a new source of income for Yahoo.

GoTo, which couldn't survive at the time, turned into Overture and came up with a way to bid for rankings in search results. Overture found Yahoo without providing a search service itself.Samuel didn't know how to make money from search traffic, so he agreed to Overture with the intention of giving it a try.Soon, the search bidding ranking brought huge wealth to Yahoo, and the shrewd Samuel had secretly decided to buy Overture.However, Yahoo had a market capitalization of only US$8 billion at the time, while Overture’s stock price was as high as US$3 billion. After the merger of the two companies, the latter would account for nearly one-third of the shares, which Samuel felt was too expensive.The two companies have been talking on and off for a long time without any result.However, Samuel had already decided to enter the search market. He immediately bought Inktomi, which was beaten to death by Google, but still had a complete search engine and served MSN, at a very low price before Microsoft realized it.Microsoft's arrogance made it lose the opportunity to enter the Internet.There was another hiccup when Yahoo bought Inktomi. One day in 2002, Yahoo employees suddenly heard a noise outside the window. Everyone crowded to the window and saw a huge truck with a big sign on it, with the words Google printed on it.At that time, Yahoo and Google were still partners, and Yahoo employees couldn’t figure out what kind of trouble Google was doing. They took a closer look at the small words Inktomi and a sentence roughly saying “Let’s come back” under Google.It turned out that the people from Inktomi came to Yahoo to pass a hope to Yahoo under the high pressure of Google.Soon, Yahoo acquired Inktomi.At this time, Overture bought Alta Vista, an old-fashioned search engine, and started to search ambitiously. However, under several heavy blows from Google, Overture's market shrank rapidly, and its stock price plummeted.Samuel made a move at this time and successfully bought Overture at a very low price, thus completing Yahoo's plan to enter the search market independently of Google. From 2002 to 2003, the Internet industry was reshuffled. Yahoo acquired all search engines except Google and Ask Jeeves and Overture, which had hundreds of thousands of advertisers, for more than a billion dollars.It should be said that Samuel's business acquisition was very successful.Samuel was instrumental in expanding Yahoo into new markets and turning Yahoo into a profitable company.Relying on search advertising revenue, Yahoo's performance reached its peak in 2005, and Samuel became the highest-paid CEO in the United States at that time.

When the water is full, it will overflow, and when the moon is full, it will lose money. It is normal for a company to have peaks and troughs in its development.However, Yahoo fell to the bottom within two quarters of the 2004-2005 peak, and Samuel, as CEO, should bear the main responsibility.Yahoo's revenue depends on traditional brand advertising and online search advertising.The former is the competition of media brands, not only Google, but any website cannot compete with Yahoo in this respect.The latter is a technical competition and is Google's strong point.After seeing the prospect of search advertising, Samuel decided to compete with the new Google in search technology and regain the king of search.This misguided expansion pushed the fledgling Yahoo into an unnecessary crisis.Like everyone else, Samuel knew that Yahoo's search and advertising systems bought from Overture were not comparable to Google's similar products, so he quickly expanded the engineering department to catch up with Google. He even established a research-based Yahoo Research Institute, And invited many experts.But while engineers worked day and night, the new ad system never came out.Samuel changed three engineering vice presidents successively, and finally only came up with a Panama advertising system that disappointed everyone.And in terms of brand announcements where Yahoo had an edge, Samuel didn't do anything significant.Samuel's blind expansion squeezed Yahoo's profit margins and turned Yahoo into a monster that was neither a technology company nor a media company.

Originally, if Samuel knew his male and kept his female at this time, Yahoo's performance would not continue to decline.After encountering resistance, he not only failed to stop the unnecessary expansion, but covered up his mistakes, fooled investors, and made his fatal mistake, which ultimately ruined his career and made Wall Street abandon Yahoo.Back in 2004, Yahoo's earnings growth had fallen short of Wall Street expectations.It created inflated profits by selling a large number of Google stocks. Although this cannot deceive professional investors on Wall Street, it can deceive the majority of retail investors.In this way, Yahoo basically maintained its stock price in 2005.Since the beginning of 2006, Yahoo has sold out Google’s stock, and its performance has declined, and it has fallen short of Wall Street’s expectations. If Samuel admits Yahoo’s difficulties and problems at this time, and spends his energy on Yahoo’s brand advertising, Although there will be some difficulties temporarily, it can guarantee the long-term and stable development of Yahoo.However, every quarter after a financial report that did not meet Wall Street's expectations came out, Samuel always had the cheek to say "we are very successful this quarter again", and then boasted about his well-built Panama advertising system, as if once this system came out, Yahoo would be able to To regain the advertising search advertising market from Google, investors have to believe him time and time again.Yahoo's stock always fell and then rose for several quarters in a row.It fell because it missed Wall Street expectations, and it rose because Samuel cheered investors up with the illusory Panama.The chart below shows how Yahoo's stock has moved since its last six quarterly earnings reports.

When Panama finally came out after being postponed for two quarters, Yahoo’s advertising revenue did not improve qualitatively at all. Samuel said that the system would take some time to take effect. After one quarter, Yahoo failed to meet Wall Street’s expectations again. Samuel Er once again said that it will take more than half a year of running time to see the effect. At this time, fools can also see the problems.The investors who had been fooled by Samuel for two years finally couldn't take it anymore and kicked him out. Samuel is gone, leaving a battered Yahoo.Although his successor, Chief Financial Officer Decker, is a financial expert, his understanding of the Internet industry is really hard to compliment.One of the laughing stock she left to all investors was to set the lowest price for selling Google stock.As an investor in Google, Yahoo owns quite a lot of Google's original shares, including 2.7 million shares given to Yahoo before Google went public.Decker actually sold it privately to an investment company before Google's listing at a price of $82.62, which was lower than Google's listing price ($85).No one can come close to this low price.This incident itself not only shows that Decker has no sense of the Internet market, but also has a poor view of the overall situation as the company's top leader.Decker, who was born on Wall Street, should be well aware of the hedge (hedge) methods commonly used by investment companies to reduce risks.When it comes to Google's stock, Yahoo's approach should be to hold it, because if Google fails and the stock falls to zero, Yahoo will have no rivals in the entire Internet. Losing Google's stock is nothing more than a small partial loss, but winning is the entire Internet.Conversely, if Google's stock price doubles, it means that Yahoo's performance is declining relatively. At this time, if you sell Google's stock, you can double the cash and come back to compete with Google. (If Yahoo holds Google’s stock until today, it will exceed US$4 billion, which is 50% more than Yahoo’s total operating profit since its establishment. Now, Yahoo is in the hands of Decker, and its prospects are worrying. We The above-mentioned companies on the cusp of the IT industry, except AT&T that later fell apart, each has the best leaders, such as IBM's Gerstner, Microsoft's Gates and Ballmer, Intel's Grove and Cisco's Chambers. But Yahoo now has one such leader.