Web of uncertainty clouds Yahoo

The day after Yahoo announced the imminent departure of chief executive and co-founder Jerry Yang, the stock market applauded.

The company's stock price jumped about nine per cent.

"With this CEO change will come hope that Yahoo will improve its performance," Citigroup analyst Mark Mahaney wrote in a note to investors.

What comes next for one of the nation's most popular web companies is far from clear, however. The company is in the midst of a search for Yang's successor. Meanwhile, the economic downturn is expected to eat away at advertising revenues, the company's mainstay. Its stock price has never returned to its heights during the dotcom bubble. And while Yahoo boasts myriad pages of information and entertainment, its overall identity is unclear and in each of its niches, it faces fierce competition.

"It's late for Yahoo," said Kathy Sharpe, chief executive of Sharpe Partners, a digital marketing agency in New York City. "They never anticipated a day when Yahoo wouldn't be king."

Yahoo, which began in 1994 as a project by Yang and fellow Stanford graduate student David Filo, cruised to prominence during the first dot.com era.

But since then, it has failed to keep up with the evolution of the industry. Even as consumers began to navigate the web using search engines, Yahoo's offerings seemed geared at consumers who would stay on the site, without venturing beyond. It didn't invest much in social networking, the web trend that followed.

Missed the bus

"They completely missed social networking," Sharpe said. "They have [photo-sharing site] Flickr, but they didn't do anything with it. They have a foothold in Asia, but they're not doing anything with that either. They used to be the leader in behavioural targeting [for ads], but not so much anymore. When Yang blew the Microsoft deal, that should have been it. He should have walked away."

Indeed, legions of investors have blamed Yang for resisting a $44.6 billion (Dh164 billion) buyout offer from Microsoft earlier this year.

Now that Yang is out of the chief executive job — he will retain a spot on the board — speculation has returned that Microsoft will once again try to buy up the company, only this time for a much lower price.

"Yahoo still has the biggest mass audience on the internet and as such they have a lot of value," said eMarketer analyst David Hallerman. "Micro-soft doesn't have that kind of reach."

Google voiced its immediate opposition to Microsoft's attempt to acquire Yahoo, saying it would seek to act like an internet monopoly. It likely would revive those arguments were Microsoft to undertake another buyout attempt on Yahoo.

Asked whether Microsoft is weighing making another offer for Yahoo, Microsoft spokesman Jack Evans declined to comment.

The search for a successor began a few weeks ago, and remains wide open, company sources said. Among the possible replacements being mentioned are News Corp. president and chief operating officer Peter Chernin, former AOL chief Jon Miller, former Fox Interactive Media head Ross Levinsohn and former Yahoo chief operating officer Dan Rosensweig.

PROFILE

Dominant players in cyberspace
Google, Yahoo and Microsoft are vying for control of the
fast-growing market for Web advertising. The departure of Yahoo chief executive Jerry Yang could clear the way for an acquisition of the internet portal, perhaps by Microsoft, some analysts say.

Microsoft
The maker of the Windows operating systems, it has long been the dominant player in PC software. Strong positions in gaming with its Xbox, and in software for internet servers. As consumers have turned more and more to the internet, Microsoft has struggled to make a mark. Its search engine consistently ranks third. Nine per cent of internet searches in the United States are conducted on Microsoft.
Market capitalisation: $176 billion

Yahoo
The undisputed leader on the internet when it comes to display advertising, according to eMarketer. It counts 141 million unique visitors monthly. Twenty per cent of web searches in the US are conducted on Yahoo. Believed to be the largest e-mail service.
Market capitalisation: $16 billion

Google
The dominant corporate player on the internet, largely due to its lead in search and search advertising. More than 60 per cent of web searches in the US are conducted on Google. It also owns YouTube, Picasa and DoubleClick.
Market capitalisation: $94 billion