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Coming to a theater near you: The Yahoo that can say no

Promising a revival, CEO Scott Thompson offers up more discipline and deliberation when it comes to what Yahoo chooses to invest in or jettison.

Can a company born in the throes of the Web 1.0 era morph into a growth company that moves at a speed more commonly associated with leaner, more nimble Web 3.0 startups? That's the task CEO Scott Thompson has set for himself and for Yahoo.

After Yahoo announced its first-quarter earnings earlier in the day, Thompson, now more than a full three months into his job as its latest chief executive, used the occasion of a conference call with analysts to outline a series of steps he said would help revitalize the company.

He did not offer up any golden bullets. But Thompson sketched out a picture of a smaller, more focused company -- call it the Yahoo that can say no, investing only in areas that make strategic sense while jettisoning businesses that are no longer vital to its future.

Sounding a rhetorical refrain which often was popular with previous Yahoo CEOs, Thompson shined a spotlight on the large number of users who come to the Web site each day. "Any company that starts with nearly 700 million users, relationships with thousands of advertisers, hundreds of millions of dollars in cash flow, and longstanding strategic relationships and investments has a significant opportunity to create value," he said.

But that served as a rhetorical springboard to launch into how he would reverse a trend where Yahoo continued to lose share of time spent online.

"Although a strong tide of consumer engagement and ad spend continues to come on line, Yahoo's engagement and revenue has not been rising with that tide," according to Thompson.

Starting with what he said was a "clean slate," he said the plan was part of an exercise in which his team was asked how they would build Yahoo from the ground up if they were inventing it from scratch today. His answer: Yahoo's been biting off more than it could for too long.

"We took a comprehensive look at everything, all of the media, communication, search, social, and commerce experiences that we offer our users. We also looked at the major platforms, systems, and technologies we use to operate those properties for us and our partners, including the data center footprint and other corporate services required to make it all run," he said. "Every part of the business, and here was a simple answer. Yahoo has been doing way too much for too long and was only doing a few things really well."

Thompson's plan calls for the following:

  • Yahoo will consolidate technology platforms and shut down "or transition" roughly 50 properties that don't contribute meaningfully to engagement or revenue.
  • The company will define what's core and focus on properties that generate the majority of Yahoo's engagement and revenue.
  • Yahoo intends to deploy engineers into commerce businesses to get them closer to users.
  • Accelerate the deployment of platforms and technologies with a goal to make Yahoo properties "more scalable, nimble, and flexible" as well as less expensive and time consuming to run.
  • Better exploit Yahoo's data to personalize user experiences and improve advertiser ROI.
  • Refocus research and development on owned and operated properties. Yahoo will curtail development of a still-undefined number of initiatives (including platforms for outside publishers and theoretical science) if they are judged not to be core company interests.

That was the PowerPoint portion. But Thompson also alluded to the deeper, cultural problems any new CEO faces after taking over a company used to doing things in a certain way for so many years. The company-wide review he conducted also turned up what he described as "execution issues" that had added "complexity" to Yahoo's development and delivery process taking an idea from concept to launch.

He was blunt about what was uncovered.

"Yahoo has built processes that were originally intended to help us scale but they've become way too complex and have stifled innovation. We've made some strides here but not enough. Some of our processes continue to degrade the user experience, limit our ability to deliver for advertisers, and frustrate Yahoos who really want to produce for our customers. We simply must change that.

Reaching that goal has already caused pain. But even after last week's firing of about 2,000 people, Thompson may decide to ax more jobs. He said that Yahoo still has "way too many people for the amount of output from this business. A streamlined structure and less bureaucracy will help Yahoo get stuff done at the pace our customers and our industry require."

What are the chances that a new Yahoo CEO won't be back at the mic two years' hence repeating the same refrains? No guarantees but judging from Wall Street's initial reaction, they liked the headlines. In after-hours trading, the stock advanced as much as 4.5 percent before giving up some of those advances.