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The new Yahoo in chief

Terry Semel was a surprise pick to take over as CEO. A well-regarded Warner exec, he's a newbie to tech. Is he up to the challenge?

A week after his appointment as the new chief executive of Yahoo, there's still an air of mystery about Terry Semel.

The biggest question Wall Street and industry executives have asked is "Why Terry?" Despite a stellar 24 years at Warner Bros., Semel has never run a public company; he has limited experience in the advertising-sales business; he invested in the Digital Entertainment Network (DEN), a poster boy for online-entertainment failures; and he has not been known as a turnaround guy.

Yahoo's board of directors hopes there's a first time for everything.

Semel brings to the company a steady, stable demeanor widely praised by former colleagues and the entertainment industry at large. After he approached the Yahoo job, Semel did his homework by meeting with executives, board members, and even large shareholders such as Softbank in Japan.

"He spent the next month doing due diligence and with the board members," said Bob Daly, Semel's former co-CEO at Warner Bros. and now managing partner and CEO of the Los Angeles Dodgers. "If they asked him 20 questions, he'd ask 30."

When you're building a Yahoo Finance, you're building a brand. That's an area that I've done throughout my career. He continually describes himself as a "builder," ready to roll up his sleeves and turn big companies into giant companies (Warner Bros. went from $750 million in annual revenues in 1980 to $11 billion by the time he left in 1999).

And after decades as an entertainment mogul, Semel's relationships with other big media companies could come in handy. Yahoo needs content, be it editorial, video, music; and it also needs closer ties with the big traditional media companies. Semel, who reportedly played an influential role in bringing together Vivendi and Universal, could have a few chips to cash, but continues to deny his hiring was an effort to sell Yahoo.

In Semel's lap sits a company that once seemed impervious, but is now full of holes and badly injured. Executives have left; the stock, once trading as high as $250, has plummeted into the teens; and overall revenues have slumped.

Now it's up to Semel to turn Yahoo into a "Matrix," instead of a "Mars Attacks."

Semel spoke to CNET News.com, along with co-founder Jerry Yang.

Q: You're inheriting a company that's been under a lot of fire about where the business is going. What's the biggest thing that needs to be fixed right now?
A: I think Yahoo has great core assets. And it's those assets that fascinated me and brought me to the table. I love building things and will look forward to helping to build those core assets into a much larger and more diversified company throughout the world.

Does the strategy that Yahoo has had in terms of selling advertising and also doing different types of partnerships with other content providers and retailers and such--is that a strategy you see as being very sound at this point? And do you intend to continue to pursue that?
We have an opportunity to grow a lot more because a large portion of the advertising has really never been tapped. Surely it's too early to articulate where I see the company going per se, but I'm totally taken by two issues or two avenues the company raised in its Q1 earnings report. One, they talked about improving their advertising revenues by going more heavily toward the top 200 advertisers in the world. That's a world that I work a lot in. Those advertisers also can provide great crossover promotional opportunities and therefore have a chance to move eyeballs from online to offline and back and forth a lot. On the other hand, they also talked about beginning the process of some premium services, from business entertainment services to Yahoo Finance. And Yahoo Music for that matter. So I think (a) you're going to talk about how good it is, (b) you're going to talk about how well-priced it is, and (c) what are the marketing plans for it and how can we move it throughout the world--and particularly throughout a very competitive world? Those areas are very, very close to the world that I come from and the background that I have.

You come from a history of content production and distribution. Is that something that you're looking to introduce into Yahoo's business, whether that be the creation of content or more types of unique material that users can access?
Before trying to decide whether you create it yourself or have others create it for you, let's go to the brand-building opportunities. When you're building a Yahoo Finance, you're building a brand. That's an area that I've done throughout my career. It can include other big promotional partners or advertising partners and also comes down to how you market it to consumers or other business clients.

I spoke with your former partner Bob Daly, who said you had a lot of respect for Jerry (Yang). Are the two of you going to be joined closely at the hip in terms of turning Yahoo around?
Yang: The thing about Terry is that despite the obvious media and entertainment experience, the thing we looked at was his personality and personal attributes. He's a guy that doesn't have a whole lot of ego. He can build great teams and lets the team take a lot of the credit. He's a guy who is able to be flexible and innovate and build business models on top of great brands. These are the things we look for as a person and a business leader--not to mention that he and Bob overachieved their targets for a very long time...Those are the things that we looked at to say, "Hey, here's a guy who can help lead us...
There's no mistake that we've made it clear that Terry's the guy who's going to lead us, and the new Yahoo, into the future. David (Filo) and I will continue to be passionate and continue to be supportive and continue to be here and be as much of a help and continue to drive the business along with Terry as we can.

Simply put: I'm looking forward to building this company. Period. Terry, you've been described as somebody people have enjoyed working for. Do you intend to seek the guidance of former associates from Warner?
I think my first focus at Yahoo is to really spend as much time as humanly possible over the next 60 or more days and get to meet everyone here and have them meet me and work with everybody and get into each other's rhythm. There are so many terrific people here already. I look at this as a long-term growth opportunity. So, I want to work with people who are here; I want to help them, support them, educate them and let them educate me.

Is there anything in the business of Yahoo you've been keeping your eye on, in the sense that you've isolated one part of the business that you find could be very good for continued growth?
I think at the moment--and I'm not an expert at this--Yahoo has two or three real businesses: one is the advertising support business, which generally, in the marketplace, has been weakened. I think they have an opportunity--or we have an opportunity--to grow a lot more because a large portion of the advertising has really never been tapped. Number 2, their business enterprise services is a terrific business for the company. The company is very well qualified to move forward in that. They have begun--they're making great headway in it. I think it could be a very good revenue base for our company. Number 3, there's a whole world of premium services there. Several are in the early stages right now. I think a lot of focus on them and a lot of attention paid to them could provide additional services to customers and bring us into that business which in the main we have not been in.

Do you think Yahoo needs more of a "traditional media piece" through other traditional media channels?
You're raising a very, very broad subject. I think if we keep our focus on growing and improving upon our core assets, if we dig into that and start mining the areas we talked about--which represent enormous growth for our company and enormous revenue and profitable growth for our company--and if along the way, if there are interesting joint ventures or interesting opportunities, we should at least examine them as we go forward.

But we're talking about--why I came? Simply put: I'm looking forward to building this company. Period.