A force for change at Yahoo

CFO Susan Decker will take on a key advertising role next year as the suddenly wobbly company looks to get back on firm ground.

Tech Industry
In January, the woman many believe is the heir apparent to run Yahoo made a very public splash by bluntly saying she didn't expect her company to beat Google at the search game anytime soon.

"We would be very happy to maintain our market share," Susan Decker, Yahoo's chief financial officer, reportedly said. Decker's frank assessment caused major ripples at Yahoo's Sunnyvale, Calif., office. Some executives believed she had been misquoted. Two search vice presidents even posted a Yahoo corporate blog distancing Yahoo from Decker's comments and reaffirming the company's commitment to search.

As the year comes to a close, it's looking more and more like Decker may have the last word on what's right for Yahoo as she takes on a lead operational role in the suddenly wobbly Net company's future.

On December 5, Yahoo announced it was reorganizing into three areas; advertising, audience and technology, and Decker was named to head the ad group beginning January 1. At the same time, the company said it was losing some top executives, including Chief Operating Officer Dan Rosensweig and Lloyd Braun, head of Yahoo's media and entertainment group. The executive departures seem to continue. Former vice president of brand marketing Murray Gaylord just left for NYTimes.com, for example.

While no one inside Yahoo will come out and say it, the recent management shuffle has given Decker the opportunity to prove she has the management chops to take over for CEO Terry Semel, who some believe will give up his post within the next year. Yahoo declined comment for this article.

The changes put Decker squarely in charge of the area in which it needs to improve the most to keep pace with Google--perfecting Panama, the new advertising platform that executives and analysts expect will raise Yahoo's ad performance and revenues. So far, insiders say the ad platform is testing well.

Susan Decker Susan Decker

Another big challenge for Yahoo will be to clean up organizational redundancies and disconnects that were outlined in the so-called "." In one example of such issues, the music services Yahoo Music and Musicmatch--a paid music service that Yahoo acquired years ago--haven't historically been combined, creating competitive operations in the same company and potential overlaps in workforce.

In recent years, Yahoo's new media arm in Santa Monica, Calif., also created its own marketing group independent of the company's headquarter team, which could be another potential redundancy, according to onlookers.

Finally, Yahoo needs to play catch-up in one of the hottest areas of the Internet--video. Two years ago, Yahoo formed a new media group in Santa Monica under Braun--a Hollywood player who while chairman of ABC Entertainment Television had given the green light to hits like Lost--with the expectation that Yahoo would become an Internet media heavyweight.

But instead of churning out successes, Yahoo's ambitions were eclipsed by nimble upstarts like YouTube, which Google bought for $1.65 billion. Yahoo is currently scouting for a new executive to head up its Audience Group; that person will oversee search, media, communities and communications.

In many ways, sources say, Decker had been telegraphing her concerns for some time, and her new role indicates that Semel is listening. Her remarks nearly a year ago reflected her longtime belief that Yahoo should not be chasing after Google in the search game. Instead, it should be focusing on building Yahoo's already popular network while bolstering search advertising and performance on its own turf, according to former Yahoo executives.

Those sources said Decker had long been bearish about investing heavily to win search-distribution partnerships away from Google because its rival could produce higher financial results from sponsored listings. Technologically, Google had surpassed Yahoo at optimizing ad revenue. Therefore, Google was prepared to give away a higher percentage of the profits to third-party partners like AOL, MySpace.com and others in the pursuit of gaining market share. Decker believed, according to one former insider, that giving away the farm to win deals from Google was foolish.

Instead, she believed Yahoo should focus on delivering search results and advertisements to its own visitors, because as the top destination on the Web (in one recent survey, MySpace topped Yahoo), Yahoo could remain focused on itself, not Google.

Still, Decker appeared to be outvoted at Yahoo, former insiders say, and Yahoo double-downed in search. "The fact that she wasn't onboard could have been strategically very correct," one insider said. Now, as head of search-distribution for Yahoo, it remains to be seen whether Decker still believes that Yahoo should be cautious when it comes to striking third-party partnerships.

Former colleagues say Decker has great strategic sensibilities and understanding for Yahoo's position in the market. Among peers, the 44-year-old mother of three is thought of as the prototype of the perfect working woman. Yet to some, her intelligence can be intimidating. "She's going to figure out quickly what needs to happen and she'll probably be right," said one former colleague.

Decker has been at Yahoo for six years. She came from investment bank Donaldson, Lufkin & Jenrette, where she helped Yahoo go public and was an equity research analyst covering media, publishing and advertising stocks for 12 years before being promoted to research director. Current and former co-workers have high praise for her steady financial hand.

"I think she has a lot of credibility within Yahoo and is known for being buttoned-downed, disciplined and even-keeled," said Doug Hirsch, former general manager of entertainment at Yahoo who left in July 2005 and founded health-related social-networking site DailyStrength.org.

But the next year will be telling for both Yahoo and Decker's futures. Youssef Squali, an analyst at Jefferies & Co., said it will be interesting to see Decker in such a key operational role.

"She hasn't had much of an operational track record yet, but she was certainly successful as a CFO," Squali said. "She's built a large following and credibility with the street, which means the street will give her the benefit of the doubt for a while."

Insiders say that with Decker's new role, Yahoo will likely focus on strengthening what makes the network different to consumers.

Also, sources familiar with Yahoo's workings expect there to be a reorganization to rationalize all the redundant positions, both throughout the company and between Santa Monica and Sunnyvale. That action would fall in line with Decker's tendency to keep costs tightly under control, sources say.

"She's got a tall order in front of her, whether it's rallying the troops and boosting morale or deciding what to do (with) the competitors," said Mark Hull, a former Yahoo product management director who is now vice president of marketing at casual game site iWin.com. "Whether it's her or Terry (Semel), those challenges are pretty self-evident."

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