The new CEO believes faster, global engineering will help Yahoo find a way out of its troubles--eventually.
Stephen Shanklandprincipal writer
Stephen Shankland has been a reporter at CNET since 1998 and writes about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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Yahoo's 5 percent layoff is going to be different this time.
So new Chief Executive Carol Bartz promised Tuesday as she announced first-quarter financial results and described the impression she's now begun trying to make on the Internet pioneer. Instead of an across-the-board cut, Yahoo's layoff of about 675 people is intended to enable new hiring and investments in the company's bigger Internet properties.
"We have good engineers but have to hire more and get them focused on the right stuff. It's probably the most important thing Yahoo's going to do to really become a big strong growing international company," Bartz said during a conference call to discuss the company's lackluster first-quarter results.
Specifically, she said the company will hire engineers to bring Yahoo's major properties onto a unified global platform rather than its current variety of different systems for different countries. Today's scattered technology infrastructure has prevented Yahoo from adapting quickly and adding new features, especially outside the United States, she said.
The choice shows Bartz isn't taking a quick-fix approach to Yahoo's problems. First comes engineering, then comes a better experience for Yahoo users, and only then comes the financial return. "All that investment will pay off, I believe, with more innovation, faster and better user engagement, and the stuff we need to be a hot site. If we're a hot site, the advertisers will follow," she said.
And Bartz cautioned that the revamp isn't going to be complete soon.
"To fully globalize all our platform is probably a couple-year program," Bartz said. "You can't underestimate the past focus the company had on the U.S. market...The international properties almost had to fend for themselves."
As an example, Bartz pointed to a revamped Yahoo Music site that opens up to content from YouTube, iTunes, Amazon, and other sites and lets Yahoo members share their music-related activity with their friends. That revamp wasn't possible internationally, she said.
During the call, Bartz generally stuck to her script, reining her characteristically salty language. But some of her frustration with Yahoo's sluggish pace shone through at the end of the hour-long call.
Yahoo's engineering focus "was sort of scattered to the winds. There were engineers in almost every country, and way too many product people. We had one product management person for every three engineers," Bartz said. "We had a lot of people running around but nobody fucking doing anything!"
Projects like the Yahoo Open Strategy have been more than a year in the making and only are arriving gradually. Yahoo is a big property, and changes necessarily come slowly as the company tries to figure out what works and doesn't as it tows its massive user base toward new technology, but meanwhile, rival Google touts its experimental "launch early, launch often" philosophy.
Even as Google expands into telephone services, Web browsers, mobile phone operating systems, general-purpose cloud computing infrastructure, and any number of other projects, Bartz is keeping Yahoo focused on its core assets: a number of high-traffic Web properties.
Bartz specifically pointed to Yahoo's home page, sports, news, finances, mail, search, mobile, and entertainment sites as the companies focus, saying the company will deliver a "wow experience for our users."
Patience could be hard to come by. Yahoo's first-quarter revenue, excluding commissions paid to partners, declined 14 percent from $1.352 billion to $1.156 billion.
The company was hurt by a variety of factors. Revenue from graphical "display" ads on Yahoo sites dropped 13 percent worldwide to $371 million, while revenue from search advertising dropped 3 percent to $399 million. Affiliate marketing revenue, a search-related category, declined 16 percent to $511 million.
Revenue per search dropped along with the economy. "It's like online window shopping. People are grazing around, they're just not clicking through to buy," Bartz said.
But online search remains key to Yahoo's future, Bartz said, though she declined to say whether it's necessary for the company to be a primary player or whether it would work if it's using another company's search results. Microsoft and Yahoo held many discussions in 2008 about such a partnership, with Microsoft taking over the business one option, and such talks appear to be on again according to All Things D and the Wall Street Journal.
"I'm well versed enough in the search business at yahoo to say it's absolutely critical to Yahoo. It's critical to our customers and partners that they have a combined search and display experience on the Internet. I haven't changed my position on that. Relative to anything else with Microsoft, I'm not going to comment," she said.
Bartz also specifically touted one hybrid project, Yahoo's plan to bring branded display ads to search results, which today feature only text ads.
In the long run, though, Bartz remains a believer in traditional display ads.
"Pulling back on brand advertising is a short-term solution that leads to long-term brand erosion," she said, and those with premium brands won't resort to just bidding for search keywords to preserve their brand.