Two top Yahoo execs to leave in reorg

Chief Operating Officer Dan Rosensweig and Lloyd Braun, the head of Yahoo's media and entertainment group, are leaving the company, Yahoo spokeswoman Joanna Stevens said. John Marcom, senior vice president of international operations, is also leaving the company "soon," she said. She declined to provide more details.

Meanwhile, Chief Financial Officer Susan Decker will take over a reorganized advertising unit but will continue to serve as CFO until a replacement is found, the company said.

The leadership assignments will take effect on January 1, 2007, and the reorganization is expected to be completed by the end of March. Stevens said no layoffs were being announced at this time.

Yahoo, which has suffered this year from search market share losses, the delay of its new ad platform and a drop in profits, is realigning its business groups under three new operating units. The executives heading up the units are set to report directly to Chief Executive Terry Semel.

Terry Semel

"We need a revitalized structure to heighten accountability and streamline decision making while allowing us to better focus on serving our key customers," Semel said in a blog posting

The new Audience Group will oversee search, media, communities and communications. An executive search has been launched for an executive to lead the group. The new Advertiser & Publisher Group, which Decker will oversee, will combine marketing, sales and distribution partners to create a global advertising network.

The new Technology Group, headed by Chief Technology Officer Farzad Nazem, will tighten product-engineering integration, help build new social-media environments and speed up development of next-generation ad platforms, the company said in a statement late Tuesday.

Although Decker will be stepping out of her longtime role as CFO at Yahoo, the task of heading up the sales and publisher group will not be all that unfamiliar, one analyst said.

"Sue joined Yahoo when it was pretty early in its formation as an organization and was instrumental in helping it develop its strategy, including sales," said Brian Pitz, an analyst at Banc of America Securities. "She really gets it."

Susan Decker

Decker's shift to an operational role in heading up the advertising and publishing group could bode well for her to one day lead the company as CEO, Pitz said. He added, however, that Semel is doing a good job running the company and doesn't see him leaving anytime soon.

"The Internet is continuing to grow and evolve at a rapid pace, and we're reshaping Yahoo to be a leader in this transformation, just as we did successfully five years ago," Semel said in a statement.

Dan Rosensweig

Rosensweig, who joined Yahoo nearly five years ago, was previously president of CNET Networks, the publisher of News.com.

"When we recruited Dan five years ago, we brought him on to help revitalize the company," Semel said in his blog. "Since then, he's helped grow our global audience to one in every two Internet users, introduce social media to our users, create a leading mobile infrstructure, attract a record number of advertisers and position Yahoo for its next phase of growth."

One analyst said Rosensweig's impending departure comes as no surprise to Wall Street.

"We had heard for a while that he wanted to leave and do something new, like maybe get into politics," Pitz said. "But I think he wanted to stay until March to ensure a smooth transition for the second phase of Panama, which is expected in the first quarter."

Panama is the name of Yahoo's new search-advertising platform. The platform, whose first phase went live in October, had previously been delayed by a quarter. In its second phase, the marketplace design will include more factors for ranking ads, for example.

Some industry followers are concerned about the timing for Yahoo's reorganization, given Panama's status.

"We think this news will be a near-term negative, as it increases execution risk during a very transitional (and) critical time," Anthony Noto, a Goldman Sachs analyst, noted in a research note. "We think Panama's new marketplace will create some unanticipated consequences. Execution risk increases meaningfully when a new leader is forced to deal with unintended consequences in addition to learning his (or) her new role."

Over the long term, Noto believes that the reorganization will aid Yahoo in its next stage.

Shares of Yahoo initially opened down in early-morning trading but virtually regained their footing later in the morning.

Braun, a former ABC executive, was also hired by Semel, another ex-Hollywood executive--from Warner Bros. Braun's tenure has been a rocky one at Yahoo, marked by rumors of his departure and complaints that he didn't fit with the tech culture of Silicon Valley and that he failed to turn the company into an entertainment powerhouse.

Lloyd Braun

Braun's departure was not included in the formal announcement but was confirmed after the fact.

The new structure should quicken the pace of innovation at the company, which is in heated competition with Google and Microsoft for online ad dollars.

The changes are similar to general suggestions proposed by an executive in an internal memo that leaked out last month.

In the missive known as "The Peanut Butter Manifesto," Senior Vice President Brad Garlinghouse said Yahoo was "spreading its resources too thin, like peanut butter on a slice of bread." He complained that Yahoo lacks a "focused, coherent vision," "clarity of ownership and accountability" and "decisiveness," and he recommended a dramatic organizational shake-up and work force cuts of up to 20 percent.

Yahoo, which ceded its leadership in the search market to Google after the dot-com bust, has been troubled with setbacks this year. They have included the delay of its new advertising platform, which was designed to help it better compete against Google, and a drop in third-quarter profits attributed to slowing ad sales.

Over the last year, Yahoo has continued to lose market share to Google. Google's share has risen to 45.4 percent in the United States in October from 39 percent a year earlier, while Yahoo's market share fell to 28.2 percent from 29.2 percent, according to ComScore Networks.

Semel, however, discounted suggestions that Yahoo's reorganization was related to the "Peanut Butter Manifesto."

"Now, I know what you're thinking--this is all about peanut butter. Actually, we've been orchestrating this plan for a number of months as we envisioned the next phase of growth for the Internet," Semel said in his blog. "Following our third-quarter results, I very openly discussed that we were going to become more focused and bring about change."

Yahoo has watched Google's stock rise to more than $500 a share, while Yahoo's share price has fallen about 30 percent since the beginning of the year. It closed at $27.40 on Tuesday.

Google has also been out-"wheeling and dealing" Yahoo, snagging a deal to provide advertising on News Corp.'s MySpace.com. The popular social-networking site had been getting ads served by Yahoo.

There have also been other executive losses at Yahoo recently, including that of David Katz, who was in charge of Yahoo's sports and studios units, as well as two executives from the Yahoo Publishing Network Group, Senior Vice President Bill Demas and General Manager Will Johnson.

Semel's blog drew quick interest from users, many of whom appreciated his use of the technology to explain the reasons behind the reorganization and his thoughts of moving the company forward. Users also weighed in with their own suggestions for improving Yahoo's prospects.

A user going by the name Steve Morsa posted his thoughts on Semel's blog: "Nice, bold moves from a great company, Terry and the Yahoo team. If I may humbly suggest another: The launch of a brand-new ad platform where you'd enable your advertisers to quickly and easily select and bid on the actual demographic and psychographic traits and characteristics of their most desired customers--instead of just the words people enter into search boxes...Like paid search did before it, paid match is itself going to turn the world of advertising upside down again. Yahoo should be at the helm when it does."

A user going by the name Brendan wrote: "I think the smallest and most effective thing you could do to improve the usability of Yahoo would be to allow users to stay logged in on a computer by checking a box. Gmail allows it, and it's my biggest irritation with Yahoo services, which is why I switched to Gmail."

Yet another user, Matt Schulte, wrote in with a suggestion: "No media biz release would be complete without stressing 'heightened accountability and streamlined decision making'...but I think the real questions are...who are these 'key customers,' and what does 'creating great user experiences' really mean? It seems like Yahoo has rolled out many products in the last year that they consider provides 'great user experiences'...but weren't they really potentially great advertising vehicles, except not enough customers used them?"

Schulte continued: "Sometimes, I wonder if Yahoo considers its advertisers to be its key customers...which, of course, makes perfect big-biz sense, but it's also putting the money cart before the people horse...I think something big, bold and dramatic on the order of AOL's taking down the walls or Google's scooping (up) YouTube, will be necessary to stop the Wall Street (and) blogger whispers, and if this bold move is something unequivocably about real 'user experience' and not a press release about a new ad partner, then Yahoo will begin to get back the momentum it had a year ago."

CNET News.com's Stefanie Olsen contributed to this report.