BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
BUSINESSWEEK E.BIZ -- PERSONALITIES ONLINE EXTRA: Q&A: "When I See Other Portals Cutting Back, I Smell Blood" Yahoo!'s No. 2 exec says he hopes to use the slowdown to "grab market share" and expects to leap ahead in corporate portals For the first time in its seven-year history, Internet bellwether Yahoo! Inc. is facing a serious business downturn. After posting growth for 20 straight quarters, Yahoo warned investors that its first-quarter revenues would decline by an eye-popping 26%. Between a slowdown in Internet advertising and the emergence of an ultra-competitive media powerhouse in AOL Time Warner, Yahoo has some tough challenges ahead. BusinessWeek Correspondent Ben Elgin sat down to breakfast with Yahoo's No. 2 exec, president and COO Jeffrey Mallett, to discuss his battle plan. Here are edited excerpts of their conversation: Q: How is Yahoo changing in the rough-and-tumble market? A: Our goal is the same: to provide essential services so people use us more. I'm more bullish than ever. I see a great opportunity in Internet advertising right now. This is our chance to grab market share. When I see other portals cutting back, I smell blood. Q: Yet you're also looking to expand revenue streams? A: Taking nothing away from our consumer [Internet] advertising business, of course, we're always looking to diversify our revenue [streams]. Our enterprise business, for example, is extremely important to us. With [the 1999 acquisition of] Broadcast.com, we really started our enterprise-services unit. The corporate-portal offering is now the cherry on top. We've already signed 18 contracts...That's some pretty good progress. We've also got store-hosting and site-management offerings for smaller businesses. Q: How deep will the corporate business go? Now, many corporate-portal players are offering links into hosted business applications, be it accounting products or human resources software. Would this be getting too far afield for Yahoo? A: No, this isn't too far afield for us. In fact, many of our partners and customers are [suggesting that we] integrate some applications into the corporate gateway. This isn't something that's in our immediate plans. Our goal is to be the market leader [in corporate portals] by the end of the year. Once we achieve that, we'll certainly look at some of these other opportunities. Q: What will it take to extend your potent consumer brand into the business realm? A: We're very proud of our consumer brand. We've invested in that all along, when others didn't think branding was important. We're in a commodity business, and branding matters. My favorite [acronym] for Yahoo is: You Always Have Other Options. I always keep that in mind. Certainly, we're looking to extend our brand. We're working on a new advertising campaign right now, focused at business executives. It will be a very print-oriented campaign with probably no TV. The new marketing campaign will begin toward the end of the first quarter, or early in the second quarter. Q: How daunting a competitor is the new AOL Time Warner? A: Certainly [AOL Time Warner COO] Bob Pittman has an impressive arsenal to work with. He can just lay all these options out right in front of you. But I like where we're at. [By not owning the content], our vision can be bigger than AOL Time Warner. The best-of-breed offering always wins.... We can be the best of breed on the Internet by pulling together the best content from the most sources. We're not limited by proprietary content. And [media companies] need online outlets for their content. That's going to be the most critical factor. Q: Rumors are flying that traditional media companies are interested in acquiring Yahoo. Any truth to that? A: There's nothing new here. It was Viacom supposedly buying us [three weeks ago], and before that it was Disney. But keep in mind, we're always looking, always keeping our options open. If we felt that this business was hitting the wall, sure, we would look to get out. But we're not at that wall. Q: Can you at least say if your phone is ringing? A: There are always discussions happening in this business. We showed up on most people's radar screens in mid-1999 when they finally realized we weren't going away. We've gotten calls from everyone from [Disney's] Michael Eisner to [News Corp.'s] Rupert Murdoch since then. Q: Yahoo has been knocked in the past for being arrogant. It partly stemmed from the attitude: "We're changing the world. You're either with us, or you're not." How do you answer that? A: We ran Yahoo to optimize market share, there's no question. If there was a company out there that didn't get the Internet, or wasn't certain what working with us could do for them, we moved on very quickly. We gravitated toward companies that were ready to dive in [to Internet advertising]. I make no apologies for that. Now we're putting in a lot more resources to work with traditional advertising agencies. I'm very direct and straightforward with them. I don't pretend that we've worked extraordinarily well together in the past. But I tell them that we need each other to make [Internet advertising] work. Q: How has the balance of power worked between [Chairman and CEO] Tim Koogle, [founder] Jerry Yang, and yourself? A: The three-headed monster has gotten a lot of attention. It's something that business professors everywhere say isn't possible. At some point the egos have to get in the way, they say. But we've struck just the right balance of egos between us. We're all very blunt and straightforward with each other. It has really ended up being an advantage for us, having three capable leaders. Most of our competitors just had a single leader, and they collapsed under the weight. There's no way a single person could run our business. Q: But there's got to be some tension. A: When the three of us meet, we're brutal to each other. It's intellectual sparring. We're not afraid to tell each other: "You're wrong" or "that's bulls--t." But by the time we finish the meeting, we're all on the same page, and we're ready to move forward. Q: Will there be any layoffs or other cost-cutting measures? A: We want to gain market share, so we don't expect anything dramatic. We do want to reduce operating expenses by 5%, which will happen in a couple of areas. There won't be any layoffs, and we'll continue to add employees, but we'll reduce hiring levels in certain areas. There will also be some cuts in discretionary marketing and distribution costs. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Yahoo!'s General Says ``Charge!'' RESUME: Jeffrey Albert Dimery Mallett TABLE: Mallett on the Yahoo! Hot Seat ONLINE EXTRA: Q&A: "When I See Other Portals Cutting Back, I Smell Blood" INTERACT E-Mail to Business Week Online

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