Bloomberg News

Yahoo Interim CEO Faces Challenges of Two Prior Chiefs

May 15, 2012

Ross Levinsohn, executive vice president of the Americas for Yahoo! Inc.,speaks at the 2011 Web 2.0 Summit in San Francisco, California, U.S. Photographer: Tony Avelar/Bloomberg

Ross Levinsohn, executive vice president of the Americas for Yahoo! Inc., speaks at the 2011 Web 2.0 Summit in San Francisco, California, U.S. Photographer: Tony Avelar/Bloomberg

Ross Levinsohn has watched two chief executive officers come and go since he joined Yahoo! Inc. in 2010 as vice president of the Americas. As interim CEO, he’ll grapple with the same challenges that plagued his predecessors.

Levinsohn stepped into the CEO role this week as Scott Thompson resigned after failing to fix errors in his academic record. Thompson, whose exit also was part of a board restructuring, had joined the company in January after previous CEO Carol Bartz was fired in September.

Levinsohn, who has held stints at social-networking service MySpace and search engine AltaVista, must repel challenges from Facebook Inc. (FB:US) and Google Inc. (GOOG:US), which increasingly attract more users and advertising dollars. Levinsohn, known for working well with clients, can use his knowledge of media and the advertising industry to spur growth at Yahoo, said Sameet Sinha, an analyst at B. Riley & Co.

“Basically, he’s been around the Internet or media industry for at least the last 15 years at very prominent companies,” Sinha said. “He’s known both in New York as well as in Silicon Valley.”

Yahoo had begun to show signs of progress under Thompson, who eliminated 2,000 jobs and realigned management. In the first quarter, when Sunnyvale, California-based Yahoo posted its first revenue growth in more than three years. Still, the increase was just 1 percent, trailing Google’s first-quarter sales gain of 24 percent and Facebook’s 45 percent jump.

User Time

While Yahoo has more than 700 million users, their average time spent on the site during March was less than two hours, 15 minutes, according to ComScore Inc. (SCOR:US) Google sites attracted more than three hours of user time, and Facebook had more than six hours.

The challenges to Yahoo’s business were in place long before a proxy contest by New York-based hedge fund Third Point LLC. (YHOO:US) The investor, which sought to put its own directors on the board, was the first to flag discrepancies in Thompson’s resume, a finding that led to his resignation.

With Thompson’s departure, the company settled with Third Point and added three of its nominees to the board. Yet Levinsohn hasn’t moved beyond Thompson’s larger predicament, said Colin Gillis, an analyst with BGC Partners in New York.

“The challenge is essentially similar to what was facing Scott Thompson” he said. “But at least there’s a very clear action plan and there’s no longer the divisiveness that was shaking the company.”

Insider’s Advantage

Gillis said Levinsohn is likely to be considered for the job of permanent CEO. As a company insider, he may be seen as having advantages after his two predecessors were hired from outside the company. Bartz had led engineering-design software company Autodesk Inc. (ADSK:US), and Thompson had served as president of EBay Inc. (EBAY:US)’s PayPal unit, an online payments provider.

Newly appointed board chairman, Fred Amoroso, said in a meeting with employees yesterday that he would like to see Levinsohn become permanent CEO, according to a person who was briefed on the matter, who asked not to be identified. The Wall Street Journal previously reported the remarks.

Levinsohn is more prepared for the challenge than his predecessors, said Jon Miller, chief digital officer at News Corp. Levinsohn and Miller worked together at what is now Fuse Capital, a venture-capital firm.

“They finally got something right; the last two hires in particular never had any relationship to how Yahoo gets all of its money and all of its engagement,” Miller said. “He’s learned by being directly involved in the industry for a long time, getting an intuitive feel for what works and doesn’t work.”

How Companies Work

Levinsohn proved himself at Fuse Capital to be capable of understanding how companies, large or small, need to operate, said Roland Van der Meer, a managing director at Fuse.

“He really thinks in the larger strategic scale of what a bigger company has to do, and needs to do to take advantage of what’s going on and get ahead of that curve,” he said. “He’s tough because he knows what’s right and wrong. But at the same time, he’s just a regular guy.”

Prior to Fuse, he worked at Miller’s employer, News Corp. (NWSA:US) In 2005, Levinsohn got a call at his desk from Chairman Rupert Murdoch, who invited him to the company’s cafeteria for a spontaneous meeting, according to Travis Katz, a former executive at News Corp. Over lunch, Murdoch told Levinsohn he was planning to create a new online division and needed someone to lead it.

Levinsohn jumped at the chance to talk about how a bold new approach was needed, Katz said.

Meeting With Murdoch

“Ross pitched what he thought the opportunity was to Rupert and how big it was and how important it was to the future of the media company,” said Katz, who was part of the initial Fox Interactive Media team.

After Murdoch interviewed more than two dozen other internal candidates, Levinsohn got the job.

During his time at News Corp., he was instrumental in getting the company to buy MySpace, Sinha said. While Levinsohn was right to see the emerging trend of social media, the site would later lose users to Facebook, giving up its lead in the field. News Corp. later sold off the service.

At an investor conference last year, Levinsohn said MySpace was once the “shiny object” that made sales to large advertisers relatively simple during his time there. Now Facebook is getting that same kind of boost, he said.

Levinsohn knows the advertising industry well, said Roy Bahat, a former colleague at News Corp. and president of its IGN Entertainment unit.

“Ross understands what brand advertisers want from the Internet,” he said. “He understands premium content, great audiences and thinking at scale. Yahoo would be lucky to have him long term.”

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.


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