Yahoo: Bringing Geeky Back

Under CEO Jerry Yang's direction, the Web portal is trying to return to its tech roots and shift away from being a media catch-all

by Catherine Holahan

From the outside, it might not look like much has changed at Yahoo! (YHOO) since Jerry Yang took the reins as chief executive in June. Yahoo hasn't engaged in the massive layoffs some analysts deemed necessary. Nor does Yang appear to be considering Wall Street's other, more radical suggestions, such as ceding control of the company's search advertising business to Google (GOOG) or slicing Yahoo into smaller, more profitable chunks. And despite a long-rumored interest in Facebook, Yang has yet to acquire a stake in the social network.

But business is anything but usual under cofounder Yang, who's trying to return Yahoo to its roots as a technology company in the wake of efforts by predecessor Terry Semel to build a media empire. Yang is aiming to transform the culture, making Yahoo a place that encourages innovation, faster product development, and increased collaboration with outside Web sites and developers. "Jerry gets when technology rules apply and when media rules apply," says Vish Makhijani, senior vice-president of Yahoo Search. "There is more spring in the step from the technology folks here." When Yahoo releases third-quarter results Oct. 16, the shift is likely to be the focus of questions from analysts and media, eager for a progress report on a 100-day review promised by Yang in July.

A Tech Relaunch

Yang underscored his reemphasis on tech in September, when during a meeting with executives he pledged to foster an environment that makes it easier to launch new products. He put a fine point on his message by inviting Apple (AAPL) Chief Executive Steve Jobs to address the several-hundred person crowd. Semel, by contrast, had invited actor Tom Cruise to speak to Yahoo leaders in past meetings. The Jobs appearance came a day after Yahoo announced plans to "streamline" its entertainment business in Santa Monica, Calif., in order to free up resources for "the development of next-generation platforms, applications, and services."

To that end, Yang is making it easier for outside developers to work with Yahoo. Following the lead of younger Web companies, such as Facebook, Yahoo is releasing the so-called application programming interfaces (APIs) that enable programmers to create programs that can be embedded on Yahoo pages. Already, the company has opened up the source code to Yahoo Mail (BusinessWeek.com, 9/11/07), allowing third-party developers to create small programs that work with users' address books and other services.

Yahoo also is working with partners to create mini versions of their sites or programs that can be installed on Yahoo users' personalized home pages. Matt McAlister, director of Yahoo's Developer Network, said in an e-mail that he's "never been more optimistic about the future of the company," thanks in large part to these developer initiatives. "I think Yahoo is focusing on the right things and moving in a very positive direction," he added.

Under Yang, Yahoo also has made acquisitions focused on improving how its technology works. On Sept. 17, Yahoo acquired e-mail, calendar, and Internet calling service Zimbra for $350 million. "Zimbra offers incredible technology," said Brad Garlinghouse, Yahoo's senior vice-president of communications and communities, in a blog post after the acquisition. Earlier in September, the company acquired advertising network BlueLithium for $300 million, a move that could help Yahoo bolster its data-analytics tools.