The early Web startup got the Net before any of the adults. But after taking a fall, the now-beleaguered kingpin of digital advertising is looking to sales and marketing veterans to reel in the revenue.
Beset by shrinking ad sales, the taut budgets of blue-chip marketers and an anemic economy, Yahoo! has bulked up in recent months, recruiting talent with a breadth of experience in consumer, media and interactive ventures.
Recent hires have included John Costello, the chief global marketing officer who served in key posts at Sears, Roebuck and Co., AutoNation and more recently MVP.com (AdAge.com QwikFIND AAM76P), and media-savvy Wenda Harris Millard, tapped as chief advertising sales officer. Ms. Millard held top posts at Gruner & Jahr USA Publishing and was president of Ziff Davis Internet before Yahoo! hired her. The moves follow the May arrival of Yahoo!'s new chairman-CEO, entertainment honcho Terry Semel, former co-CEO of AOL Time Warner's Warner Bros.
Yahoo! needs the bench strength to compete against bigger and more diversified media companies in this withering economy.
Among Mr. Semel and his top sales and marketing management team members, five of the 10 executives are new this year (see chart, right); average age of the 10 is 47.
"We needed more senior people, far more experienced people who have access to clients," said Greg Coleman, Yahoo's! exec VP-North American operations, hired eight months ago from Readers Digest Association.
In five months' time, he said Yahoo! cleaned out the ad sales force, dropping an estimated 150 salespeople with an average of three to five years of experience. Yahoo! has gradually built up to the same headcount, adding 30 senior salespeople who have at least 10 to 25 years of sales experience. Mr. Coleman said 10 more senior salespeople will be in place by year-end.
Senior sales types bring experience and access. Access to decision-makers and influencers is all-important given competition among big media players for the shrinking ad dollar.
Beyond sales, Yahoo! will look to Mr. Costello to evolve the brand. "Yahoo! is the ultimate direct-marketing machine," he said, adding that one of his goals is to make Yahoo! "come of age as a consumer utility and marketing tool." Mr. Semel underscored the point last week when he told a meeting of analysts and press that Yahoo! will develop one-to-one database marketing services and other bundled services for marketers and consumers.
At age seven, Yahoo! is at a crossroads. In 2000, about 90% of its revenue came from advertising. By year-end 2001, Mr. Semel projects, the number will be 76%, with 20% derived from business and consumer fee-based programs and 4% from transactions. However, Lehman Brothers analyst Holly Becker last week put Yahoo!'s Internet ad revenue for 2001 at 80%.
Mr. Semel hopes to achieve a 50/50 split between ad-supported revenue and other marketing services by 2004. Some analysts maintain a wait-and-see perspective.
As it hunkers down, Yahoo's plans revolve around delivery of services such as market research, Internet service outsourcing and one-to-one database marketing. Yahoo!, Mr. Coleman said, wants to build digital marketing programs for marketers. The task goes well beyond selling banner ads and morphing skyscraper ads to offering customized programs.
With its global scale of 217 million users, Yahoo! has the reach. But can it successfully pull off the new ventures? Many of the deals will involve alliances and partnerships. Outright acquisitions are also possible, given Yahoo's $1.7 billion cash reserve. (That's assuming Yahoo!, with its shrunken market cap of $8.4 billion, doesn't get acquired.)
In a research note last week, Merrill Lynch analyst Henry Blodget noted 2001 revenue derived from premium services offered by Yahoo! will be nearly $90 million, or about 15% of revenue, up more than 100% year-over-year. "With regard to advertising revenue, the company is still transitioning from dot-com spending to a much higher quality revenue and customer base. Importantly, however, this transition is mostly complete, and the company has recently run large, successful campaigns for Ford, Disney and other Fortune 500 companies," reported Mr. Blodget, the dot-com bull who last week disclosed plans to resign from Merrill Lynch.
Yahoo!'s stock hit an all-time high in January 2000 at a split-adjusted $237.50 a share before tumbling; it traded last week below $15. Yahoo! saw its empire go south with the collapse of the dot-com economy and, with it, an entire advertising base.
"We want to increase the dollars in the advertising world, and we want to decrease our reliance," Mr. Coleman said. He described five revenue generating "buckets": brand advertising and awareness; promotions (tactical, financing and specials); research; outsourcing of Internet functions such as the PayDirect product Yahoo! created for HSBC bank; and one-to-one database marketing to let marketers deploy online loyalty programs such as one now in progress with PepsiCo. The goal is to diversify Yahoo!'s offerings as much as possible.
Mr. Coleman said the research business is likely to be a combination of partnerships and alliances with established firms; he declined to name likely candidates.
Mr. Costello's experience as a former Nielsen Marketing Research USA president could come in handy. The new marketing chief noted Yahoo! is sitting on a gold mine of data showing the behavior of more than 200 million people.
Contributing: Alice Z. Cuneo