I want to rule the world

Two years ago, the world’s second-biggest search engine was on the ropes. But Yahoo! CEO Carol Bartz oversaw profits of $1bn last year and is out to make the critics eat their words
I want to rule the world
Yahoo!’s investment in the Arab world is all part of the bigger plan to localise its content
By Claire Ferris-Lay
Sun 12 Jun 2011 02:33 PM

When Carol Bartz took over Yahoo! Inc’s global operations in 2009 she told journalists she was going to “kick some butt” at the world’s second-largest search engine. Her appointment came nearly a year after Microsoft launched a $31-a-share bid for the internet services company — which it repeatedly rejected — and its stock was languishing around the $12 mark. Yahoo!’s former chief executive and co-founder Jerry Yang had been heavily criticised by the board for turning down Microsoft’s deal, which led to a shareholder revolt that saw its share price fall to its lowest levels since 2003.

Bartz moved quickly in a bid to turn the embattled company around. In less than four months she had cut five percent of the workforce, replaced executives and turned the organisation’s structure on its head. Under Bartz’s leadership, Geocities, Yahoo! Go and Yahoo! Photos have all been closed down.  Two years into the job, has Bartz achieved what she hoped when she began? The former Autodesk boss gives the impression she has some way to go before she’ll be entirely happy. “I know Yahoo! today is very different from the Yahoo! it was two years ago and I think the Yahoo! two years from now will be very different than today,” she tells Arabian Business.

“We’re very focused on great content [and] we’re very focused on really being able to serve a good local community — we didn’t have that focus two years ago,” she adds.

The current focus at Yahoo!’s headquarters in Sunnyvale, California, is firmly fixed on resolving an ongoing dispute with Alipay, the online payments unit of Alibaba Group, in which Yahoo! owns a 43 percent stake. In May, Yahoo! said that Alipay, one of the most important assets in its Chinese investment, had been transferred to a separate entity controlled by Alibaba’s founder in order to meet Chinese regulations relating to foreign ownership.

The two firms are currently in negotiations over how to compensate Yahoo! for Alipay but Bartz is staying tight-lipped on the subject. “Until we have something, we don’t have anything,” she says. Yahoo!’s share price declined twelve percent in the days that followed the May announcement but have since made gains after several hedge fund managers snapped up the cut price shares. “I have a lot of confidence in where it’s going,” she says of the firm’s current price.

She remains just as confident that we are not heading towards a second dotcom bubble, as some commentators have suggested in recent months. A string of high-profile IPOs coupled with increasing anticipation over potential offerings by Facebook and Twitter has left some concerned about over inflated prices. The recently listed business social networking site LinkedIn saw its stock soar to a valuation of nearly $9bn during its first day of trading while three weeks ago the daily deals website Groupon announced its plans to raise up to $750m in an IPO.

“It might be that people are chasing a couple of shining pennies but I don’t think there’s a tech bubble. The difference is these companies have real revenues and are making money,” says Bartz.

“Before during the real bubble there was no revenue so there was never a way to make money. These companies have revenue and that’s the key difference. If you chose not to have a profit to grow something fast, you can, but the very fact that you have proven you can make money, revenue, is I think the key difference,” she adds.

Profits at Yahoo! increased 86 percent in 2010 to $1bn following a year of heavy cost-cutting, the firm said in January. Despite the turnaround, Yahoo! is still battling to maintain its market share as traffic bleeds to its competitors, Google and Facebook.  In November 2010, for the first time ever, Facebook overtook Yahoo! to become the third largest website in the world with 648 million unique visitors compared to Yahoo!’s 630 million, according to data from comScore.

Bartz is convinced that Yahoo! can hold its nerve in the battle against social networking sites, insisting that there is enough for everyone. “There is absolutely a place for searching, there’s a place for communicating with friends [and] there’s a place for absorbing information for what’s happening around you in the world. I think you’ll have companies in all three of those categories just like there is a place for flash buying, group buying,” she explains.

“The social interaction of content we think is extremely important. Just running a site connecting you to friends is only one aspect of your life and advertisers agree that there are certain kinds of ads that you’ll run on social sites and different kinds of ads you’ll run on news and entertainment sites versus the type of ads you run on a search engine. There’s really room for all of us,” Bartz says.

Yahoo! is increasing the number of social tools available and in May launched a new version of its email service that allows users to easily send or receive Facebook and Twitter messages directly from their inbox.  Other changes include improved search tools that make it easier to find pictures, videos or information in email inboxes.

“Yahoo!’s vision for online communications brings together all the tools that people use to connect — email, chat, SMS, and social updates — and makes it easier for them to share content and engage in conversations. We’re delivering that on this strategy with the latest version of Yahoo! Mail,” its chief product officer, Blake Irving, said in May.

Yahoo!’s Middle East and North African operations have grown substantially since its 2009 acquisition of the Middle East web portal Maktoob for $164m. In the eighteen months since the buyout, Yahoo! has seen its combined reach in the region grow from 30 million unique users to 50 million and its regional homepage has become its second most visited homepage.

Bartz admits that the firm has yet to make a return on investment on the Maktoob purchase but attributes that to the significant investments it has made in operations. She’s upbeat about the importance of this region, describing it as “probably more exciting than India”. It’s not hard to see why, either. Internet penetration in the Middle East and North Africa is the second fastest growing in the world, second only to India, according to a recent report by Cisco Systems.

Social networking and the region’s burgeoning youth population — around two thirds of the Arab world is under the age of 25 — are one of the biggest drivers behind its growth. Yahoo! saw three million new users go to its Egyptian news site during between January and March as political unrest swept across the country. In Saudi Arabia one million new users logged onto Helwa, the company’s women’s lifestyle website between February and March, while Egyptian traffic increased by 50 percent during the same period.

“There are more than 300 million people in the Middle East and North Africa. Around 70 million are online today with 50 million more to come in the next two to three years. Arabic is one of the fastest-growing languages on the internet. Yet only one percent of online content is in Arabic today while five percent of the world’s online population speaks Arabic. Clearly, there’s huge potential here,” says Bartz.

And wherever users are, advertisers are not far behind. Yahoo! is looking to increase digital sales in the region from one percent of the total ad market to at least five to seven percent by 2015. Year-on-year digital advertising in the Middle East and North Africa is growing 25-30 percent, says Bartz.

Localising content, hiring staff to create that content, and developing Arabic-language products are all top of the list of priorities at Yahoo!. Since the Maktoob acquisition, the firm has doubled its staff in the region to 300 and Bartz doesn’t plan to stop there. “I would hope [to double our staff] in the next couple of years because when you think about it, that one percent to five percent is the real problem. If we can just get that video and that local blogging citizen content up that would be a big deal for us,” she says.

Additional investment — though Bartz declines to confirm how much — will also be made in an online video on demand service, which will deliver content from popular Arabic series, movies and music videos. On June 14 it will launch its homepage for mobile in both Arabic and English and in August will introduce a specific Ramadan product that will cover everything from lifestyle to religious content. Acquisitions could also be on the radar, confirms Bartz, but adds there are no negotiations currently underway. “There are always some 20 to 30 companies that we’re just watching or in contact with because a lot of the time a company’s product would be a feature for us because it’s not enough to actually be a company but it’s enough to be a part of a company.

“Sometimes we’re just trying to find engineering talent or talent, maybe even business development talent so I don’t personally know of any we are looking in the region right now [but] we’re always looking, because it’s amazing what small groups of people can put together,” she says.

Yahoo!’s investment in the Arab world is all part of the bigger plan to localise its content, not just for this region, but across the world. “Our big dream is we have 680 million users and that we therefore have 680 million sites because your site looks different, reads different, with different ads and everything,” says Bartz.

Clearly Bartz has got some way to go before she’ll be entirely satisfied she’s kicked enough butt.

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