Yahoo's taskmaster (pg. 2)

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By Jon Fortt, senior writer

As CEO of Autodesk, she managed to succeed despite odds that were farcically stacked against her. When she arrived in 1992, sales growth had slowed and profits had fallen. She had to deal with a founder, John Walker, who had a penchant for sniping at the company's management, and with a band of programmers who bristled at her top-down style. As if that weren't enough, on her second day on the job she discovered she had breast cancer. Bartz had a radical mastectomy, made business calls from her hospital bed, and returned to work just four weeks later instead of the recommended six, a decision she has since said other women shouldn't emulate. "I didn't want people saying, 'There - women finally get to be CEOs and look what happens,'" she told the New York Times.

Eventually she silenced any doubters. Bartz transformed Autodesk through a series of smart acquisitions and by encouraging new product development. Autodesk's software and applications became must-have tools for designers and manufacturers alike, thanks to Bartz's insistence that the company methodically roll out new features based on customer feedback. Peers noticed. "Sometimes you get tech industry leaders who are either really great on making money or really great on technology but can't turn it into a great business," says Ann Livermore, a longtime Silicon Valley executive who leads enterprise technology at Hewlett-Packard. "Carol is very balanced between the two."

***

There's plenty for Bartz to tackle at Yahoo, starting with sprawl. David Filo and Jerry Yang's directory of websites weathered the dotcom bust, only to create bigger problems for itself. During a breakneck period of growth between 2003 and 2005, Yahoo expanded into areas such as online dating and job listings, while gobbling up Internet companies, including one called Overture that was the first to figure out a way for advertisers to pay for placement adjacent to online searches. But while Yahoo management was distracted by dealmaking and executive infighting, a crosstown rival, Google, emerged with an entire business essentially built around a technology similar to Overture's.

Google perfected paid search and eventually moved into new areas, such as online applications and maps. Yahoo, meanwhile, lurched from one strategy to the next: Under former CEO Terry Semel, a Hollywood veteran, the company tried to reinvent itself as a digital-media company, complete with original web content and an office in Santa Monica. Semel resigned in June 2007, and Yang stepped in as CEO. His big idea: to seize the lead from Google in search advertising. But Yang's reign, too, had an ignominious end. He was slow to consolidate redundant businesses (two photo sharing properties, multiple social-media sites) and failed to explain the strategy behind his Get Google objective. Sensing chaos at Yahoo, Microsoft CEO Steve Ballmer made the $45 billion bid for his rival, which Yang turned down, much to the dismay of investors. (Yahoo's market cap is about $18 billion today.)

Bartz has brought some much-needed decisiveness and order. She blew up Yang's confusing management structure and tried to impose rules. (She told employees she would "drop-kick to fucking Mars" anyone who disclosed unauthorized company information, a comment that was immediately leaked to the press and blogs.) And she is doing away with "abandoned products floating like debris in space" - Bartz's term of art for ideas that launched in good times, failed to impress, then limped along for years. Properties that fit the description end up on her imaginary Wall of Shame, a list of misfits that a strategy team will save, sell, or scrap. (Online data storage site Yahoo Briefcase and travel tool FareChase, among others, have already landed on the scrapheap.)

She also wants to prevent more space debris from launching in the future. "Yahoo was amateur hour in the past when it comes to product management," she bluntly told business partners last month; groups haphazardly released things without a clear sense of whether customers wanted them. From now on, she has promised, products will arrive on a schedule so that customers can offer feedback, with the best ideas appearing in the next version - a formula that worked well for her at Autodesk.

She's personally soliciting customer comments. Since February, Bartz has been on a listening tour with Yahoo's sales executives, huddling with chief marketing officers, newspaper CEOs, digital ad agency executives - even NBA commissioner David Stern - to find out how Yahoo can get more of their business in a down economy. At a recent series of meetings in New York, she eschewed PowerPoint slides, handed out her business card, took her own notes, and pressed for suggestions on how Yahoo can do better. "When you meet with her, she's very frank. She really doesn't blow smoke," says Nick Beil, CEO of search engine marketing firm Performics, a unit of Publicis Groupe. "I think if she's focused, she can make some pretty big improvements in a short period of time."

One short-term move she likely won't make: selling Yahoo. Bartz has told associates she isn't interested in hawking Yahoo or its search business to Microsoft or anyone else. It isn't that she dreams of overtaking Google, a coup she has privately said is unrealistic. Instead Bartz believes she can use Yahoo's second-place search position to revolutionize online advertising, and in the process restore Yahoo's status as a digital superstar.

If that seems equally unattainable, consider the state of online ads. The rectangular display ads that flash, dance, and wobble everywhere on the web aren't nearly as effective as they should be. The first challenge is targeting. Sites like Yahoo know how to put ads in obvious places - say, a Nissan Altima ad on Yahoo Autos, or an E*Trade ad on Yahoo Finance.

Ideally, though, car shoppers and investors would see those ads everywhere on Yahoo based on who they are, not just what they're doing. If Yahoo could find a way to deliver a luxury car ad to a high-income person in the market for a new vehicle while she's checking her e-mail, formerly low-rent ad space on Yahoo Mail could suddenly become valuable real estate. Similarly, advertisers might be willing to spend more on sites that can deliver a payoff: a store visit, a test drive, or a sale - outcomes that Yahoo today tracks poorly, if at all. Bartz is "going to be pushing her staff to think up ways that can be done," says Rob Norman, CEO of WPP's ad-buying giant, GroupM. "It's a matter of finding the measurable thing against which they can sell."

Not surprisingly, every other Internet site is deploying its best and brightest to come up with better ways to serve Madison Avenue. Facebook, for example, hopes to sell ads that target consumers based on user-generated content. Microsoft is getting set to unveil a new-and-improved search engine. It falls to Bartz to explain to advertisers (and employees and investors) what ultimately will distinguish the company from these competitors and others.

She's fallen short thus far, telling people in meetings that Yahoo is a "starting point on the web" that strives to "deliver 'wow' experiences." The rap sounds quite a bit like the script recited by executives of companies such as AOL (a unit of Fortune's parent, Time Warner), InfoSpace, and other web disappointments. Bartz needs to come up with a compelling plan - and a better way of explaining it - if she doesn't want Yahoo relegated to also-ran status.  To top of page

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