Yahoo's Shareholder Meeting (2012)

[Editor's note: this post was originally published on July 12, 2012.]

Yahoo’s shareholder meeting was bland.  No slides, no video, no new trinkets—just the basic CEO pep talk plus business jargon.  Apparently, Yahoo’s new catchphrase is “technology-powered media company,” which is short for, “Please stop asking us if we’re a tech company or a media company.”  At this point, the only job with more turnover than Yahoo’s CEO might be your local fast food joint, but interim CEO Ross Levinsohn seems nice enough, so that’s a plus.  Of course, he spewed the same pablum as every other CEO from Yahoo, but what do you expect?  It must be difficult getting respect from the troops when the company won’t remove the "interim" label before the annual meeting.  Still, it’s not about the CEO or whether Yahoo wants to become a media or tech company—it’s about execution.  As another person wrote, “[I]t’s increasingly hard to see what Yahoo uniquely offers to its audience.”  Combine a failure to execute with a failure to produce unique content or services, and you have a recipe for extinction. 

Levinsohn’s short speech highlighted Yahoo’s many partners, including NBC, ABC, and Spotify.  I may have misheard him, but Levinsohn said that more than half of the videos viewed online came from Yahoo, which prompted a surprised look from one employee.  Yahoo believes its election and Olympics coverage will attract traffic.  Levinsohn also mentioned the consumer several times, stating, “Consumers want interesting and informative online experiences,” and “It [all] has to start with the consumer experience.”  In other words, he said nothing new or unique.  Of course a public company that seeks consumers and viewers has to satisfy them.  Which is why Yahoo’s conduct over the last five years has been so comically tragic: Yahoo bungled its transition to a new email format (also botching its calendar feature); entered and promptly left the social media space via Yahoo Pulse; couldn’t provide a consistent selection of online media content, ceding that audience to Hulu and YouTube; couldn’t properly manage copyright infringement claims to prevent viewers from clicking on unplayable videos; and made the term “quality assurance” MIA.  In addition, Yahoo’s videos lack captions, whereas both YouTube and Hulu have some form of online captioning.  It could be worse—just two years ago, Yahoo’s homepage seemed to resemble the National Enquirer or TMZ, prompting some viewers to wonder whether Yahoo’s latest strategy relied on Kim Kardashian, Octomom, Justin Bieber, and hordes of lobotomized or low-IQ viewers.  Thankfully, Yahoo has reversed its descent into becoming the world’s largest online tabloid.  However, it now seems to be aiming for the “World’s Largest Linkfest of Content Already Seen by Everyone under 40 on YouTube and Facebook,” but as I said, things could be worse.   

Today, the CEO focused on Yahoo’s various partnerships with other media companies as well as its access to “700 million viewers,” but Yahoo doesn’t seem to understand that a) it doesn’t matter how many viewers you have if none of them are particularly loyal; and b) relying on content and partnerships from other companies with their own websites isn't a viable long-term strategy.  As I told the CEO during the meeting, “Think about it.”  If Company A--which has a vested interest in promoting its own websites and content--decides to partner with Company B, which is a mere portal for Company A’s content, what will happen?  Company A won’t license its best content to Company B and will use its leverage as a content provider to take as many users from Company B as possible and make them loyal to their own website(s).  It’s as if CNBC decided to partner with Bloomberg by linking to Bloomberg articles, thinking, “Well, if I got Bloomberg, Fox Business and a bunch of other business content, then people are sure to come here instead of going to those websites instead.” But of course, CNBC focuses on creating its own unique content and attracting its own viewers.  To the extent CNBC thinks Bloomberg, Fox Business, or the Motley Fool has an interesting idea, they do a story themselves instead of just linking or deferring to their competitors’ websites or channels.  In essence, Yahoo’s business strategy seems to be “As many eyeballs as possible, regardless of user time spent on the page or the quality of content displayed” (see Kardashian/Octomom reference above).  It’s a sad state to be in for a company that was once a top Silicon Valley innovator  (Speaking of which, am I the only one who remembers Yahoo’s funny commercials for its personal ad service?)  

Yahoo’s latest mis-step?  Hackers from “d33ds” disclosed about 400,000 user passwords, including many from Yahoo.  I downloaded the file to see if my emails were hacked, too.  They weren’t.  It looks like almost all the passwords taken are from deactivated accounts, so Yahoo got lucky this time.  And it wasn’t just Yahoo emails on the list—I saw hotmail and even gmail accounts apparently compromised. Besides, few of the exposed passwords had any capitalized letters, which violates Online User Security 101.  The hackers are definitely cheeky, though—they ended their email/password list with the following quote: “Growth begins when we begin to accept our own weakness.” -- Jean Vanier 

The Q&A session was short.  One shareholder asked about Yahoo’s role: was it a TV station, TV studio, or ad agency?  The CEO said Yahoo wanted to create a good overall consumer experience.  A CalPERS representative said the state’s pension fund supported the Board but not the way Yahoo was awarding compensation to its executives.  Another shareholder rightfully criticized former Yahoo CEO Terry Semel’s compensation of $ 600 million, which seems grossly high given Yahoo’s current stock price.  

Some final notes: Julia Boorstin from CNBC was there.  I didn’t like her, but her cameraman was nice.  Cory Johnson from Bloomberg was also there and looked like his usual professional self (did you know he founded the hip hop basketball magazine SLAM?).  I prefer Bloomberg, which has a more serious outlook than CNBC.  Maybe the “eyeballs at any cost” strategy works on TV, which is more visual and less interactive.  It might explain the mismanagement of Yahoo all these years by big-media executives. Boorstin asked me about the interim CEO issue (yawn) and the Facebook/Yahoo deal.  According to TechCrunch, the deal occurred “without money changing hands,” so I responded to her question with another question she should have been asking: “How much money is involved?”  She didn't seem to catch my point.  So much for television media as an enlightening Fourth Estate.  

Disclosure: I own shares of Yahoo, but my positions may change at any time.  My hunch is that a private equity fund will buy Yahoo at some point or the company will increase shareholder value by splitting up or selling off its various parts.  

Yahoo Annual Shareholder Meeting (2010)

I attended Yahoo's Annual Shareholder meeting on June 24, 2010 at the Doubletree Hotel in San Jose, California. About 35 non-employee shareholders and 50 Yahoo employees attended. What a change! No media circus, no hoopla about Icahn's or Microsoft's intentions, and no ill-advised grandstanding by Bostock--just a normal, professional annual meeting. In short, Carol Bartz is simply amazing. She has taken Yahoo from seemingly endless PR disasters to instant credibility. Even Bostock--whose dithering I despise--seems tolerable next to Bartz. In fact, "to dither"--which means, "to be nervously irresolute in acting or doing"--seemed to be Yahoo's motif before Bartz.

Bostock (pronounced, "Bah-stock") opened the meeting by introducing Yahoo's Board of Directors and Executive team. (I was happy to see Brad Smith, Intuit's CEO and Yahoo Board member, at the meeting. Intuit's consistent ability to deliver strong products makes it an excellent partner to have.) Bostock said that Bartz had acted "decisively" and the Yahoo team had "made enormous progress." He turned the podium over to Yahoo's general counsel, who handled the formal portion of the meeting.

Yahoo's general counsel did a fantastic job. After hearing Responsible Wealth's representative Lincoln Pain introduce a shareholder proposal ("Say on Pay"), Yahoo opened the floor for comments on the proposal, limiting statements to two minutes. Yahoo's approach to shareholder proposal comments creates a good balance between too much information and too little information. Too many companies won't allow shareholders to comment on proposals or go the other direction and allow shareholders unlimited time.

One shareholder did have a comment on the "Say on Pay" proposal. He said similar proposals had been used as a club/baton to harangue the Board and CEOs. He criticized RiskMetrics, Responsible Wealth (the organization sponsoring the proposal), and ended by saying, "If you own a house in the Bay Area, you're [considered] rich," and "Responsible Wealth is ACORN for rich people." This proposal was defeated.

After the general counsel concluded the business portion of the meeting, the meeting was adjourned, and Carol Bartz shooed the general counsel off the stage and began her presentation.

Bartz detailed Yahoo's partnership with Microsoft. She said that by working together, Yahoo and Microsoft could attract 30% of the marketplace for search (with Google attracting the other 65 to 70%). Bartz indicated that Yahoo was focusing on several main areas: local, social, video, and mobile. She praised Yahoo's longevity, reminding us that while most tech companies founded fifteen years ago are now gone, Yahoo is still here. After a simple, crisp presentation, she opened the floor for Q&A.

Shareholder Anthony Mezzapelle mentioned that Yahoo's operating profit margin in the past three to five years seemed too low and wondered why Yahoo wasn't using its ample cash to improve its margins. Ms. Bartz answered that Yahoo had about $4 billion in cash, and agreed that Yahoo's 6% operating margin was "shockingly low." She said that Yahoo has spent money trying to improve margins, but revenue did not follow. Bartz seemed confident that Yahoo's margins would improve in the future. Ads are supposed to be fun, Bartz said, and Yahoo has better ads than competitors; moreover, Yahoo's partnership with Microsoft was generating more eyeballs and traffic for Yahoo's advertisers. Thus, while the advertising marketplace was fragmented, that fragmentation represents opportunity for Yahoo, according to Bartz.

Victor Anthony Cruz, representing Amnesty International, reminded Yahoo about Shi Tao, who is serving a ten-year sentence in China for voicing dissent in cyberspace. (See here for more on Shi Tao.) Cruz indicated that Yahoo's discomfort over the China issue pales in comparison to the prisoners' feelings, and Yahoo should be more active in calling for their release. Bartz responded by saying that Yahoo had "actively" called for Shi Tao's release and worked with the State Department to try to help Shi Tao. She reminded Cruz that Yahoo "can't do a jailbreak." She also said that Yahoo has not directly operated in China for years and would not be happy until Shi Tao was released.

Another shareholder discussed Yahoo's poorly timed share buybacks. He noted that Yahoo's average share buyback price was $26.35/share, and Yahoo bought much of its shares in 2007. Bartz said that buybacks should be analyzed over a period of 20 years. "Hindsight is perfect," she said, but Yahoo made the best decision at the time based on the information it had. Also, Yahoo was reviewing its buyback formula.

Other shareholders asked about Yahoo's foreign stakes. One shareholder asked if Yahoo would be returning some of Alibaba.com's value to shareholders. (Yahoo owns a stake in Alibaba.com and has a joint venture with Yahoo Japan.) Bartz responded that Yahoo had no plans to sell its Japan stake and would figure out how to monetize it over time. Bartz also told another shareholder that Yahoo had no operational control over Alibaba.com but was aware of the issues relating to Chinese monitoring relating to the website.

I made several comments, and opened by praising Ms. Bartz tenure at Yahoo. I said I was generally against high executive compensation, but in this case, she deserved every penny she got. She laughed, and responded that her compensation wasn't $47 million--the number most people throw out when discussing her package--and the share price would have to "triple" before she actually received that much money.

I then offered some suggestions. I told Yahoo that its online calendaring system had numerous glitches. Several months ago, Yahoo changed its calendaring system, creating several problems. For example, times set to repeat had suddenly changed, and some days at the bottom of the calendar could not be opened. I suggested whoever was in charge of the calendaring "needed a talking to," and the inability to handle a calendaring system affected Yahoo's credibility.

I then expressed an ongoing concern about Yahoo's choice of homepage content. I am sick of hearing about Hollywood "stars" and their personal lives. It bothers me that I actually know Kim Kardashian has a new boyfriend (thanks, Yahoo). It bothered me when Yahoo kept displaying stories about OctoMom, Paris Hilton, etc. (at this point, Bartz chimed in, mentioning Britney Spears and Kate and 8). I said I despised such stories so much that I had changed my homepage to something non-Yahoo. This comment set up an awkward exchange, where Bartz asked me what homepage I was using now. After some hesitation (hey, she asked), I answered, "Google"--causing several disgusted reactions in the room.

I also mentioned concerns with Yahoo's automatic updating and user sharing process. Right now, unless you opt out, whenever you make a comment on a Yahoo news story, your comment is displayed to your friends/contacts. In fact, I had no idea that some of my posts were being shared with my friends/contacts until someone mentioned a comment I'd made on a story weeks ago. Also, I had no idea that my actions on Yahoo would be shared without my consent. I immediately deleted my Contacts list and did the best I could to prevent my information from being shared. Nevertheless, Yahoo lost credibility by failing to have an opt-in social media system rather than an opt-out social media system.

Moreover, it was surprising to see Yahoo so behind the curve when it comes to privacy. When I post something on Facebook, I know I am sharing my comment with my Facebook friends. In contrast, just because I use Yahoo doesn't mean I expect my comments and user activity to be shared with my entire Contacts list, which could include people who've emailed me only a few times or many years ago. Although I criticize Yahoo for failing to foresee these privacy problems, I am still a Yahoo user. Overall, Yahoo gives me much more than it takes.

Finally, I jokingly asked Bartz when she was planning on going into politics (Meg Whitman and Carly Fiorina seem to be setting a trend for Silicon Valley female CEOs). Bartz immediately responded, "Never."

Congrats to Bartz for bringing some much-needed gusto to Yahoo.

Disclosure: I own an insignificant number of Yahoo (YHOO) shares.