Yahoo reveals reorganization plan

In bid to restore growth, CEO splits company into 3 units

With 700 million visitors, Yahoo maintains one of the largest portals on the Web, but it has failed to translate its audience into revenue.

SAN FRANCISCO - Yahoo finally gave employees a hint of its strategy Tuesday.

In a memo, Scott Thompson, the company’s new chief executive, told Yahoo’s remaining 12,000 employees that he was revamping the company into three divisions: consumer products, geographic regions, and technology. The goal is to refocus the flagging Internet business on two potential areas for growth: Yahoo’s media properties and the wealth of data it has on its users.

“Our highest priority is winning in our core business,” said Yahoo’s new chief, Scott Thompson.

With 700 million visitors, Yahoo maintains one of the largest portals on the Web, but it has failed to translate its audience into revenue. Revenue has declined over the past three years, and Yahoo continues to cede its share of the advertising market to its competitors, notably Facebook and Google. Yahoo’s board has dismissed five chief executives in five years, and the company continues to frustrate shareholders with its reliance on cost-cutting rather than growth.


“Our highest priority is winning in our core business and that will earn us the right to pursue new growth opportunities,’’ Thompson wrote in the memo. “To accomplish that, we’re establishing a new leadership structure, organizing all of our activities around Yahoo’s customers.’’

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The announcement was made one week after the largest layoffs in Yahoo’s 17-year history. The company dismissed 2,000 employees, or 14 percent of its workforce, last week. Blake Irving, the company’s chief product officer, resigned Friday.

The leaders of the new technology group will find ways to leverage Yahoo’s trove of data, which appears to be a cornerstone of Thompson’s strategy since joining Yahoo from PayPal in January.

“The data is very, very impressive,’’ Thompson said in a January conference call. “You’ll see some interesting, data-oriented experiences coming out sooner versus later.’’

Thompson has yet to elaborate on how Yahoo plans to use that data. People inside the company, who declined to be named, said it was still unclear how, or even whether, the company could translate that data into revenues.


“You can shuffle people around as much as you want, but we need to see how Yahoo plans to grow revenues,’’ said Colin Gillis, an analyst at BGC Partners.

The products group will be dispersed across divisions. Yahoo’s new consumer division will include its media properties, including its home page, sports, and news. It will also include its entertainment sites, its social media properties, including the photo-sharing site Flickr, and a new commerce division that will include Yahoo’s travel, auto, shopping, and real estate businesses.

The overhaul was timed to coincide with a game of corporate musical chairs. Ross Levinsohn, who leads Yahoo’s operations in the Americas, will take over Yahoo’s media business. Shashi Seth, who runs the search business, will also oversee Yahoo’s social media, e-mail, and instant messaging services.

The company said it was not ready to announce the head of its new commerce division, but a person inside Yahoo, who declined to be named for lack of authorization to speak publicly, said the opening would be filled by Sam Shrauger, Thompson’s former protege at PayPal, who resigned as PayPal’s head of products this week.

The company is also changing its regional operations, deploying some of its engineers into its regional offices. Yahoo’s revamped technology group will be run by Mark Morrissey, who previously led the ailing search business, and David Dibble, who oversees Yahoo’s data centers and now its cloud infrastructure.


It is too early to tell whether the reorganization will be enough to satisfy Yahoo’s shareholders.

In a separate memo to employees last week, Thompson said the company deliberately waited until after the layoffs to announce its strategy.

“We felt it was only fair and respectful to those who are leaving and transitioning to take care of each of them before turning to our future,’’ Thompson wrote.