There's a brain drain going on at Yahoo! (Nasdaq: YHOO). Without proper care and medication, this talent leak could easily turn into a wholesale flush and send the company to circle the drain of business history in short order.
What's going on?
The bleeding has been going on for some time now, but the latest announcements and rumors are among the most damaging losses Yahoo! has seen. When Yahoo! bought online picture-sharing site Flickr in 2004, the new addition's leaders said they were "in it for the long haul, with the same management and same team." Consistency at the top of that division was "crucial for preserving the Flickrness that is Flickr," so founders Caterina Fake and Stewart Butterfield pledged to stick around.
And now they're gone, with hardly any explanation of the reasons for leaving. We can only guess, and I will in a minute. But wait -- there's more.
If that vote of no confidence in Yahoo's top brass wasn't enough, sources "close to the company" say that three executive VPs are leaving, too. Search boss Vish Makhijani is joining Russian search leader Yandex, at a time when the closest thing to a Russian Google (Nasdaq: GOOG) or Baidu (Nasdaq: BIDU) seems ready to go public. Communities and communications VP Brad Garlinghouse was the author of the "Peanut Butter Manifesto" a couple of years ago, and he is presumably heading into the world of private equity or hedge funds next. Yahoo! must've run out of peanut butter. And Qi Lu, the chief architect of the Panama advertising platform, is another casualty. No word on his next move, though.
Vish and Brad have headed up some of Yahoo!'s greatest successes over the years, such as Yahoo! Search when it still mattered and Yahoo! Mail, which remains the top dog in its field. They represent some of the best things the company had going for it, such as a deep pool of engineering and strategic planning talent. And between Garlinghouse and the Flickr people, Yahoo is losing some of its best, last chances to keep and build its single greatest asset -- the millions of diehard Yahooligans around the world who use the site for everything.
The little devils on my shoulders
The cynic on my left shoulder says that maybe this was all Microsoft (Nasdaq: MSFT) ever wanted to accomplish with its drawn-out and ultimately fruitless buyout bid. A major competitor is left severely weakened and bleeding more and more every week. MSN and Microsoft Live should be able to snap up all of that market-share piecemeal and then buy a shell of Yahoo!'s former glory for pennies on the dollar, right before the former giant simply dies.
The optimist on my other collarbone whispers that the cynic is dead wrong, though. The only winner in that scenario is Google, which gets the same weakened competitor and has a much stronger hand when it comes to attracting search and advertising business. Big G also has deep pockets and could force Microsoft into a bidding war over Yahoo!'s remains in the endgame. None of this is good news for Microsoft, and Redmond has never been flat-out stupid.
Epilogue
So no, I don't think Steve Ballmer wanted to see any of this. I thought that an exodus of this sort would have been inevitable if the takeover campaign had been successful, but that's beside the point now. Microsoft lost, and the damage was done anyway.
The way CEO Jerry Yang and his board of directors handled the whole saga did not inspire confidence in the company's future. Sure, they kept saying Yahoo! was worth more than what was offered, but they never could quite explain how or why. The failure to put the spotlight on a few key teams that could lead the Y out of the valley of darkness must have exacerbated the pain, as the top talent never got enough public support and a true chance to shine.
Maybe we shouldn't expect Flickr to save the day, or Yahoo! Mail, or any other particular component. The whole of Yahoo! surely is greater than the sum of its parts, as the site has always been kind of a Wal-Mart (NYSE: WMT) of the Web -- one-stop shopping with everything from underwear and milk to truck tires and lawnmowers. Only in Yahoo!'s case, it's everything from news and email to discussion boards and comparison shopping.
It may be too late to stem the blood loss. Yahoo! has forgotten what made it great in an effort to stave off an unwelcome suitor, and the wounds run deeper than anyone thought.
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