RealTime IT News

Koogle to Leave Yahoo! Board; Semel Ascendant

Yahoo! announced Tuesday that Tim Koogle, the company's first chief executive, would step down from his board seat next month.

The company said Koogle would relinquish his seat on the board of directors to focus on his other business interests. Yahoo! nominated ad exec Roy Bostock to replace him.

Koogle's departure leaves Jerry Yang as the only representative of Yahoo!'s early days. He leaves a company radically different from the one he headed as chief executive from 1995 to 2001. In the two years since, Terry Semel, a Hollywood executive thought an unlikely choice to lead the company when he was named to replace Koogle, has transformed Yahoo! into the most successful Internet company.

Advertising Rebounds

When Semel took the reins from Koogle, Yahoo! was mostly a one-trick pony: completely reliant on advertising. While this served the company well in the dot-com boom days, the implosion of the industry had left the company's ad business in a shambles.

"We weren't that great at it," Semel said of Yahoo!'s brand advertising. "We had one relationship with agencies: nonexistent."

Semel set out to stop the bleeding. He initiated an overhaul of the company's ad-sales business and brought in veteran media professionals. Slowly but surely, the company moved away from its dot-com clientele to strike deals with traditional companies for branding campaigns.

The results have been stunning. While Internet advertising at AOL fell 40 percent last year, Yahoo!'s marketing services revenues increased 31 percent to $177.5 million. The company expects advertising to continue to grow, bringing in 20 percent more this year.

The stunning success at Yahoo! is seen as something of an anomaly in the industry, which as a whole is recording only modest growth. Commenting yesterday on the prospects of the Internet ad industry in the wake of Yahoo!'s recent positive first-quarter results, DoubleClick CEO Kevin Ryan said, "The overall Internet advertising market as a whole is not growing as fast as Yahoo!'s growing."

Search Stars

Yahoo!'s success under Semel has been helped along by the simultaneous explosion of the paid search industry. Thanks to a paid listings deal struck with Overture Services in November 2001, Yahoo! has profited enormously from advertiser interest in text listings. Last year alone, the company brought in $140 million from its Overture relationship.

Semel has bet Yahoo! has only begun to scratch the surface with search. In December, he engineered a $235 million deal for search technology company Inktomi, putting Yahoo! on the road to compete head on with Google for overall supremacy in search.

After buying Inktomi, Semel enthused that search was a "beautiful system" that matched sellers and consumers in a mutually beneficial exchange. Earlier this month, it unveiled a buffed-up Yahoo! Search, and more changes are in the offing once Inktomi is integrated.

Revenues Diversify

Perhaps the biggest change brought about since Semel took over from Koogle is Yahoo!'s revenue mix. At the end of the first quarter, the company's reliance on marketing services had fallen to 67 percent.

Semel has focused intently on transforming Yahoo!'s 100 million registered users into paying customers. To do so, Yahoo! has rolled out a number of premium services, from e-mail services to personals ads. The company now has a lucrative Internet access deal with SBC Communications, as well as a bundle of premium services with Yahoo! Platinum.

Yahoo! ended 2002 with 2.2 million customers. This year, Semel anticipates 50 percent growth in customers, particularly in e-mail, access and personals. In three to four years, he anticipates Yahoo! will have billing relationships with 10 million users.

With Yahoo! now consistently returning profits, Semel is expected to make more moves. Recently, the company converted $750 million in bonds, giving it a $1.5 billion cash supply for acquisitions and fueling expectations that the company will continue to evolve on Semel's watch.