• by Mark Walsh  @markfwal, July 28, 2011

Yahoo surprised Wall Street when it missed revenue expectations for the second quarter because of weakness in its display ad business caused by sales force turnover.

During Yahoo's earnings conference call last week, CEO Carol Bartz explained that a reorganization of the sales structure in recent months had led to a higher level of turnover than anticipated, which ultimately had an impact on premium display sales.

The sales revamp followed a management shakeup last year, in which former Fox Interactive Media President Ross Levinsohn succeeded Hilary Schneider as head of Yahoo's Americas region, and Wayne Powers was named head of North American ad sales. Mark Ellis later joined as head of North American field sales in March.

Powers, who reports directly to Levinsohn and was previously president of Time Inc.'s Media Group, recently discussed with Online Media Daily the sales upheaval and restructuring at Yahoo.

OMD: What prompted reorganization of the sales structure at Yahoo?

Powers: What started the transition is that advertisers are now looking at the digital space in a much more traditional way, and they're looking at how they can evolve the digital space from a creative perspective. So it quickly became apparent that focusing on solution-based selling was going to be important for us to truly unlock the power of science, art and scale. We talk about it as a point of differentiation for us. That's where we as a company have transitioned to, so that when we go to clients and agencies, we're much more focused on bringing unique ideas to them utilizing all of our assets.

OMD: How has the sales operation been reorganized to reflect that focus?

Powers: We made some changes -- I brought Mark Ellis, who was running the field sales for AOL, to run our field sales organization here. That's the group that primarily interfaces with our top 300 advertisers. Then we created the marketing solutions team headed by Elizabeth Ritzcovan; she and I worked together at Time, and they're at the intersection of where the advertiser enters into the company. Her team really works across our content and our product teams to build out creative ideas that get brought back to the advertiser, the agency and client partners.

The third part of the change is that we launched, about two months ago, a global agency and client partnership group headed by Seth Dallaire. His team is focused on working with the major agency holding companies and several of our clients who have expressed interest in broadening their message on a much more global level.

With that reorganization, we needed to go and hire, so we're in the process of adding resources -- information resources as well as people to all of those teams. And that's taken place over the course of the last three months.

OMD: Yahoo has long prided itself on having strong relations with Madison Avenue. Where did it lose its footing with agencies?

Powers: The holding companies -- as they started to have more of a voice, at a much more strategic level -- there just weren't the resources put against it to unlock that opportunity. Speaking with the CEOs of the major holding companies, it became clear they really want to engage with us in a strategic longer-term way. That was something we needed to commit to, which we've done.

We're in high-level discussions -- not only around programming and ideas, but as they start to see the overall media landscape changing how we as a company can be part of that evolution. It's really going to be a big area of focus in the future.

OMD: What led to the sales staffing shortage that hurt display ad revenues in the second quarter?

Powers: As we came into the second quarter and we started to focus more on the solution selling, we had some attrition, and we also needed to bring people into the organization who had solution selling as part of their DNA. The whole focus here has always been about selling reach. When you go through creating a restructure like that, you have that traditional dimension of turnover and attrition.

And then we had the tsunami hit and the automotive companies have parts issues, and so they pulled back on spend in the second quarter. Same thing with CPG -- fuel price increases led to commodity price increases, which they couldn't push out to the consumer -- so they cut back on their spending. The same thing happened in retail. So take three really important categories for us, during that same transition, and it created that softness that we saw in the second quarter.

OMD: Can you talk about how things were restructured at the field sales level?

Powers: On the field sales side of it, we had eight individual regions, and what's happening is that it wasn't as streamlined as it needed to be. Agencies have an affinity for the Yahoo brand and they went to us to make it easier for them to do business with us. But to do that was just eliminating this level of barriers between our teams and the clients and the agencies.

Streamlining it to three regions helped us do that. The West is being managed out of L.A. under Todd Miller, the central part of the country out of Chicago with Dave Cleary, and the East, managed here in New York by Chris Maccaro.

OMD: Are there any key sales positions that still have to be filled?

Powers: We're filling both kind of at a director level as well as the account executive level. The regional vice presidents, Chris and Dave and Todd, are in place now, so they're working aggressively to fill these open spots and we hope to have those done over the course of the next 60 days.

OMD: What about sales expertise tied to different media channels?

Powers: Within each of the fields we have teams that support video, mobile, social, local. We're staffing up and investing in the multiple platforms and screens; video is a huge area of opportunity for us. So we're investing not only in content but in our sales infrastructure.

OMD: What's the timing for getting the sales force fully up to speed?

Powers: The pipeline for the account executive and director positions we have open is pretty robust, so we're working as aggressively as we can to get these people hired. We're working toward that kind of six-month time period.

OMD: With programmatic buying playing a bigger role in display ads, what's the relation between Yahoo selling through its direct sales force and its Right Media Exchange?

Powers: What doesn't get sold through our field and our mid-market teams then goes into the exchange. These opportunities we have to go out into the field and build these experiences for advertisers would be the guaranteed placement. But we still have inventory that goes unsold, and in many cases, it still fits the definition of premium because it's around very engaged content, and that gets pushed through the exchange. We see those two things working in concert maximize monetization of our inventory across the site.