Yahoo's Bartz Offers Early Progress Report

Carol Bartz of YahooIn her first major public appearance since becoming Yahoo CEO seven weeks ago, Carol Bartz remained mum on the prospects of a search deal with Microsoft but indicated that more changes are in store for the Web portal.

Aside from core properties such as mail, sports, news and Yahoo's home page, "everything else is up for examination," said Bartz, speaking Tuesday at the Morgan Stanley technology conference in San Francisco.

She said that the company has created a "wall of shame" internally to identify products that have not lived up to expectations or essentially been abandoned.

"I feel in this time we need to make sure we are running very tight fiscally so we can spend. So we can figure out where to do M&A," she said in a Q&A session with analyst Mary Meeker. Bartz's comments follow her reorganization last week of Yahoo's management structure, creating a more streamlined, centralized corporate framework.

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Asked about the response, Yahoo CFO Blake Jorgensen, who appeared with Bartz Wednesday, said employee morale is higher than it's been in two years. "Over the last four or five years, there's been a lack of clear decision-making and Carol, in her first three or four weeks, has provided clear decision-making," said Jorgensen, who Yahoo announced last week will leave the company as part of the reorganization.

In discussing the recession's impact on ad spending, both executives emphasized that premium display advertising on the site is stabilizing, while "Class 2" or remnant, ad sales continue to grow at a healthy rate. Display advertising for Yahoo declined 2% in the fourth quarter, while search increased 11%.

"I think Class 1(advertising) will come roaring back," said Bartz. "People want the big experience. They're not abandoning that." They also assured that Yahoo will benefit from advertisers consolidating online ad buys during tough times with a smaller group of large properties that includes Yahoo.

When it comes to search, Bartz declined to be drawn out on whether Yahoo is pursuing negotiations with Microsoft to sell all or part of its search business to the software giant. Microsoft CEO Steve Ballmer has expressed a willingness to reopen talks on that subject with Yahoo under Bartz. But she indicated that in any event, Yahoo would want to maintain access to the search data to use for better targeting advertising on the site more broadly.

She stressed the growing importance of linking display and search advertising, highlighted by the company's recent introduction of Rich Ads In Search, which lets advertisers include images, logos and video in search results and add deep links to relevant pages. Bartz also said the company's sales teams have had success selling search and display together as a combined concept.

Underlying tighter integration of search and display is the goal of serving users more relevant ads wherever they go on Yahoo. In that vein, Bartz expressed confidence in behavioral targeting to eventually use search data and other user activities on the site to deliver more useful ads. "This kind of thing is just going to grow," she said. "But it's a long slog for the technology and getting the user to experiment with us."

The same goes for social media. While Bartz has no illusion of Yahoo creating its own Facebook, it's an area where the company has to offer a solution. "How we would partner to make your experience as seamless to a social place--that's one of things we're looking at," she said. Jorgensen added the forthcoming version of Yahoo's home page would provide easier access to outside partners. AOL took a similar step when it relaunched its home page last fall, adding prominent links to social networks such as MySpace and Facebook.

Maps is another feature where Yahoo has not shined, but it's not quite as high a priority to address. "I use Google Maps," confessed Bartz.

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