Yahoo fails to keep up

Once a Leader, Yahoo Now Struggles to Find Its Way

Yahoo has been one of the most-visited sites on the Internet since its glory days as a web portal. Yet as the rest of the Internet moved on to social networks and mobile devices, Yahoo failed to keep up.

The short answer: On September 6, 2011, Yahoo's board fired CEO Carol Bartz — by phone — after two and a half years of flat revenue, and named CFO Tim Morse interim CEO. It was the third CEO change in four years at a company being steadily eclipsed by Google and Facebook.

How did Bartz find out she was fired?

From a phone call — and then everyone else found out from her. Bartz emailed Yahoo employees from her iPad: "I am very sad to tell you that I've just been fired over the phone by Yahoo's Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward." The call came from Chairman Roy Bostock, who had been one of her most influential backers when she got the job. The news was first broken by Kara Swisher at AllThingsD.

Why was she fired?

The numbers told the story. Bartz, who came from Autodesk to succeed co-founder Jerry Yang in January 2009, ran an austerity campaign that cut costs and boosted earnings — but revenue kept sliding even as the overall internet ad market grew rapidly. Google had soared past Yahoo in search and overtaken it in display advertising; Facebook and Twitter were siphoning off users' attention. Investors concluded she couldn't deliver the long-promised turnaround, and the stock — stuck around $12.50 through her tenure — actually jumped on news of her departure.

What happens now?

The board named CFO Tim Morse — whom Bartz herself had lured from chipmaker Altera two years earlier — as interim CEO, and announced a "comprehensive strategic review." Analysts immediately speculated that Yahoo could become a takeover target, or might move to sell its valuable 43 percent stake in China's Alibaba Group — a relationship Bartz's tense dealings with Alibaba CEO Jack Ma had only complicated.

Is this a pattern at Yahoo?

Yes. Bartz was the third CEO in four years: Terry Semel left in June 2007, co-founder Jerry Yang took over and departed in early 2009, and now Bartz. Each failed to restore Yahoo's flagging brand after Google's ascent. For a company that once defined the web portal era, the revolving door at the top has become the most consistent thing about it.

Frequently asked questions

Who replaced Carol Bartz as Yahoo CEO? CFO Tim Morse became interim CEO in September 2011 while the board searched for a permanent replacement.

Why couldn't Yahoo compete with Google and Facebook? Bartz bet on original content while the industry moved to social media, mobile apps, and video technology — the exact areas where Yahoo fell behind.