Yahoo!'s Talent Keeps Bailing

"With the tremendous investments being rolled out in the VC community, many people are leaving to join entrepreneurial companies and start their own," Reed says.

Along with the renaissance in entrepreneurial activity, a hiring binge by Google -- the company has more than 200 recruiters -- is reigniting talent wars in Silicon Valley, says Reed.

And while Yahoo!'s decision to embrace its media roots may be sound from a strategic standpoint, it leaves the company more vulnerable when going head to head for top talent that wants to work on the most complex engineering problems.

Finally, with the emergence of popular professional-networking technologies such as LinkedIn, it is easer to learn about new opportunities in greener pastures than ever before.

These developments make the recent stalls at Yahoo!, which announced a weaker-than-expected third quarter and softened guidance, all the more perilous.

If things get worse, Yahoo!'s talent may begin to see its pedigree from the company as more valuable than its future there. And "Yahoo! senior management will get picked up in a nanosecond if they decide to leave," says Victoria James, an executive recruiter who focuses on Internet companies.

So what is Yahoo! to do? Simply upping the amount a company is willing to pay to keep employees on board may seem like the most straightforward route. But that doesn't deliver results, according to recruiting experts.

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