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The <I>TSC</I> Streetside Chat: Jeff Mallett Can Still Yahoo!

The COO says the future still looks bright for the Internet portal. And he offers some advice to his successor.

Back in 1995, when Jeff Mallett started at Yahoo! (YHOO) , the Internet bellwether-to-be was barely a gleam in the Nasdaq's eye.

But now, the company that was once not much more than a few computers in a trailer is worth more than $10 billion.Mallett, Yahoo!'s president and chief operating officer -- and employee number 12 -- announced this week that he was stepping down from his post, effective in April. His departure will follow by a year that of longtime CEO Tim Koogle; the pair was credited with leading the team that turned a search engine into an Internet media empire.Obviously, with Yahoo!'s revenues down from their peak -- and its stock price down even further, not all has gone smoothly at the company. But Mallett talks an upbeat game on his way out. We spent a few minutes with him to talk about the past and the future.

TheStreet.com:

The press release announcing your impending departure from Yahoo! said you were leaving "to take advantage of greater flexibility for family and business interests." What can you tell us about these business interests?

Mallett:

Nothing big or radical underneath there. I'm still aligned with Yahoo! for the next several months. I'm going to charge through and work through this quarter, so I'm going to stay focused on that. I'm definitely going to recharge the batteries and hang with the kids, which is really important to me. And at that point, I'll look at outside business interests and kind of move on forward on that side.

TheStreet.com:

What's your personal agenda for the next three months? What's at the top of the to-do list?

Mallett:

Well, the top of the to-do list has been really consistent almost to the year, to the day, when you look at the transformation and changes we began back in late February, early March of last year. The list of three things remains consistent.

It starts with people. So, making sure that we bring along the new executives, bring them up to speed -- i.e., the Terry Semels and the Greg Colemans and the Wenda Millard.

Terry Semel is Yahoo!'s chairman and CEO, Coleman is executive vice president of North American operations, and Millard is the company's chief advertising and sales officer. All joined Yahoo! in 2001.

And there are still some people we are recruiting right now -- a chief communications officer. So a number of other senior folks we're trying to bring into the organization

is job one.

'...Over 73% of all Web purchases begin with people researching. And Yahoo! is the No.1 place that they go to research.'

Job two is to continue to be right in the bowels of the organization and make sure that we stabilize all the key metrics. The business is really tight from a metrics standpoint.

And then the third is I'm going to continue to focus, which I have been, on the new growth initiatives -- directly involved in leading the access effort with our partnership with

SBC

(SBC)

and others to come. So I'm going to stay very close to that. Second, underneath, there is our listings business -- as that begins to move along, to make sure that we are really driving that, moving forward.

Those are the three big buckets that I'm going to focus on -- continue to focus on -- 'til April.

TheStreet.com:

You've been talking about bringing in a new advertising staff and new account people to work with Madison Avenue. What's the progress of that?

Mallett:

Our new sales chief, Wenda Millard, took over the reins a few months ago. We really reorganized, restructured and brought in almost an entirely news sales organization here in North America, with a focus on experienced media sales people, concentration on certain verticals that we believe show great growth -- i.e., computers, pharmaceuticals, etc. And then the third element was being very focused on bringing the agencies to the fold and making them a really important part of bringing our products and services to market.

We've got a lot of work to do still. I think we're just beginning to see some of the benefits of the reorganization of the sales force -- new talent and new offerings. We've benefited

slightly

from that already here in Q4, but still got a lot of work to do in there.

TheStreet.com:

There was talk on your earnings call about higher click-through rates on the paid search listings you run from

Overture Services

(OVER)

. Can you explain what that means?

Mallett:

What we called sponsored matches is powered by Overture. And we have consistently seen significantly above what has been modeled out on their network with other providers. The click-through rate is much higher.

'I'm a forward-looking guy, and, honestly, I don't spend anytime beating myself up or looking backward and saying, "What if," even in this moment of reflection.'

TheStreet.com:

Why is that?

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Mallett:

I think one is -- we knew we had this in our arsenal before -- that over 73% of all Web purchases begin with people researching. And Yahoo! is the No.1 place that they go to research.

The second one that we look at is historical. That we are -- talk about good parts of our heritage -- we are the trusted search and directory service out there, packaging the right thing for the right people, etc. As that's a trust level for people: "Hey, if Yahoo! is putting this up there. ... as a relevant recommendation from a search query, I'm going to go check it out." And that's the two big factors.

TheStreet.com:

It was unclear on the earnings call what your progress was on developing any in-house service in addition to, or instead of, the work with Overture.

Mallett:

Overture is our partner, and they've been great, and we'll continue to work with them. We've also introduced another option. As we laid out at analyst day, Nov. 15, we are building out a service to offer our own house brand, our own house service. And we will do a final evaluation of moving toward that over the next few months. So we're leaving our options open at this point, but we're well down the path of developing our own service.

TheStreet.com:

What do you know now that you wish you knew when you joined Yahoo! in 1995?

Mallett:

I think there's only one thing that in hindsight, looking back, that is consistent and true -- and you'd get the same answer from

Yahoo! co-founders Jerry

Yang or David

Filo -- is

that, just overall, the growth of the entire Internet segment, the growth of Yahoo! -- and I just mean growth on everything -- moved much faster than anybody believed it would. It's neither good nor bad. That's just sort of fact.

So, looking backward, that would be the one sort of macro thing that no one really had a sense of in '95, '96: It would move this far along this quickly and be this essential for businesses and for users. Looking at 219 million individually unique people using our service each month -- that is amazing, to go that quickly from literally tens of thousands only seven years ago.

'Embrace change, and always be able to be in a position to adapt change. Because -- just the pure nature of the business -- the ability to adapt and build off of change will be a key competitive advantage.'

TheStreet.com:

But now that you know that -- that it was all going to grow so quickly -- what would you have done back then?

Mallett:

We wouldn't fundamentally look at changing anything. We are sitting in the lead position. There're only three big players that are chomping into 2002 on a global basis --

AOL Time Warner's

(AOL)

AOL, Microsoft

(MSFT) - Get Report

, Yahoo!. We've got ourselves back to being profitable and in a growth position.

Sure, you can always look back and armchair quarterback and question things. Net Net, we're a leader. We're in a strong position right now. And we're one of the big three on a global basis.

I'm a forward-looking guy, and, honestly, I don't spend anytime beating myself up or looking backward and saying, "What if," even in this moment of reflection. And believe this is all about positive growth on the go-forward. So I'm not beating myself up for anything.

TheStreet.com:

Any advice for your successor?

Mallett:

Stay true to being really focused on a handful of well-defined, distinguished businesses. And I think we have laid out the six for them.

Embrace change, and always be able to be in a position to adapt change. Because -- just the pure nature of the business -- the ability to adapt and build off of change will be a key competitive advantage.

Those would be the things I would tell him or her.

TheStreet.com:

If you could save only one press release or one memo for evidence of what you've done at Yahoo!, what would it be?

Mallett:

Honestly, the thing I'm most proud of was believing in Jerry and David and shaking hands and signing up with them back in September '95. And I think that everything going forward -- met great people, had a great business experience. I've done well in all facets. If I looked at the sort of one-page document that says, "Hey, do you want to come and join us?" which we did in September '95. And I think that's the precious one piece of paper that I cherish the most.