strategymemos.com

Yahoo · Nov 2006

The “Peanut Butter Manifesto”

A Yahoo senior vice president tells senior staff the company spreads itself like peanut butter across everything, and asks for a narrower focus, clear owners and deep cuts.

Author
Brad Garlinghouse, Senior vice president
Written
Nov 2006
Published in full
18 Nov 2006, TechCrunch
Document
Internal email memo, leaked
Notes
8: 4 fact, 4 editorial
Last reviewed

Short excerpts from the email as TechCrunch reprinted it in full, typos included, on 18 November 2006, the day the Wall Street Journal published it.

Excerpts · 8 notes
Yahoo2006
Date:
November 2006

[ … ] Not shown: Why he joined Yahoo, and pride in its recent successes.

But all is not well. Last Thursday’s NY Times article was a blessing in the disguise of a painful public flogging.

[ … ] Not shown: A call to get back up and signal fundamental change.

We lack a focused, cohesive vision for our company. We want to do everything and be everything — to everyone.

[ … ] Not shown: Silos, and leaders hired from outside with differing visions.

I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.Editorial · 1Known at the timeThe image does what an argument rarely can: everyone can picture the thin layer, and no unit can claim to be the exception. He also credits it to others (“I’ve heard”), which makes the diagnosis sound settled rather than his own opinion.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006

I hate peanut butter. We all should.

[ … ] Not shown: Overlapping roles, unclear ownership and slow decisions.

We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company.

YME vs. Musicmatch

Flickr vs. PhotosEditorial · 2Known at the timeThe list turns a complaint into a work plan. Each pair names two teams with owners who would read the memo, so it cannot be waved away as a general gripe. It also makes the memo personal for the people who would have to carry it out.

[ … ] Not shown: Six more overlapping pairs; low morale; pay that rewards tenure.

We have awesome assets. Nearly every media and communications company is painfully jealous of our position.Fact · 3With hindsightOn 1 February 2008 Microsoft proposed to buy Yahoo for $31 a share, about $44.6 billion, a 62 percent premium. It withdrew on 3 May 2008, after offering to raise its bid to $33.00 a share. On 13 June 2017 Verizon completed its purchase of Yahoo’s operating business; IT Pro put the price at $4.48 billion. The two figures are not like for like: the first was for all of Yahoo’s shares, the second for the operating business only.SourcesMicrosoftMicrosoft Proposes Acquisition of Yahoo! for $31 per Share1 Feb 2008MicrosoftMicrosoft Withdraws Proposal to Acquire Yahoo!3 May 2008VerizonVerizon completes Yahoo acquisition, creating a diverse house of 50+ brands under new Oath subsidiary13 Jun 2017IT ProVerizon completes acquisition of Yahoo as Mayer quits14 Jun 2017 We have the largest audience, they are highly engaged and our brand is synonymous with the Internet.

[ … ] Not shown: A three-pillar plan, offered as one path among several.

b) We need to exit (sell?) non core businesses and eliminate duplicative projects and businesses.

We can’t simply ask each BU to figure out what they should stop doing. The result will continue to be a non-cohesive strategy. The direction needs to come decisively from the top. We need to place our bets and not second guess. If we believe Media will maximize our ROI — then let’s not be bashful about reducing our investment in other areas.Editorial · 4Known at the timeThe memo demands that leaders declare what Yahoo is and is not, then stops short of doing it. “If we believe Media” is a condition, not a choice, and firm lines such as “Search focuses on search” assign turf without ranking search against media. It names no business to exit, so the hardest decision stays where it was.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006

a) Existing business owners must be held accountable for where we find ourselves today — heads must roll,Fact · 5Known at the timeTechCrunch described Garlinghouse as the Yahoo SVP who “owns massive pieces of the overall organization (front page, mail, IM, etc.)”. The memo counts its author among the accused: the leaders at fault are “they (we!)”.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006

[ … ] Not shown: General-manager roles and performance-based pay.

a) The current business unit structure must go away.Fact · 6With hindsightOn 5 December 2006 Yahoo announced a reorganisation into an Audience Group, an Advertiser & Publisher Group and a Technology Group, saying it would organise its services “around audience segments and advertising customers, rather than around products”. Chief operating officer Dan Rosensweig would leave at the end of March. TechCrunch, citing the Wall Street Journal, had reported that Rosensweig put Garlinghouse in charge of a working group on the memo’s points.SourcesYahooYahoo! Re-Aligns Organization to More Effectively Focus on Key Customer Segments and Capture Future Growth Opportunities5 Dec 2006TechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006

[ … ] Not shown: A call to decentralise and remove as much matrix as possible.

c) We must reduce our headcount by 15-20%.Fact · 7With hindsightThe Associated Press reported on 21 October 2008 that Yahoo would cut at least 1,500 jobs, about 10 percent of a payroll of about 15,000, and that it was Yahoo’s second round of mass layoffs in nine months. We have not found a sourced total for the two rounds together.SourceNBC News (The Associated Press)Yahoo to cut at least 1,500 from work force21 Oct 2008

[ … ] Not shown: Why restructuring comes first.

Blow up the matrix.Editorial · 8With hindsightWhat Yahoo announced less than three weeks after the memo appeared kept a technology group that would “support the entire organization” beside two customer-focused groups, all three reporting to Semel. That answers the memo’s complaint about products competing for the same users, but it is a different structure from a small number of general managers who own every function.SourceYahooYahoo! Re-Aligns Organization to More Effectively Focus on Key Customer Segments and Capture Future Growth Opportunities5 Dec 2006 Empower a new generation and model of General Managers to be true general managers.

Kill the redundancies. Align a set of new BU’s so that they are not competing against each other. Search focuses on search.

[ … ] Not shown: His loyalty to Yahoo, and a call to get back up.

And stop eating peanut butter.

All 8 notes and their sources
  1. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.Editorial · 1Known at the timeThe image does what an argument rarely can: everyone can picture the thin layer, and no unit can claim to be the exception. He also credits it to others (“I’ve heard”), which makes the diagnosis sound settled rather than his own opinion.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006Back to the passage
  2. Flickr vs. PhotosEditorial · 2Known at the timeThe list turns a complaint into a work plan. Each pair names two teams with owners who would read the memo, so it cannot be waved away as a general gripe. It also makes the memo personal for the people who would have to carry it out.Back to the passage
  3. We have awesome assets. Nearly every media and communications company is painfully jealous of our position.Fact · 3With hindsightOn 1 February 2008 Microsoft proposed to buy Yahoo for $31 a share, about $44.6 billion, a 62 percent premium. It withdrew on 3 May 2008, after offering to raise its bid to $33.00 a share. On 13 June 2017 Verizon completed its purchase of Yahoo’s operating business; IT Pro put the price at $4.48 billion. The two figures are not like for like: the first was for all of Yahoo’s shares, the second for the operating business only.SourcesMicrosoftMicrosoft Proposes Acquisition of Yahoo! for $31 per Share1 Feb 2008MicrosoftMicrosoft Withdraws Proposal to Acquire Yahoo!3 May 2008VerizonVerizon completes Yahoo acquisition, creating a diverse house of 50+ brands under new Oath subsidiary13 Jun 2017IT ProVerizon completes acquisition of Yahoo as Mayer quits14 Jun 2017Back to the passage
  4. If we believe Media will maximize our ROI — then let’s not be bashful about reducing our investment in other areas.Editorial · 4Known at the timeThe memo demands that leaders declare what Yahoo is and is not, then stops short of doing it. “If we believe Media” is a condition, not a choice, and firm lines such as “Search focuses on search” assign turf without ranking search against media. It names no business to exit, so the hardest decision stays where it was.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006Back to the passage
  5. heads must roll,Fact · 5Known at the timeTechCrunch described Garlinghouse as the Yahoo SVP who “owns massive pieces of the overall organization (front page, mail, IM, etc.)”. The memo counts its author among the accused: the leaders at fault are “they (we!)”.SourceTechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006Back to the passage
  6. The current business unit structure must go away.Fact · 6With hindsightOn 5 December 2006 Yahoo announced a reorganisation into an Audience Group, an Advertiser & Publisher Group and a Technology Group, saying it would organise its services “around audience segments and advertising customers, rather than around products”. Chief operating officer Dan Rosensweig would leave at the end of March. TechCrunch, citing the Wall Street Journal, had reported that Rosensweig put Garlinghouse in charge of a working group on the memo’s points.SourcesYahooYahoo! Re-Aligns Organization to More Effectively Focus on Key Customer Segments and Capture Future Growth Opportunities5 Dec 2006TechCrunchYahoo's Brad Garlinghouse Makes His Power Move18 Nov 2006Back to the passage
  7. reduce our headcount by 15-20%.Fact · 7With hindsightThe Associated Press reported on 21 October 2008 that Yahoo would cut at least 1,500 jobs, about 10 percent of a payroll of about 15,000, and that it was Yahoo’s second round of mass layoffs in nine months. We have not found a sourced total for the two rounds together.SourceNBC News (The Associated Press)Yahoo to cut at least 1,500 from work force21 Oct 2008Back to the passage
  8. Blow up the matrix.Editorial · 8With hindsightWhat Yahoo announced less than three weeks after the memo appeared kept a technology group that would “support the entire organization” beside two customer-focused groups, all three reporting to Semel. That answers the memo’s complaint about products competing for the same users, but it is a different structure from a small number of general managers who own every function.SourceYahooYahoo! Re-Aligns Organization to More Effectively Focus on Key Customer Segments and Capture Future Growth Opportunities5 Dec 2006Back to the passage

What happened next

Dated events, each with its source. They are what followed the memo, not proof that it caused them.

  1. 1 mo later

    Yahoo reorganises into Audience, Advertiser & Publisher, and Technology groups, with new leadership assignments effective 1 January 2007. Chief operating officer Dan Rosensweig is to leave at the end of March.

    Yahoo

  2. 7 mos later

    Terry Semel steps down as chief executive and stays on as non-executive chairman. Co-founder Jerry Yang succeeds him, and Susan Decker becomes president.

    CNNMoney

  3. 1 yr 3 mos later

    Microsoft proposes to acquire Yahoo for $31 a share, a total equity value of about $44.6 billion.

    Microsoft

  4. 1 yr 6 mos later

    Microsoft withdraws its proposal, after offering to raise it to $33.00 a share.

    Microsoft

  5. 1 yr 9 mos later

    Garlinghouse leaves Yahoo. AOL hires him in September 2009.

    The Register

  6. 10 yrs 7 mos later

    Verizon completes its acquisition of Yahoo’s operating business, for about $4.48 billion, and combines it with AOL in a new subsidiary, Oath.

    VerizonIT Pro

The calls, against the record

Each claim in the memo’s own words, the evidence, and our reading of it. Verdicts are editorial.

  1. Open

    “a thin layer of investment spread across everything we do and thus we focus on nothing in particular”

    Evidence

    Yahoo’s December 2006 reorganisation still named “search, media, communities and communications” as its core strengths, and by June 2007 CNNMoney reported that Yahoo had “fallen further behind” Google in online advertising.

    YahooCNNMoney

    Our reading Editorial

    The record fits the diagnosis: Yahoo kept its breadth and lost ground. No source we have found ties the lost ground to thinly spread investment rather than to other causes.

  2. Mixed

    “The current business unit structure must go away.”

    Evidence

    On 5 Dec 2006 Yahoo announced a reorganisation into three groups and said it would organise services around audiences and advertisers, “rather than around products”.

    Yahoo

    Our reading Editorial

    Yahoo announced a new structure within weeks. What it announced was organised by customer segment with a shared technology group, not the general-manager model the memo asked for.

  3. Mixed

    “We must reduce our headcount by 15-20%.”

    Evidence

    In October 2008 the Associated Press reported that Yahoo would cut at least 1,500 jobs, about 10 percent of roughly 15,000 staff, its second round of mass layoffs in nine months.

    NBC News (The Associated Press)

    Our reading Editorial

    Deep cuts came, but nearly two years later and in a downturn. We have not found a sourced combined total to compare with the memo’s range.

  4. Mixed

    “We have awesome assets. Nearly every media and communications company is painfully jealous of our position.”

    Evidence

    Microsoft offered about $44.6 billion for all of Yahoo in February 2008; in 2017 Verizon bought the operating business for about $4.48 billion.

    MicrosoftMicrosoftIT Pro

    Our reading Editorial

    Others did want the position: Microsoft offered a 62 percent premium and later offered to raise its bid. A decade later the operating business sold for a fraction of that, though the 2017 price was for the operating business only.

Takeaways Editorial

  1. A sharp image travels further than an argument

    “Peanut butter” made a familiar complaint impossible to forget, inside and outside Yahoo. An image that sticks gives a diagnosis staying power, so choose one you are willing to have quoted back.

  2. Focus means naming what you will stop

    The memo asks leaders to declare what Yahoo is not, but it names no business to exit. A call for focus that leaves the choice to someone else is easy to agree with and easy to ignore.

  3. Reorganising is not the same as choosing

    Yahoo announced a new structure within weeks yet kept its breadth. A new chart can clarify who owns what; it cannot decide which bets the company should stop making.

Practise the strategy skills in this memo

Socratify is an interview coach. Each link opens a practice session with this memo as the case; nothing is sent until you choose to start.