January 4, 2012 7:13 pm

Technocrat looks to revitalise Yahoo

A technocrat with an impressive track record – but is he the right person to revive the fortunes of a struggling web icon that has been through three chief executives in as many years?

That was the question being asked on Wall Street and in Silicon Valley on Wednesday after Scott Thompson, head of online payments service PayPal, was handed the top job at Yahoo.

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Analysts like Yousseff Squali at Jefferies were quick to acknowledge Mr Thompson’s successes while at PayPal, a division of Ebay which has grown rapidly to become, in the eyes of many, that company’s prime asset. Yet they also questioned his complete lack of media and advertising experience.

With a strong background in technology and in building online platforms, Mr Thompson took charge at PayPal in 2008 and has since more than doubled its revenues. He has also been credited with greatly expanding its reach to merchants across the web, confirming its influence as a payment platform that extends far beyond the Ebay marketplace.

However, whether he has what it takes to turn around a fading digital media business, bring innovation back to Yahoo’s lacklustre product development process and revive the interest of advertisers who have been drawn increasingly to new social and mobile platforms, are different questions.

In addition, the new Yahoo boss will face the task of clearing up in the aftermath of a complex strategic repositioning at the company, the outcome of which is still uncertain as it pursues potential deals to shed its Asian assets and sell a large stake to a private equity-led group. And amid a defection of top talent and with the board’s reputation dented by its mishandling of Yahoo’s recent struggles, he is set to inherit an organisation with plunging morale.

Mr Thompson brushed off insistent questions from Wall Street analysts on Wednesday about his lack of media and advertising experience, stressing his solid achievements at PayPal and promising to learn the ropes quickly in his new position.

“That’s not lost on me – that’s not lost on me at all,” Mr Thompson said of his lack of direct industry background in an interview with the FT. Declaring himself a “confident person”, however, he said he was “comfortable about acknowledging what I don’t know” but would be quick to form a new strategy.

He also sought to emphasise the relevance of his technology experience for rekindling advertisers’ interest in the company. By collecting and analysing the reams of data generated by its base of more than 700m unique users, Yahoo is in a strong position to develop valuable intelligence for advertisers, he said.

Mark Mahaney, internet analyst at Citibank, echoed others when he confessed to being “somewhat concerned” about the appointment of an executive with little experience in the midst of sweeping structural change in the online display advertising business.

Yet Mr Thompson’s supporters said that his background – he worked as a technology consultant and as chief technology officer at PayPal before running the business – would bring something to Yahoo that the company has been badly lacking.

“One of the things that Yahoo hasn’t had, with the exception of [co-founder] Jerry Yang, is a strong technology leader who can walk into a developer’s room and hold court, who has credibility,” said Charlene Li, an analyst at Altimeter Group. “They are a technology-driven media company in the middle of Silicon Valley – they need somebody who can corral that, who can work with lots of partners.”

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