Advertising: The Future of Yahoo!

I met with Chris Jaffe today, who runs the Advertising User Experience Division here at Yahoo!. We talked about where he thinks the best opportunities are at Y!, and where the future of Y! lies. Not surprisingly, he believes that advertising is the place to be, and admits that in the past Y! placed it's B level engineers in advertising (with A level in product development). Now he is seeing this trend reverse as Yahoo! enters its "teenage years." In his meetings with Sue Decker, they have both agreed that the future of Y! is moving away from its owned content (yahoo.com) and into advertising partnerships with content owners (Ford, P&G, NBC).

One area that he believes Google is much farther behind than Y! is in TV advertising--currently advertisers on TV barely know what demographic is watching their ad, and in the near future Yahoo! will be providing data that is just as detailed as what is available for online ads.

Chris also discussed the area where he believes Google is still killing Yahoo!: scalability. All of the advertising tools at Google are automated--they just need to feed the "Adwords fire" and the auctions will take care of themselves. Y! still has a large salesforce, and in his opinion 3/4 of these people are un-needed (saving only the people who deal with Fortune 50 companies). Hopefully I will be able to discuss this in more detail with Robi Ganguly, who is also on my team and working in the division focused on improving scalability.

I believe that Chris truly agrees with the vision of Sue and Jerry here (he said that he has turned down multiple offers in the last 8 months), but he is concerned that they may not be able to deliver in time. In his opinion, if APEX hasn't launched in 18 months and blown away the competition, then Yahoo! is toast. And looking at Panama, this is a legitimate concern.

As for me, he believes that right now is the time to start a company or move into technology--the internet space is established but still moving very quickly, and there are very smart people who have figured out how to be successful (he mentioned Meebo as a great example). He also believes that you can move into consulting at any point in time, and that the experience you get working in the Valley will make you a more intriguing candidate for any job.

Google Q2 Revenue Down

Shares have dropped 8% in after hour trading.

I can hear people celebrating around my cube :)

Yahoo! Q2 Results

Today we had an all-hands meeting at Yahoo! to discuss the Q2 results and what is in Yahoo's future. Jerry Yang focused on how to change Y! three years down the road. His vision of Y! is a deep, active marketplace of consumers, advertisers, and publishers/developers. The opportunity exists in turning data into insights, which can then be turned into revenue generation. The problem is that Y! has become too separate from the Web. One change that he would like to make is rid Y! of its "closed garden" mentality--allow users to access content that is not on the Y! network. Additionally, he would like to change the company's focus away from deals with advertisers and content providers, to becoming partnerships. He has given himself 100 days to buy alignment with leadership, and evolve the organizational structure.

So, what do I think is wrong with Yahoo!?
-Decisions take too long to move through the organization--Y! needs a flatter hierarchy
-Culture is "9-6 job"; people are not enthusiastic about working here--changing this needs to start at the top
-People are protective of their turf within Y!, but do not necessarily make decisions that are in the best interest of the entire company

This last point is best illustrated through an example I heard yesterday. Someone within the division I work in (SDS) found out that a group of 100+ engineers were being laid off due to downsizing at their company. SDS moved in to interview as many candidates as possible, and was interested in many of them to hire. Realizing that other divisions at Yahoo! might also be interested, SDS told them about the opportunity as well. Now these divisions are angry at SDS because they were not informed earlier, and SDS has gotten the "pick of the litter." My guess is that in the future, if another opportunity like this ever occurs, there will be no communication between divisions for fear of being ostracized. Not a great thing when Yahoo! is trying to focus on "hiring the brightest people and placing them in areas where they will add the most value," as Jerry Yang mentioned in the all-hands meeting this morning.

Meeting with Bradley Horowitz

On Friday, I had a meeting with Bradley Horowitz, Head of Advanced Development Division at Yahoo!. Bradley had given a talk for the Executive Speaker Series the first week of my internship, and I was very interested in his role as 'innovation leader' at Yahoo!. We discussed the difficulties of maintaining an entrepreneurial culture at a company the size of Y!, which are exacerbated by how quickly Y! has grown. One major problem that I have seen is that Y! has no platform--there are very little best practices across the network, and products/business units are still verticalized with little communication. Bradley mentioned that fixing this problem is one of Jerry Yang's priorities, and that very soon he will implementing a major change to address this problem.
I also asked Bradley how a company like Y! can keep its best employees; what stops them from leaving for startups or starting their own companies. Bradley runs Brickhouse, which addresses this problem, but he agreed that there is nothing Y! can do (or should do) if an employee has a great idea and wishes to pursue it outside of Y!. However, if the employee chooses to pursue his/her idea within Y!, than instead of a 1:1000 chance of success, it will be more like 1:100 or 1:50. So basically it comes down to people's risk tolerances--starting your company at Y! will never make you a billionaire, but it can make you a millionaire.

Human Tetris

Check out this new Japanese game show where humans act like tetris pieces. Perhaps a new Wii game?

Jerry Yang new CEO at Yahoo!

Quite the first day at work for me at Yahoo! It was just announced that Terry Semel has stepped down at Yahoo! to take a non-executive role. Jerry Yang, one of Yahoo's original founders, has taken his place as CEO. Sue Decker, who was believed to be in position to take the CEO role, has been named President. All three will be discussing at a company wide meeting today at 5:00. Couldn't have imagined a more exciting first day for me!

Why is online poker illegal in the U.S.?

Last fall a bill passed through Congress that caused poker sites such as Partypoker.com to turn around all of its U.S. customers--why?? And more importantly, will it be illegal forever?

Short History of Online Poker

Free online poker was first played over the IRC chat network in the late 1990s. Planet Poker was the first online cardroom to offer real money games in early 2000. ParadisePoker.com grew to become the internet’s largest online cardroom, and was acquired by Sportingbet PLC in October of 2004 for $340 million. Today, "Online Poker" is the single most searched term on the Internet.

Unlawful Internet Gambling Enforcement Act (UIGEA)

On October 13, 2006, the Safe Port Act was signed into law. Attached to the Act was a provision that deemed any online bet or wager illegal if the bet was unlawful under any law in the State at which it was initiated or received. This outlawed financial transactions between online casinos and American banks and credit card companies. Accordingly, many poker rooms stopped taking deposits from U.S. customers and their stock prices crashed. Sportingbet sold all of its US-facing sportsbetting and casino businesses to a group of investors for $1, and an assumption of $13 million in debts.

HR 2046 -- Internet Gambling Regulation and Enforcement Act of 2007

This bill was introduced into Congress on April 26, 2007 by Rep. Barney Frank (D-MA). It argues that internet gambling is a $13 billion industry worldwide, and licensing and regulating gambling in the U.S. would provide an increase in tax revenues. The bill establishes the steps required to receive an internet gambling license, arguing that through this procedure the U.S. could reduce underage gambling, compulsive gambling, and money laundering.

Will this bill pass?

Poker Players Alliance (PPA), an interest group for poker players, has formed to help support this bill. The group has 500,000+ members, and recently announced that former Republican Senator Alfonse D'Amato is the new chairman of the board. Through the website group members have the ability to send a letter to their representative congressman to support HR 2046. Last year, PPA spent $560,000 in direct lobbying efforts, a 100 percent over what was spent in 2005.

There has also been an increase in international pressure, as UIGEA is viewed as anticompetitive. In March of 2007, the World Trade Organization “ruled that America's online gambling ban has unfairly closed U.S. markets to offshore casinos.” The U.S. tried to argue that the act was needed to protect ‘American morals.’ However, the WTO noted that online horse betting was granted an exemption from UIGEA. This ruling opens the door for online gaming countries such as Antigua and Barbuda to file lawsuits against the U.S.

Finally, Academia has also begun to investigate whether poker should be classified as gambling at all. The Wall Street Journal recently published an article on May 5 entitled “Harvard Ponders Just What It Takes To Excel At Poker.” Harvard University Law School Professor Charles Nesson invited a group of poker professionals, game theorists, law students and gambling lobbyists to, as Nesson put it, “legitimate poker.” One of the attendees, Jay Kadane, has pitched to sponsors a project to show statistically that poker is a game of skill. University of Chicago economist Steve Levitt has already begun a similar project entitled Pokernomics.

Legalizing poker could bring well needed tax revenues to U.S. states. Most likely, states that already allow poker (such as California) will be the first to allow poker. For poker to be legal, it will have to be permitted under the laws of the customer's place of residence and the operator's. It will be very interesting to see how tax revenues are shared between the operator's state and the customer's state.