How Apollo Turned Yahoo Into One of Its Fastest-Returning Deals

The original sin of Yahoo was giving search away to Google in June of 2000. There's this myth in the internet that they were defeated by Google because they took their eye off the ball or what. It was worse than that. They outsourced it. Yahoo hadn't had its own search engine in 17 years. So where does most of the audience come from? [music]

Yahoo Sports over 100 million users a month. Yahoo Finance over 100 million users a month. Yahoo Mail, one-third of all Americans have a Yahoo [music] Mail account. So all those things fit together are what add up to 700 million users a month. There are companies that are valued more than us who have less than one-tenth of 1% of our user base. I really believe that the best days of Yahoo can really be ahead of it. I think now we're in comeback phase.

Awesome to be here, Molly.

Totally.

I know. We made it work. [laughter]

That was, uh, yep. That was, that was why I was in town for, for this. Came straight from Aspen at the Forbes CMO conference and I'm on my way to Amsterdam next week for Human X. So there's, this is, this is, uh, this is just that time of year.

Back out of the summer. Right into it.

Yep. 100%.

Oh jeez. [laughter]

Little more, little more, little 4.8 billion.

For nearly $5 billion bought the assets.

Um, well, I, I mean, at the time was more, you know, [clears throat] I was somebody that they called in the process of deciding to buy the company. Uh, so I, you know, I wasn't part of Apollo then. I, I left another job to come do this, which we talk about, you know, why I did that. But, um, yeah, look, the history was that Verizon under different leadership had bought AOL and then a few years later Yahoo. They merged them into one company that was first called Oath. They then changed that name to Verizon Media, but it was all those assets under one roof. And then the new Verizon management team decided they didn't want to be in that business anymore. I think it took them a few years to find the right buyer at the right price. Um, but Reed Raymond from Apollo, one of the, the leaders of their private equity group, um, got in there and, and figured out how to construct a deal that would work.

Um, well, it, it was, you know, just the ability to actually get the right, um, framework for Verizon because they wanted to maintain some ownership, which they did. They still own 10% of us, um, and, uh, you know, and then have a vision for what this thing could be going forward. You know, uh, I think combined they were bought for about twice what we bought it for. So, uh, and during that time had, had really, um, had a different mission than I think either company had ever had before. It was really to help Verizon grow 5G and be a part of that. A lot of the decisions were based on that and not really the, the real mission of what Yahoo itself was, was about. So look, the, the company that was set up was a brand new company. We are a 5-year-old company managing a 30-year-old brand at this point. Um, but it was a completely new company stood up, uh, from scratch to house these brands under, under one roof, which closed in September of 2021. They bought it May of 21. It closed in September of 2021 and I started about the end of the month of September 2021. So, it's been about exactly 5 years for me.

We made it.

Yeah. Um, well, interestingly, it was the middle of, like, September of '21. If anybody remembers, was, I think, Delta variant was starting at that point. The, you know, we didn't meet people in the office for a while still after that and the decisions were, you know, if you come in, do you have to be vaccinated? I mean, that's, that's what that time frame was like. So kind of a weird time to pick up a company, but I had just done it a year earlier with Tinder. I came in, I had worked for the IAC family before they bought our company in 2005, how far I go back. And, uh, so that same, those same people brought me back to, um, for that job again in the middle of COVID. Uh, so that was July of 2020. So that was an even more difficult time to pick up a company cuz we really never met anybody for that year. Um, here, you know, we, we were back to work pretty quickly after that. But, you know, for me, this was actually the third time that I had, uh, was going in to lead a turnaround. Um, the first was Ask Jeeves, which is kind of the poster child for the Web 1.0 crash and, uh, you know, however difficult this one would be, you know, nothing would be harder than turning that brand around and those products around at that time. I think I was announced on 9/11, I think was the actual, my first day on the job officially, but they had bought my '90s startup that I was a part of, one of the founders of, and I joined there as one of the heads of product and over time had worked my way up to CEO. We, we 50x'd that stock and sold it to IAC and Barry Diller. I stayed for another 3 years as CEO, uh, and then left to do another startup, um, and that was, um, bought by CBS, the television company. I joined as a CEO of their internet group, which had bought multiple public companies over time that had, you know, just were not performing at, at their best, and so that was turnaround number two. I think that is still the sixth largest internet company by unique users. You know, I think we went from 70 to 220 million users with, with those properties. So I had been through big internet turnarounds before. So Yahoo is one that I knew, uh, both that it had great bones for what a, you know, for a great turnaround. You know, it had the thing that was hardest to get, which is traffic. It had a lot of traffic, but the products had seen better days. You know, coming out of years at Verizon, the company structure and, and composition was not optimal, but those are things you can work with, you know. And so the first 6 months were from the playbook that I had run before, you know, evaluate the team, don't, you know, I don't come in guns blazing on, on day one. I get in there and get to know everybody and, um, and you know, there's always great people wherever you go. There's always things you don't understand from the outside until you are inside running a company. It's never exactly what you, you would think. The data will tell you differently how the products work, who the audience is, all those kinds of things. Um, so those first 6 months are really getting to know it and then that leads into, you know, all the different steps of a turnaround that come after.

Yeah, I, um, it's interesting because I would have people, I still have people always ask me what's that like working for private equity. I don't, the reputation isn't always great for what, how they're going to manage these things, but I've had the opposite experience. You know, Reed, I still talk to him almost every day in some, you know, form, uh, 5 years later. He, you know, he, he was wearing a 'Make Yahoo Great Again' purple hat around, you know, he really...

PEs are in it for a reason. They want an outcome, whether that's an IPO or whether that's a sale. You know, they're not here to hold it for, you know, to be Stripe and just never have, have an outcome of some kind. But at the same time, you know, there aren't that many that they view that have asymmetric upside relative to others where you just run the PE playbook. So they, and, and they hired a team starting with me who wouldn't be here if they did. You know, I'm a growth person. I only do the turnarounds to get to the fun part, which is when you get to start putting irons in the fire for growth and you reap the benefits of the turnaround to start investing and building new things for your huge audience that you inherited. Um, and that really is how Apollo was treated the whole time. I have had to work for many different kinds of people, right? Venture capitalists, whether it was my first startup where I never had a real job before or my second startup where Bill Gurley was my, my, you know, and Jeff Yang were my main two investors. I mean, they're, they're difficult to work for, too. You know, Barry Diller, uh, Les Moonves. I mean, these are, you know, every, everybody has to serve somebody and, and I have not found private equity to be, at least with my Apollo team, to be, you know, some difficult force to reckon with compared to other, you know, people I've had to work for.

Yeah, I mean, you really, so there's a couple things. I mean, one is, you know, speaking for Yahoo in particular, it's a conglomerate. It's not one brand. If you look at the other companies kind of our size in the industry, Pinterest, Snap, Reddit, Roku, these are all kind of one-product companies for the most part. And with Yahoo, it's a, it's a conglomerate of many different brands that compete independently in their spaces. So Yahoo Finance competes with Bloomberg or CNBC or, uh, you know, maybe Wall Street Journal. Um, we have a new product that competes with TradingView and others in, in that space. Sports, ESPN and, and others like that. Yahoo Mail, Gmail, I mean, they all have competitors that are very different and it creates this ecosystem of brands. That's not the first time I've seen that. IAC had 60-plus brands and with Ask we joined that family. CBS Interactive I had 30-plus brands, many of which had nothing to do with CBS. So CNET was the leading technology site. SportsLine was one of the OGs in, in sports and fantasy sports. Last.fm in music. I mean, you go down the list. GameSpot in video games. We had all kinds of different brands that, um, we had to figure out the right structure for. I did it wrong at CBS Interactive the first time where we started off. I tried to have everything report to me. My background is all product and I was a kid in a candy store with these brands, many of which I was a user of. And it turned out that I was just going to slow things down that, that we needed to run way faster. I had to hire general managers who could be entrepreneurial and be independent and my job was to work with them on their plans and, and, you know, hold them accountable and try to help out where I could but to let them run. It was interesting when we got here how what had, whatever had happened through the years at Verizon, they kind of evolved into a company that really had one head of product, one head of technology, one head of content spread across all the brands. There were people who specialized, engineering teams who specialized, but they were really kind of spread between them. And so the first thing that we did was reorganize the company into this more conglomerate structure with GMs in all these, um, groups. That means they all get their own head of product, their own head of technology, their own head of content. Even from central, they, they will have their own head of sales usually, um, marketing, PR, business development. So, you know, and they'll be kind of assigned to those divisions. Uh, and so we, we had to put that structure in place and I then I had to go hire for that. So some of which were people internally who were great and were going to be part of it. Some I had to go get true experts who were badasses in their field. Uh, and so that's what we did. We started putting that team together. And that really was that 2022 time frame. The next step is once you have that team, you understand what you're doing. Well, now let's look at, you know, are we doing all the right things? Do we need to reduce our focus? Are there things that we should spin off? You know, where, where are we, you know, off of, um, you know, the mission of the company, which I should mention also had to be reinstituted because, you know, if you go way back, the original sin of Yahoo was giving search away to Google in June of 2000. There's this myth in the internet that, that they were defeated by Google because they took their eye off the ball or what. It was worse than that. They outsourced it first to a company called Inktomi, and there were actually others before that, and then the market, the crash happened, and to get a better deal to save money on something that was viewed as a cost center, search, even though 92% of all, I think, sessions on the internet at that point started with search, it was viewed as a utility that was not core. One of the reasons was because there was no business model yet. So what became Overture and then what became AdWords and AdSense for Google didn't exist. All the search engines, and there were 10-plus of them that were public companies, Ask included, had banner ads everywhere on search results pages. So just imagine how bad that, that was. So it kind of came from the right place. It just, you know, wound up being, uh, something that was really hard to recover from. So generations of Yahoo started to figure out other, you know, ways forward. In the 2000s, while they did some very interesting things in search and other places, it was a foray into Hollywood. They had Yahoo Music and, uh, you know, TV and all, just all kinds of other things. They hired a lot of people from, from Hollywood. There were then a series of, of different CEOs. They then went back at Google, uh, in, in the 2010s and tried to go that way and then eventually selling to Verizon. The mission of the company was to help Verizon, you know, and their mission. It turned out that underneath all that, the reason why Yahoo continued to be successful all the years with this huge audience were the places where it was still, uh, fulfilling the original mission of the company that Jerry Yang and David Filo did in 1995, which is just being the trusted guide to the internet, helping people through the wild west of, uh, you know, that it had become to help them get things done in Yahoo Finance and sports and news and mail and, you know, different parts of search and weather and all these places where we still had leading brands. That's what the company was doing. And so we kind of had the benefit in 2022-23 of, of just focusing on the things Yahoo is doing well and we, we didn't have the burden of, first of all, being a struggling public company that was hard to make those changes in public is very difficult, and second, uh, to, you know, just focus on the things that we did really well where, where we were already successful. So that's where our focus went during that time frame, which meant that we spun a lot of things out or shut, or shut them down.

Well, it was first AOL.

And which had really, uh, kind of tilted more towards media during that time frame and, uh, Tim Armstrong, who's a great CEO and, and good friend, had gone that way and, and Verizon had this vision, which if you remember AT&T also had because they bought Time Warner. And so at that time those two companies thought that was the way forward. AT&T made a much bigger bet with Time Warner that wound up obviously spinning back out and at, uh, at Verizon it was AOL and then that team really was the one that convinced them to buy Yahoo and merge these two things together into this huge, you know, internet conglomerate that had just immense audience and an immense, uh, you know, amounts of data that could then be used to target in, in really interesting and, and good ways, which is a really good vision, but it was inside of the wrong company.

Um, it is back to the conglomerate structure piece by piece. So Yahoo Sports over 100 million users a month. Yahoo Finance over 100 million users a month. Yahoo Mail, one-third of all Americans, you have a Yahoo Mail account. It's hundreds of millions of accounts. Um, and down the line in the news where we're one of the top three properties as an aggregator. We talked, that was also another strategic move that we made was, um, going back to focus on aggregation as opposed to enterprise news and competing with the Associated Press and other places that, that should not have been our job. It had kind of gone that way over the years. Um, so, um, so yeah, so all those things that fit together are what add up to 700 million users a month where we are, you know, every month top five in the US, usually top five globally, and, um, number one or number two or number three in all these different categories.

Yeah, so look, AOL was the biggest. We could talk about that. The first one was Edgecast, which is a content delivery network competing with people like Akamai, that again we just viewed that we didn't have a right to operate. Um, the second and, and probably the biggest transformation job that we had to do until now where we're having to transform the whole company with a, you know, around AI was the ad tech business. So AOL and, and Yahoo had each purchased 30-plus, um, ad tech companies over the years. What we inherited was a three-legged stool of a, uh, SSP, DSP, and native platform that had a couple of issues. One was it lost a lot of money. So operating those things was massive, and it was hundreds of millions of dollars a year out the door that we had to fix. The second is that it was, to, to help make that successful, it was the primary source of revenue for Yahoo. So instead of being able to play the field with our supply-side platform and, and be able to pull yield levers on and, and taking all comers onto that and, and, uh, and optimizing for the, the highest yield, we were only taking ads from the ad tech business. So offloading that actually did two things. One is we, you know, we shut down money-losing businesses or sold them. And the second is that we were able to now truly optimize revenue on Yahoo proper. So it was two things. As part of that, in February 2023, we actually had to let go of over 2,000 people. Part of that was because we didn't want to sell the SSP. A lot of people wanted it, but we didn't want to give anyone, anyone preferential treatment the way we had been doing on our pages. We wanted to be able to yield optimize. So we had to shut that down. We sold a native business to, to Teads, uh, and took 25% of their company. Uh, so that, that was those two. And then, uh, while we did offload more things like you mentioned, TechCrunch was one, AOL we just did in October of last year, um, you know, was, uh, uh, you know, was, um, was focusing on the DSP. So actually there it wasn't just offloading things, there was actually the decision of, oh, there's a crown jewel in here and we can actually invest in that thing. So a lot goes into all that.

No, it wasn't even on the, on the map yet. That, that was November of '22. We were, [laughter] you know, we had no idea in September of '21.

Well, look, the first thing is in a transformation job is you, I always tell the team, you can't skip levels of the video game, right? You have to go level by level and win each level to earn the right to the next one. Uh, it always comes down to product. We're a consumer internet company. That's what we do for a living. Building great products. If, if you're not doing that, it's like a, you know, you're either, it's like Shawshank Redemption. You're either get busy living or get busy dying. That's how it is with, with this. And some of these products had not been worked on in, in like 10 years. Some of these things have not really been improved.

And so it was get back to work. So hire great product people. And we have an amazing team now that I would say is a great product team relative to, you know, any other big consumer internet company. We brought great people in who share our passion for putting this brand back on the map, who all of, all of whom have entrepreneurial backgrounds. Every general manager from me on down has been an entrepreneur at least once and started companies. So we take that approach. Improve the products is, is definitely game one. If you can do that and you can start getting growth going again, well now you can actually get to, you know, building brand new things like Yahoo Scout, our, our search engine that we launched earlier this year. Yahoo hadn't had its own search engine in 17 years.

So, or college fantasy football, which, which we kind of broke the internet with when we announced it this summer. And has been amazing and 40% of the people who have been coming to the platform, uh, where, you know, fantasy, Yahoo Fantasy is huge, we had our three biggest days ever this year for NFL, but college, 40% of those users are brand new to Yahoo. So doing these brand new things has been, you know, is, is the reward you get for doing the hard work and the turnaround work, you know, in the first place. And then the next step is, is actually the brand, which has been one of the most surprising things about this, you know, having been through the wringer with some other brands the years, that, uh, it has been incredible to see that Yahoo has a lot of latent brand love in there for it, and especially with younger audiences. So I think we've talked about this, but over 50% of our audience is Gen Z and Millennial. We have 75% of Gen Z is using Yahoo and are one of our products. And when we market, we've done a lot of really interesting marketing. We have a great social, social, uh, media team. We have a really creative, uh, you know, uh, brand advertising team. We have seen like 31% absolute point, uh, lift in brand love, which is, you know, one of the things you, you track with Gen Z. And that's again from our Cardi B campaign, from our Kyle Cook the Weather Boy campaign from Summer House, you know, for all the social media things that we've done, uh, you know, it really is, it, it is met with great reception. And so that really gives me hope that the more we turn that dial, uh, the more there is to do there. Again, if you don't have great products, you have no business even trying.

Yeah, I mean, that's, that's art and science. So it's going to start with, with data and understanding your user base and what, which again you never really understand from the outside. You know, it's funny. I, I have a bunch of my UCLA college friends. We, we, to help me get to know this college product, I got a bunch of them on it and they beat me up all day long for things that they're finding in the product. And when you, when then I, when I then go talk to the actual product team on the sports team, what, you know, what's really driving things behind the scenes or whether something's really wrong or it's particular to one person's opinion is just different, right? Take that across search where what happens on the other side of that search box is so complicated compared, especially now with, with AI, but even going back to the old days of, of 10 blue links, like, you know, you enter that query. But what we have to do on the other side to like capture that and understand what to do with it is incredibly complicated. And how to do that for hundreds of millions of people and move the needle forward is different than what it might just be for one, one user. So data is going to lead you the way forward. After that it is creativity and, and people who have a sensibility for, um, for users. One of the benefits of having a huge audience is that you can A/B test your way to things. So you can have a hunch, especially now with AI we can do it even, even more. We can experiment more. I do think product teams can get a little too addicted to that or become too cautious and want to do 200 tests at one time. Um, you know, you can't do that. You have to have, uh, you know, some passion for what you think the product should be and, and lead with that. But, uh, the thing that Yahoo had that I had experience at prior companies was this huge audience. And that is just, it's so hard. If you go look at the top internet companies in Comscore or Similarweb or others, it is incredible how many are from the '90s. It's amazing how many are from the early 2000s, YouTube and Facebook. I mean, we're all, we're 30 years old, but Google was almost 28 years old. Um, you know, YouTube, I think it's 21 years old, Facebook 22. I mean, we all are kind of in the same dating range or whatever. I mean, it's all, you know, we're all about the same age, interestingly, at this point. And new brands that get added to that really only happen once every 3 to 5 years, right? Chat was the latest. Before that, um, it was probably TikTok, you know, Snap, Instagram. It just doesn't happen very often. So I think, you know, I hesitate to call it a moat because you can lose it so easily if you don't treat it right. But this level of distribution allows you to improve the products and have it work, right? Versus trying to light the wet log from scratch, which is what entrepreneurs have to do, you know, which is why so many of the biggest consumer internet companies were, happened by accident. You know, they really weren't the thing that they intended to be a lot of the time. So we don't have, we don't, you know, we, we have a great platform to be able to, uh, to build great products on. That's just, we're lucky to have that.