After a few months’ search, the struggling Internet media company announced on Wednesday that its new chief executive would be Scott Thompson, the president of PayPal, the online payment service owned by eBay.
The 54-year-old Mr. Thompson, analysts say, has a background mainly in technology rather than digital media or corporate turnarounds. While PayPal is a consumer service, analysts said that was very different from a media company.
Mr. Thompson joins a company that is losing momentum against the ascendant powers in the consumer Internet business — Google and Facebook. Its woes persist even though it has 700 million online visitors a month, one of the largest audiences on the Web; is a leader in online news, sports and finance; and will report net profit of more than $1 billion in 2011 on revenue of nearly $4.44 billion, estimates Jordan Rohan, an analyst at Stifel Nicolaus.
Still, Facebook surged past Yahoo last year in online display advertising in the United States for the first time, according to eMarketer, a research firm. Yahoo has farmed out its search advertising to Microsoft, in a cash payment and revenue-sharing deal.
The overall online ad market increased more than 20 percent to $31.3 billion last year, while Yahoo’s share of that thriving market slipped to 11 percent from 13.3 percent in 2010, eMarketer estimates.
Yahoo’s slippage prompted the ouster last September of Carol Bartz, a respected technology executive recruited to be Yahoo’s chief executive in 2009. But Ms. Bartz proved unable to rejuvenate the company.
Now it is Mr. Thompson’s turn.
“Yahoo seems like the ideal fixer-upper from afar,” Mr. Rohan said. “But Internet assets are hard to fix.”
In a conference call on Wednesday morning, Roy J. Bostock, the chairman of Yahoo’s board, said Mr. Thompson had proved at PayPal that he could take a company with solid assets and build a business. That is the central challenge at Yahoo, Mr. Bostock said, noting its collection of online media offerings and large audience. The problem, he said, was that Yahoo had been floundering — “treading water,” as he put it. “You can call it a turnaround, if you want to,” Mr. Bostock said.
Analysts say Mr. Thompson must first decide how to focus Yahoo’s strategy.
In recent years, the company has spread itself too thin by making sizable investments in technology and also in creating original media content, said Shar VanBoskirk, an analyst at Forrester Research. That, she noted, is in contrast to Google, which aggregates content from around the Web and concentrates its investment in technology, but does not spend money to create media content itself.
Mr. Thompson, analysts say, will probably push to harvest more advertising dollars from all the consumer data it collects from people using its popular e-mail service and visiting its sites, which cover a range of topics including finance, sports and gossip.
“It’s not about putting up pretty content, but about maximizing the value of the eyeballs in front of that content,” said Charlene Li, founder of the Altimeter Group, a technology research firm. “There’s a real opportunity for him at Yahoo, if they can take all this data and use it for advertisers.”
At PayPal, Mr. Thompson demonstrated an ability to take an existing business, redefine it and achieve strong growth. Since he took over PayPal in 2008, and before that when he was chief technology officer, Mr. Thompson helped guide the company’s transition from being a payment method for eBay shoppers alone to an online payment system for all kinds of transactions. Under Mr. Thompson, PayPal expanded its number of users to more than 104 million, from 50 million, and increased its revenue to more than $4 billion, from $1.8 billion.
“That, to me, is a track record of building,” Mr. Bostock said.
In the conference call and an interview later, Mr. Thompson said that it was too soon to discuss any strategic shifts he might make. But he said Yahoo had to innovate and improve its offerings for both consumers and advertisers. “That balancing is what we need at Yahoo,” Mr. Thompson said. “That is how big businesses with network effects are built on the Internet.”
Yet when a company’s momentum wanes, the same snowballing effect can make recovery unusually difficult. Mr. Thompson acknowledged that challenge, but said the trend was reversible at Yahoo, without describing the path to recovery.
“The core business assets are stronger than people believe at this point,” he said. “We can turn the network effects in our favor as opposed to against us.”
Mr. Thompson began meeting with Yahoo board members in November, he said. And the more he looked at the company, whose Silicon Valley offices in Sunnyvale, Calif., are a few miles from PayPal, based in San Jose, Mr. Thompson said, the more he became convinced that Yahoo’s problems were fixable and that he could do it, despite his lack of experience with online media and advertising.
“There is really a lot here, a lot of upside,” he said. “And it’s clear what I need to learn at an accelerated pace.”
The appointment of a new chief executive, Mr. Bostock said, will not slow down Yahoo’s current negotiations to sell off most of its stakes in China’s Alibaba Group and Yahoo Japan to its Asian partners. If a deal is reached, it would involve a complicated asset swap and cash payments from Alibaba and Softbank — and bring Yahoo as much as $10 billion in cash to invest to reinvigorate its main business in the United States, people briefed on the talks said.
But a new chief executive, analysts say, does make it less likely that Yahoo will be sold to private equity investors. When asked during the conference call about that, Mr. Bostock said, “I do not envision us not being a public company going forward.”
Since Ms. Bartz left, Yahoo has been run by Tim Morse. He will now return to his former post as chief financial officer.
Yahoo shares on Wednesday fell 3 percent, to close at $15.78.
Michael J. de la Merced contributed reporting.
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