PayPal’s Thompson to Take Reins at Yahoo

Talk about starting 2012 off with a bang! It can now be confirmed that Scott Thompson, President of PayPal since 2008, will become the CEO of Yahoo. The announcement is a real shocker for many reasons, but mostly because he will be leaving PayPal at just about the point in time that it is likely to really ignite its offline business, with a move about 10 miles North on the 101, to try to revive the company that once dominated the Internet, but seems to have lost its way.

(From the Archives: Scott Thompson Interview)

Don’t get me wrong — Scott is the perfect person for the job. After all, it was under his watch that PayPal transitioned from a convenient way to buy junk, literally, on eBay, to a payments phenomenon that is poised to rock the traditional payments world. Since he took over, PayPal has become the largest (well really only) online wallet — growing from 50MM active users to more than 100MM worldwide in 190 countries. It acquired Bill Me Later and the outstanding management team that came along with it; opened its platform to now some 60k+developers; expanded its online acceptance to non-eBay retailers (capturing nearly 90 percent of the alternative payments volume on the web); acquired a number of assets, like Red Laser, Milo and WHERE that will enable PayPal to provide an end-to-end shopping experience for merchants and consumers; launched a number of mobile initiatives that powered nearly $4B in commerce in 2011 alone; and laid the groundwork for PayPal to aggressively move into the offline commerce world. No wonder Yahoo was salivating.

Scott will need to harness all of these skills and capabilities to save Yahoo from becoming one of the platform carcasses that David Evans wrote about just yesterday. Yahoo had a long history of ups and down since it was founded by Jerry Lang and David Filo in 1994. At the turn of the century, Yahoo was the Internet darling — fueled no doubt by the dot com bubble. Its stock traded at ~$500. When Carol Bartz left in September, Yahoo was trading at ~$17.00. Here’s a great infographic of Yahoo’s history:

[Source: TechCrunch]

In case Scott is reading, here are a few pearls worth considering once the PR rush subsides:

  1. Once upon an Internet time, Yahoo was the most powerful online media platform. Everyone knows that it has lost its way, its focus and, with that, its customer bases. Once readers flee to other sources, so do advertisers. Righting the ship is not just about fixing one side of the business, it is about fixing both. Figuring out which one to tackle first is not going to be easy since there is blood flowing massively from both sides. And it has to do that at the same time that its business has been vastly overtaken by Google in online advertising, and that there’s a new advertising giant down the street called Facebook.
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  3. One of the things that make platforms disruptive is the business models that underpin them. Those business models are only as strong and powerful as its customer set is. Yahoo’s economic model obviously needs some major overhaul, but may be limited at least initially given the fact that it has few assets to really cobble together to make a persuasive and disruptive economic case. Plain old online media seems so yesterday.
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  5. And, finally, the business environment for Yahoo is a whole heck of a lot different nearly 20 years later. IP-enabled devices like iPhones and tablets didn’t even exist. The lines between online and offline commerce are converging. Content is in abundance on the web and most of it is free. Deciding what business the Yahoo platform is in now, and what business they should be in going forward, has to be THE fundamental cornerstone of saving the company.
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As I said earlier, no wonder Yahoo was salivating. Best of luck Scott! We’ll be pulling for you!

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