Yahoo CFO Ken Goldman
Ken explains how he plans to help steer the internet giant back to the top.
Few people have had as much influence over Silicon Valley’s array of technology companies — and for such a lengthy period — as Ken Goldman. He has worked in finance functions in the Valley for more than 30 years, serving as a CFO for more than 25 of those 30. And his influence spreads far beyond his current company, Yahoo.
“There are probably 15 to 20 CFOs in the valley at the moment that I hired out of school for me and my companies,” he says. “I really enjoy hiring young talent — whether from graduate or undergraduate schools — mentoring them, promoting them quickly and giving them visibility and responsibility early on in their careers.”
Goldman knows about taking on responsibility early. At the age of just 34, he became Chief Financial Officer of VSLI Technology, a semi-conductor firm, taking the company public that year.
Three years into his tenure at Yahoo, he is calling on his vast experience to steer one of the marquee names in tech back to glory. And for Goldman, Yahoo and the wider industry, this means refocusing on the fundamentals of finance.
“Frankly, we got away from it,” he says. “In the go-go days of the late 1990s, we got away from the core CFO job. That’s why companies got into trouble.”
When Goldman was hired by the then-new Yahoo CEO Marissa Mayer in 2012, the company had endured a tough start to the new millennium. The dot-com bubble bursting and the company’s share price dropped from over US$100 at the start of 2000 to US$16 per share 12 years later. Mayer herself was Yahoo’s fourth CEO in just over three years. Goldman understood the need for calm.
“The last thing the company needed was for me to come in and say ‘I know it all, and we are going to change a bunch of stuff to suit my needs’,” he says. “I spent the first 90 days getting a sense of the company and understanding things we had to work on.”
After surveying the landscape, Goldman found that his main priority was to establish clear business processes. “In terms of doing things that could make a difference, one of the first I remember — and it’s something that seems very mundane — was the approval matrix,” says the CFO.
“I’m a detail-oriented individual, so I want to make sure I’m reviewing a number of expenditures. Just making sure we had the approval matrix, spending time on creating it and seeing what each of us could authorize and approve, ensured we managed our processes here.
“We also created our Capital Authorization Review Committee, where all the key players get together and review our capital authorizations on a weekly basis.”
Another priority was to refine revenue measurement processes. “We worked closely on creating better revenue metrics — by product, by region and by advertising product. We created it so that we had daily metrics — we didn’t have those before. Having the daily, weekly and monthly metrics gave us the knowledge on a regular basis about how our business is working.”
Goldman also emphasizes the importance of reviewing revenue and capital, a process that was previously missing. “We collectively created revenue review meetings,” he says. “We also have weekly deal review meetings. So now we have a regimented approach to reviewing deals and partnerships as well as potential acquisitions.”
With new processes in place, Goldman was able to focus on growth. And the CFO is clear on what is needed. “I’ve been in technology for going on 40 years, and technology value accretion is all about revenue growth,” says the CFO. “It’s that simple.”
By Goldman’s own admission, Yahoo is still catching up. “We’re not growing as fast as we want, but we’re very focused on putting the pegs in place so that we can grow,” he says.
How will Yahoo achieve sustainable growth? “It comes down to something I call the wheel of fortune,” says Goldman. “First, we get the right people in place. Second, we drive the right products. Third, we drive the right engagement. And from all of this, we can drive the revenue growth.”
To secure growth, Yahoo is focusing in particular on what it calls “mavens”: mobile, video, native advertising and social. These make up roughly a third of Yahoo’s revenue, and as Mayer said in an earnings call earlier this year, they are “core to [Yahoo’s] growth.”
Another priority for Goldman is to complete the spin-off of Yahoo’s holding in Chinese online market company Alibaba. Yahoo paid US$1b for 40% of the company in 2005. It sold under half of that stake back to Alibaba for US$7.6b in 2012. And in 2014, it sold a further 8% of Alibaba for US$5.1b. Yahoo has already announced it is in the process of selling its remaining 15% stake in the company — valued at US$40b.
“We need to accomplish that [spin-off],” says the CFO. “That’s unique to us — a multi-billion dollar asset that we were spinning off once we were able to ... But the first fundamental, and fundamental to being a tech company, is creating growth.”
As Yahoo refocuses its growth metrics toward mavens, the wider company’s make up has also changed. In 2014, Yahoo closed 15 offices and began retiring more than 75 products and services. Goldman believes that such quick rationalizing is necessary in a fast-developing online sector. “Things can happen very fast,” he says. “You have to be able to work around. We have to ask what the core markets are.”
Part of the strategy focused on winding down Yahoo’s ventures in places where there was not a large enough presence to warrant a physical office.
“We looked at offices where, frankly, we don’t have critical mass in terms of people,” says Goldman. “For example, we love Jordan, but it didn’t make sense to have customer service in Jordan for us ... There were a number of places where we just didn’t have critical mass.”
These actions are part of a drive to centralize Yahoo by bringing key talent and core functions closer to the company’s headquarters in Sunnyvale, California.
“One of the things Marissa said last year was that whatever is most important to Yahoo should be brought close to corporate headquarters,” says Goldman. “So in Sunnyvale today, we have the core functions of search and mail and so forth. We wanted to make sure the core functions are close to the center of gravity. We wanted to emphasize what we really are, and what we are is these various products.”
Working with shareholders
While managing all of these changes, Goldman has had to contend with vociferous activist investors. Last year, investment management firm Starboard Value LP asked the company to combine with fellow internet business AOL.
The CFO emphasizes the importance of allowing investors to voice their opinions. “Sometimes Marissa and I will go visit investors and just listen,” Goldman says. “We don’t have a new story to tell, we just want to do an outreach and ask: ‘What [do] you think about us?’.
“[But] you have to be careful,” the CFO adds. “The most important thing is the work mixture — you have to spend most of your time on the fundamental parts of the business. I will tend to meet with the analysts on an exceptions basis, and we attend a number of tech conferences, do a number of fireside chat Q&As around them, as well as investor meetings.”
In part two, Ken Goldman discusses the company’s acquisition strategy and capital allocation plans.