Yahoo CEO Jim Lanzone on reviving the web's homepage

23:48And they were breaking news, sometimes about us. and you know which is fair but um you know i remember they were doing that with in tim armstrong's days as well um and uh and that's great but it's it's just not the kind of content we're producing you know shams and sports and and woes before him and the nba like they started at yahoo um you know during that time period and we and we just thought look it's it's that news is going to break and very quickly it's going to be disseminated and you won't usually get credit for it on espn they don't always say where, you know, at SportsCenter, like where that news is broken.

24:20And then of course, then they wound up stealing those guys and paying them$10 million a year. So it's just like a game that we decided, like we, that's not what people are really coming to us for. It's really more to be the aggregator. And then we can provide great context in sports and finance. It's also a little bit different in that not only are we aggregating, but we have very, we have products that are extremely important. Fantasy, you know, we're one of the top two platforms in the original and in fantasy and sports and we have all these new fantasy games that we've been launching and of course in in finance you know we are the still the number one for you know tracking your portfolio and getting research and information about it and so all of our whether it's brian sazzy and his team you know on finance or or it's koc and and that stuff on sports we're providing context the actions that you're going to be taking right in in those uh in those verticals

25:16Nilay Patel:We have to take a quick break here. We'll be right back.

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29:52Nilay Patel:welcome back i'm talking to jim lanzone about the winding road that ended up with him being the ceo of yahoo this is a great spot uh for the decoder questions i actually want to ask you this you've been ceo for a minute now yahoo has been through all kinds of twists and turns at one point it was squished into something with aol at verizon called oath which was deeply confusing. You became CEO after Apollo Global bought the company. It's a private equity firm. Very few people are ever going to think themselves, I should be the CEO of Yahoo and then interview for that job. Walk me through that. What was the pitch?

30:28Did you make a deck? How did it work? They bought it in May of 21. It closed in September of 21. And, you know, they talked to a lot of different people around the industry, people that you know, that I know about, you know, doing diligence on Yahoo and whether they should buy it. And I competed against Yahoo for basically every stop of my career. I knew every executive team. I went head-to-head with them over the years. I always thought I'd partnered with them on certain things over the years. I always thought it was the granddaddy of all turnarounds. And I've been part of a few of them. I've just grown to love doing them.

31:04And in my case, I wanted to run towards the fire. I was very much of the mind that if you could get it for the right price, that it was a great deal to do. And so once that deal closed, the conversation immediately turned to whether I would be interested in running it. And I definitely was. So there was no pitch deck other than my advice and input along the way to buying it. And then over that summer before they closed, it wound up being a negotiation of me coming on to run it. And I'd been at other companies where we had thought to ourselves like, oh, I wish we could take our executive team over there and compete with them with those assets.

31:43Let's see how that Olympic race goes. Like we, we wanted to try that. And, uh, and so, you know, look, it's, it was, you know, almost 30 years in the making. I was getting it at a very different time than if I'd gotten it in 2010 or 2005 or, or some other time, but the assets were still extremely strong. And, uh, and, and yeah, I do, I do also understand the part of your question, which is PE and, and, you know, do people in my position normally want to go do that? I've, I've, you know, I've been an entrepreneur. I've started two companies. I've worked for media moguls. I've done all kinds of things.

32:14And my view on that is just, you always got to serve somebody. And it's your board, it's the public markets, it's a really hard boss, whoever it is. And I felt like Reed Raymond, who was the partner at Apollo, who did the deal, was really smart, a really good guy, and that we would be really good partners, whether private equity was behind it or VC or anybody else.

32:36Nilay Patel:Well, actually, let me ask you about the sort of PE piece of it? Because you're right that I'm very curious about that. Usually a PE firm buys a declining asset to just ride it on the way down. Everything you've talked about so far is growth, right? Have they provided sufficient capital to reinvest in the business, or are you just moving money around through cuts and reallocations? Two things. One is that they actually have been. In fact, I was in a meeting this morning where they were offering capital to do big things that we were talking about. Does the ominous music play when the private equity firm offers you money?

33:08No, if you met Reed, you wouldn't think about it like that. You wouldn't. No, we have a deal team that's not like that at all. And I don't know about it. No, they've really always wanted to kind of swing, you know, bigger. And I'd say in the early days, you know, I mean, if you go back to when I started, it was still the heart of COVID and the crypto boom and stonks. And there was one kind of boom period. And then things dried up for a bit. and then AI boom. And, you know, we've kind of gone through this. And so what we've looked at doing with that capital has been different. We've wound up buying smaller things along the way instead of bigger things, but they've been very up for the bigger things and trying to make this, you know, a much bigger outcome along the way.

33:51We have tended to make our own fuel. I promise you there has not been one reduction here that hasn't been strategically decided by my team. And, you know, we shut down two really big money losing ad tech parts of the company. That was all our team, you know, trying to do that. So we are, you know, I'd say profitable to very profitable. And we don't need to make a dollar more than our budget to satisfy the PE gods. It's agreed upon every year in our planning process, you know, what that's going to be. And certainly when we made the changes to the revenue engine, it was a little dicey there for a year.

34:28That was the Indiana Jones, like, replace the gold situation. They had to take a leap of faith with us on that. But yeah, we've not been through any PE-driven cost reduction exercises or anything yet.

34:42Nilay Patel:I've seen a quote from Apollo saying Yahoo is the fastest return on investment that they've ever had. I know you're a private company. What is that return? Is it healthily profitable? Is it just a dollar more than they spent? No, very profitable. And look, we don't disclose revenue, but it's in the billions. That number's moved around as I've moved out a lot of bad revenue with those ad tech companies that are driving a lot of top line, but not a lot of bottom line. AOL was a lot of revenue and profit, and that went out. But no, it is in the billions of revenue. It is very profitable. It's not profitable by a dollar.

35:18I'll say for a company that really paid the price for being a struggling public company for a long time, right into the teeth of some big competitors coming along to eat its lunch, it's been good to be private along the way, whether we're owned by PE or not, to be able to make a lot of these changes. But yeah, it's in a very healthy spot financially.

35:37Nilay Patel:It does not sound like you ever sat down and opened up Google Docs and said, if I ran Yahoo and made a bullet list, but you've made a lot of decisions, including the decisions to exits and businesses. How do you make decisions? What's your framework? Having watched your podcast for a long time, I knew that question was coming. And I just didn't want to come up with some bullshit answer. The answer is, honestly, because I've heard some and they sound like they're trying to write a chapter for Peter Drucker or something. I'm just not going to try and do that. I think if you've done this a long time, and I'm the wrong CEO for enterprise software company.

36:08I'm the wrong CEO for a food company. But I've done consumer internet my entire career. I've started them. I've taken over big ones. I've seen kind of everything you could see in this industry. And it's very easy to make decisions. I think it's harder to get the information for it. I think my team would tell you that, you know, I'm very quick to make decisions. I would rather they, you know, have done it themselves. And we can talk about the org structure and why that is when, you know, I'm kind of the editor-in-chief myself for what happens here. The framework is definitely through the lens of our mission.

36:46you know I don't have a set of like Enron values on the wall like integrity that mean nothing we have a view on that as well so that's not really how it happens but it really is through the lens of you know why we're here what we're trying to do what our plan is for the year my job at the end of the day is growth like you you could say you could dress that up any way you want that is my job I think that's the job of any CEO even if you're a series a you know company and so that lens for what we're trying to do is pretty easy, I'd say. And we know who we are and what we need to be. And we know what the spine of the book is.

37:20And, you know, the pages that they're kind of starting to come off of that as we go forward. And the first two years I was here, it was the transformation period. It was not only getting us through COVID and all of that and extracted from Verizon, we actually had to stand this company back up. We're not the same Yahoo. This is a new company that p.s. Jerry Yang invested in he was one of our investors that we put the name Yahoo back on um so all the transformation work that happened the first couple of years got you to the point where you could earn the right to start improving the products again because at the end of the day we are a product company and these things had to not suck let alone get to be good yeah and now we're in I'd say the third phase which is starting to take shots on goal um and so the decisions are always going to be different you know as I think you go through those phases.

38:08Nilay Patel:This is the other question. You've talked a lot about restructuring the company, getting rid of pieces you didn't need anymore. How is Yahoo structured today? And how did you land at the decisions that brought you to that structure? So it is a conglomerate or portfolio structure. I backed into accidentally the structure years ago at another company. This is actually the fourth conglomerate I've been a part of, starting with IEC, which bought Ask Jeeves back in the day. You have a thick skin, my friend. Yeah. Yeah. And, you know, in that case, it was 60 companies that had been brought together by acquisition, most of which had nothing to do with each other.

38:45And they went through a period of trying to turn it with Jack Welch as the advisor, turn it into an operating company with a common, you know, back end. And that just didn't work because Ticketmaster had nothing to do with ask and search had nothing to do with, you know, LendingTree or the catalog business. There were just so many different parts of IEC that just weren't similar. But in my CBS days, all the brands were consumer internet companies. And at first, because I had been a product, you know, I was always a product leader or founder, I was a pig in slop. I was like, oh, great. These 25 brands all get to report to me, including like the fantasy.

39:25You know, I started playing fantasy on Sportsline and okay, I get to run that now. And within like a year, it just became clear I was holding everything up. You know, I couldn't have 25 direct reports. And so I organized them into groups that were similar with general managers in charge of each business. That structure worked great. And we came to call that federal and state, that there were governors of every state that had their own economies, usually their own location, their own culture, and that that was fine. And at the federal level, there's no reason to have two IRSs or two Femas. We could, across finance and legal and HR and some other things,

40:02Nilay Patel:we'd - Can I just tell you, you're killing me. Do you know what Tim Armstrong's reorg at AOL was that basically inspired us to all leave and start The Verge? It was cities, towns. And he put up a big sign over in Gadget that said Tech Town. And I was like, I got to get out. I can't be living in tech town, dude. Like I got to, I got to bail, but I understand the metaphor. Well, it's funny too, because you say all that and that, that is the structure we had here. So I inherited this big matrix organization where nobody owned anything. There was one head of content across everything. There was one head of product across everything.

40:33And it just, what you lose there is you don't have experts who are focused, who you hire them to be the CEO of their own business. And they want that. Every one of my general managers has an entrepreneurial background and usually a product background. They want to run. And you got to let them run and be a little inefficient at the edges by having their own engineering teams, their own design teams, their own content teams. And then we will assign to them, you know, people in sales and marketing and PR who are experts at that area, but who roll up to a central person. And so that model worked amazingly well because you can get real efficiencies at the center and expertise at the center.

41:11While, you know, again, I don't think efficiency is the name of the game here. It's excellence, you know, and growth. And so you hire great people to do those things. And then I'm, you know, I'm the editor-in-chief at the center of all those. And we do have patriotism, you know, across all the brands. It's a lot easier at Yahoo where we have one central brand. But that's the structure. What I will also say, though, is structure is not everything. And at these big companies, you could be this big matrix Borg or you could be the GM model that we run. It always comes down to the people. and it I honestly think that it where you see problems it's not just the structure it's not just the culture uh that you inherited it's it really is the people and what they're good at if you don't hire real domain experts who have high eq or are really good teammates to each other and uh you know you just you're going to wind up with a cesspool anyway or people who don't know which way to run and I think our people are just awesome And I think that was true at the last company.

42:12And that's why we succeeded in doing the turnaround and then got to the point where we could launch new products that were really groundbreaking. In that case, it was CBS All Access, which turned into Paramount+. Here, you know, who would have thought Yahoo was going to launch an AI search engine? And, you know, we have some other bets that we're making. So I do think the people are what it really comes down to at the end of the day.

42:33Nilay Patel:I know you have three divisions. It's new sports and finance. Tell me about how they operate together, right? Is it ever all three of those get to do whatever they want? And at the top, you're saying, actually, we need an AI search engine that goes across these things. Or do they have harmonized product roadmaps? How does that work? Well, believe it or not, those are not the division. So those are also divisions. So we have GMs on each of those. Some roll up to Matt Sanchez, our COO. So he has the home business, the search business, email, which is in many ways our most important historical business, and our DSP, as well as monetization that goes across that, you know, loads up to Matt.

43:11Ryan Spoon runs what we call the Yahoo Media Group. And that has today sports, finance, and I've talked publicly that there's a third leg of the stool, which is we definitely probably have a right to go deeper into video in a nonfiction way across the verticals where we're strong. News today rolls into the home business just because they were so intertwined, but theoretically it could be one or the other. And then, again, every one of those businesses has a GM who really has the business plan, the P &L, the resources to run their business. And then sidebar to that, we'll have a CFO or the chief revenue officer with the sales team, et cetera.

43:51So that is how it's structured. If you were to talk internally, there actually is incredible harmony across those businesses. Yeah, they brawl sometimes over traffic from the homepage or something to do with the content management system or the monetization. But for the most part, I actually think you'd get pretty unanimous feelings about how we operate together. I think they would all sing from the same playbook. When people interview with us, they always comment about how everyone is kind of speaking off the same playbook. So, yeah, I mean, I think we actually do have a pretty good working structure together.

44:33Nilay Patel:Talk to me about the monetization piece. And I want to get into you invested in your demand side platform for ads. If I'm looking at news and sports, I would say, well, we're just going to do gambling now. Like, that's the money. Like, this is when I say finance and sports are colliding, right? The feeling that we're all just gambling seems to be infecting everything over there. You have a deal with Polymarket and others. But then you have this big investment in just what feels like traditional display advertising, which is not an investment that other people are making at scale. Why are you still so invested there?

45:05Nilay Patel:Is that growing? Are you just holding serve? And then how do you think about, well, we should just do casino? So the entire company we inherited was monetized through this group that was a three-headed monster of native advertising, a supply-side platform, and a demand-side platform. You had to buy all three, and the Yahoo consumer businesses had to only get its revenue from that group. So if you think about the SSP, it was the Yahoo SSP. We couldn't go out and play the field on an auction from Trade Desk and from Google and from others. So that was part of the decision there is we were leaving a lot of money on the table on our own consumer properties.

45:46The native ad business was just declining over time and something that was taking up a lot of resources. And so we did in one day, we did this huge, that included an extension of our Microsoft partnership on search advertising, which is another way we make money. We did all these things. So we extended Microsoft. We shut down the native business and we took 25 % of Taboola and we outsourced it to them because it was a lot of money. We shut down the SSP. There were people who wanted to buy it, but we didn't want to. We would have had to give them preferential treatment. We wanted to be able to play the field on yield on all of our pages.

46:22but the DSP was under-invested in, but was the crown jewel. It was a place where we thought we had a right to win. The vast majority of the impressions through the DSP control center are not Yahoo. It's less than 10%. And you can get anything through there. CTV, Netflix is in there, Spotify is in there. And the differentiator for it is something that's a differentiator for the whole company is when we inherited the company, it was like we discovered oil underneath it, which was this data goldmine of first-party data due to the direct relationship. 75 % of our DAUs are logged in. And so we really do know our users.

47:00You cluster that information and you either target on Yahoo proper or you take it to go, you know, across when you buy through the DSP. And we are incredible at conversion and outcomes. And that really is one of the, you know, why I think Yahoo is still a very underappreciated asset. would be for anybody. We went nine out of 10 head-to-head, you know, tests against people on the DSP side. And, you know, again, I think on the Yahoo proper side, it's even bigger. So, yes, we are selling premium ads, you know, for March Madness and World Cup on sports. Yes, we're doing partnerships with Polymarket and others.

47:43BetMGM has historically been the, you know, the gambling partner for the last seven years, it was a deal Verizon did that's just coming up at the end of this month, finally. Polymarket was just to fill in the blanks of the markets where we didn't have that deal. So we'll see like what the partnerships look like going forward. But the vast majority of our revenue is on the back of our premium properties, either through highly targeted advertising, subscriptions, and then down funnel into search. Yeah. Which, you know, we can we should talk about search separately. But yeah,

48:14Nilay Patel:I just want to unpack the demand side piece of the puzzle, right? This is where advertisers log in to buy ads and you can go address a bunch of stuff, whether that's display advertising on Yahoo and then you're saying you can even get to Netflix. I think you have a deal with Netflix to help them sell their inventory because they stood up that business so fast. I'm legitimately curious about the formats you see growing there, right? Is it display at like everywhere else, like banners and boxes are in decline and all of the money is moving to influencer brand deals. I get consumer tech companies on the show all the time.

48:45Nilay Patel:The CEO of Shark Ninja was on the show and he's like, I built my business with influencers. And we have this like massive data set of sentiment analysis from the influencers we work with to figure out what blender we should make next. And that is a crazy business that only exists because of influencer marketing. That feels, you know, if you listen to the show, you think that's the future. And here you are saying the oil underneath Yahoo was this data set that lets us target across to other platforms. But is it targeting on Yahoo that's as valuable as being able to sell CTV on Netflix? Because that feels like the risk in this whole approach.

49:18Yeah, look, it's going to be different for every advertiser. And I've worked in the streaming side of things and had an ad business in that. And you're going to get premium CPMs for brand advertising. You're not trying to drive people downstream for an outcome. DSP buyers are typically outcome-driven. Definitely Yahoo proper buyers are largely outcome-driven. We will get big brand takeovers. We just sold one yesterday for the World Cup. We've been building deeply into soccer, into motorsports, and some other verticals there. But for the most part, it is performance-based. And we are just one of the rare, I don't know, we have to be like top three places to go for really high-performing advertising.

49:59And it's not the same buyer always. So I'll give an example just because I know he'd be okay with it. But a person who used to work for me running SurveyMonkey, and they were buying through the RDSP. and he came to me and said, you know, Yahoo proper is by far the best performing part of this. Can we just buy directly from you? And so I introduced him over and they did a deal, you know, to buy direct through Yahoo. So it's a different ad format for sure. But, you know, and again, even native advertising can perform. It's going to perform at a different percentage, but the internet is just a much broader and more vast place than people appreciate.

50:37you know we we are growing yahoo after 30 years it's pretty incredible that through all with all it's been through and what you might assume about it like for example 50 percent of yahoo mail users are gen z or millennial nobody nobody would assume that um and it's growing has had one of its best years ever but the uh you know the size and scale is just very rare and so and but but of course the surface area for that is is mostly not going to be premium video advertising it's going to be display. I mean, that has its place in the ecosystem. You know, it's not the hottest thing right now, but it converts and it has a place.

51:09Nilay Patel:I'm asking these questions because it's just refreshing to hear people say the basics still have something to say for them. Yep, they do. We're going to send traffic to news publishers and we're going to do display advertising. Now we got to get search there, dude. Search has to come along for the ride. So let me ask you about search. You told my friend and colleague, David Pierce, that you're very proudly number three in search. One of the more famous decoder back and forths of all time is Sacha Nadella at the launch of Bing with ChatGPT said, I want to make Google dance. Every point of market share I can take from Google is billions of dollars for our bottom line.

51:42Nilay Patel:And then Sundar, who has a very different personality, came on Decoder and was like, good luck. Basically, in his very Sundar way, he wanted to say that I'd get a rise out of you, but I'm not reacting to that at all. And you can see how that played out. I don't think Microsoft took points of share off Google. Maybe ChatGPT did, but they don't have the monetization. right? They're furiously hiring people from meta to figure out how to monetize this new search behavior they've created while Google is just going to roll it out across their products. You're number three. You're sitting there. You're watching this dance.

52:11Nilay Patel:You're rolling out AI search. Can you take points of share off of Google and can you monetize them in a way that actually makes sense? It's funny you mentioned that Bing. I remember the Bing launch being at the D conference and this is probably before I realized how Twitter was going to work. And I put some snotty tweet up about when they announced Bing that it was essentially a copy of ask.com of what we had already built. And Dan Frommer took it and turned it into an article. And I was like, no, no, no. Perfect. I was like, delete. I didn't mean for that to get out there. So, you know, I've been through the search wars.

52:45The way that we, look, I'm never going to be in a worse position than where the Ask Jeeves brand was in 2001, 2002. And we did grow market share in search. And the way that we did it is that we had a pretty big audience for the time with a completely underperforming product that the original product showed up 85 % of the time was only clicked 25 % of the time because it was a hand-coded NLP. It didn't really do it the way NLP works today. And through a series of things of improving search and launching what became one box on Google and doing all that, what we found is that if somebody was doing 1.5 searches a month on ask, that if we launch these things, they would just do three searches a month on ask to start with.

53:33That was doubling our search volume. And search advertising was linear in terms of what that would do for revenue. So that's how we got profitable and grew that company from the brink to selling to IAC. Some of the same things are in effect here. Nobody chooses, you will not be surprised, Yahoo over Google or somewhere else to search. The reason, the way that we get our search volume is because we have, you know, 250 million US users and 700 million global users in the Yahoo network at any given time. And there's a search box there. And, you know, infrequently they use it. That search has been under threat of moving to LLMs.

54:12And so we had to evolve that search engine, which we've been in partnership with Bing since 2009 and outsource that. And we had to do something to make sure that they kept doing those searches on Yahoo, the ones that they were already doing. So to do that, we had to have AI search. And our decision was that as we looked at the landscape, we were actually the best people to build it because we actually had the data to build upon to do it. And we could do it and we could do it affordably. But are we going to grow in search? I certainly hope so. And if we do, it's going to be because people are doing an infrequent number of searches today when they use it and they see Scout and it's awesome.

54:50And the results are really good compared to what they would get elsewhere that they, the next time they're on Yahoo for mail or fantasy or check their stocks, they'll do another one. And that really is the beginning of the pathway. Wherever we wind up, I can't get there without that start. You know, there's always going to be the question mark in the middle of underpants gnomes of before profit. But that is old school. Who knows where that goes, but that has to be the starting point, and that's why we did it.

55:19Nilay Patel:We have to pause here for another quick break. We'll be back in just a minute.

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58:12Welcome back.

58:13Nilay Patel:I'm talking to Yahoo CEO Jim Lenzone about search and AI. You said earlier in this conversation that the original sin of Yahoo was giving search to Google, paying Google for the privilege of running the search box on yahoo.com. I am guessing you did not buy 10 million NVIDIA GPUs to train your own model. Who is running your search right now? So we are working with Anthropic with their lightweight model called Haiku. And there are a number of these. Actually, ChatGPT used to have one called Nano that they kind of aren't really doing anymore. I've heard they might bring it back. But we're not displaying results from Claude.

58:51It's results from our own data that they are processing, essentially. So we send them a payload that is both all this amazing data from our knowledge graph, soon to be our user side because we're about to launch personalization, 30 years of search history, all of our vertical content knowledge. And then we also are grounding with Bing. And so that combines into one payload we send to Haiku. So that's the large language model that is applied in a small parameter way to Yahoo data that sends it back to our rendering engine in the way that you see that we think is really cool and useful and the way that we render results.

59:29So it is definitely a much more affordable, kind of a MacGyver way of doing it. But it actually, if you wind up Eric Fang, who is the mastermind of this project, who is our head of our research group and the head of our search group, would phrase it as that Yahoo data, you know, plus Haiku equals very competitive AI answer engine. And again, we're not going to be doing all the things a large language model can do. But you are very shortly going to see us get into very personalized results. You're going to see us get into very agentic actions that you can take. And with that launch, not only do we launch the Scout answer engine at scout.com, but we actually, on the day of launch, have embedded it within all of our other products.

1:00:20And so, of course, there's news summaries, but there's a button in Yahoo Finance that does analysis of a given stock on the fly. It is in Yahoo Mail to help summarize and process emails and extract really useful information. And there is a whole roadmap that you're going to see with a lot of different smaller announcements over the course of the year of things that it will become very proactive. And if you remember the days of push, it's going to be very push-oriented where I think this category is going. and people use this for productivity at the core of Yahoo. And so I think this helps us also do that.

1:00:57At the same time, have a kick-ass AI answer engine.

1:01:01Nilay Patel:So you've got Anthropic, sort of the heart of it. I presume that that means you can take them out, right? If there was a better vendor or a better partner or better deal terms, you could replace that little LM core and your product should still operate. One of the dynamics in AI generally, though, is that the big models are eating more and more of the capabilities that people are building on top of them. I didn't see that coming in the history of the consumer internet, that each 800-pound gorilla tries to do everything and eat all of its progress. One day you're going to open Claude and it's just going to start serving you vertical social videos.

1:01:36Nilay Patel:And we're going to be like, how did we arrive here again? Well, they're already trying to do it, of course. But Google has started to compete more with all of its providers over the years, too. So this isn't new. So how are you thinking about the dynamic? You've got this long history. You've got a core vendor in a position that looks a lot like the original SIN. You're paying a vendor to run the search, but maybe you can swap them out later. And then that vendor is just going to keep growing its capability set. And all the other vendors who are similar position are going to keep trying to grow their capability set.

1:02:06Nilay Patel:How do you avoid the cliff? Because it rhymes with the past, as you're pointing out. To tell you the truth, look, our biggest challenge from here forward right now, because I think we're starting to cook with oil on the product side, is actually brand. You know, I think we've come a long way. We've climbed the mountain a bit and we've made a lot of progress, especially in the industry. I think people know what's going on here. But, you know, if we hope to have like a New Balance type comeback where it's got or the Gap or these places that have kind of been down, but have, you know, have made this comeback and become, you know, really solid brands again, which is my aspiration for the Yahoo brand.

1:02:47We have further to go to where I think we're really, you know, punching at the weight where I want to be. the reason why we were as good as we are is is because you know at our core we do a really good job in these verticals where we play and if we can deliver these products that are much better than what we inherited to a user basis large i think worst case you know we are growing that audience at the core and i don't think we are big enough i think uh an anthropic and in a chat in a OpenAI, we're back to fish, but have much bigger fish to fry than Yahoo. You know, we might be collateral damage in what they try and do.

1:03:30Absolutely, I've known since the start, and, you know, others have said this, that, you know, you're tempting fate by opening up, you know, a way for consumers to access your product within a large language model. Like, they certainly over time will try to take that on themselves. We've seen that every single time in this industry going back to AOL, to be honest. And we've seen, you know, so I think that is a danger for everybody. And the same way I don't think publishers would have been okay with people just taking their data and republishing the answers without getting traffic back. I think on this topic, people should be very careful on how they partner with a large language model on this going forward.

1:04:14Because they will, the big bad wolf will come to your door and say everything's cool. That being said, Anthropic has been an amazing partner. They were really impressed by the MacGyver move that Eric Fang and his team made and how we use Haiku. And in fact, they're a part of our press release for the launch of Scout. And we're going to be doing something at South by together. So that partnership's really good. And I hope that it lasts for a long time.

1:04:38Nilay Patel:The other big bad in all this is Google. We've brought them up several times. Google has a big DSP. They compete in all the areas you're competing. They aggregate a bunch of news. Google Discover is the secret referrer to like half of my competitors. They will never admit it, but it's true. They're in a lot of trouble, right? There's a bunch of antitrust cases about their ad tech stack, about search in general. I don't know how they're going to, all that's going to play out in the end, but they're under a particular kind of pressure. Do you see that as an opportunity or do you see the way they run their ad tech stack as a particular kind of threat?

1:05:12Man, I still think of Yahoo as being, as not being on the same, you know, to think that we we'd be able to take advantage of Google at this point. I think we have further to go, but I think they're in a very strong position. I think that they really were surprised by the launch of ChatGPT, and that was a generationally important product. I think Google probably had it in their labs working the same way.

1:05:33Nilay Patel:Oh, no, they did. If you mention this, a Google person jumps out of a bush and says, we invented transformers. They're over it now because they've managed to execute. That's right. And I don't know if you remember Danny Sullivan. Oh, I know Danny well. Danny was the figurehead of search and ran the biggest search conference. And, you know, all the SEOs who didn't have their names in their business cards would be outside smoking and hanging out with Mac cuts and that whole generation. Danny then ultimately went to work for Google and is like an evangelist for them. And I've seen a presentation that he gave where he is singing the praises of the open web and how important it is.

1:06:10And I am positive that they would have done more to take that on if they had been able to drive the conversation of the UI of this thing. If you've looked at it, I mean, a very small percentage of Google users have actually used ChatGPT. I think SimilarWeb put that stat out on Twitter where I saw it. Much smaller than you would think. So their opportunity, and this is why they look so much like ChatGPT, and why AI mode is embedded everywhere.

1:06:34Nilay Patel:Yeah. Yeah. And, you know, frankly, I will do something very similar once we're through this beta period of distributing it through Scout through Yahoo. But, you know, I do think it's their game to lose. I think the one thing that is existential for them is making sure that however this goes is that search advertising crosses the chasm into this new hybrid answer engine world. I do not think that products that take nine steps of a Gentic whatever to monetize some outcome are going to be anywhere near as efficient as you clicking on links and them getting paid. And obviously, the world is headed towards outcomes over time anyway, but it has to find a way.

1:07:16I think the UI that we launched lends itself to where that might head in a way that would not cause Anthropic to do a Super Bowl ad about us. I think you can do it in a way that is very clearly paid and is helpful on commercial queries. I don't know if you remember, but AltaVista tried to launch search advertising and were shut down by the industry and ads and articles and Wired saying, how dare you? Before Overture kind of made it okay, before Google AdWords came along and then really streamlined it. And I think that issue has been asked and answered already. Users are okay with it in commercial categories.

1:07:57It's just about how you bring it over. And I actually think there's a way to do it that's keyword-driven, that is rendered in a way that is in this new format that users might prefer. So that is where we're headed, and that's the product I would like to launch and see if it gets there. But if Google doesn't get that right, it will be difficult.

1:08:15Nilay Patel:I'm very curious to see how these user interfaces evolve. Like I'm watching every day ChatGPT has like a new riff and you can tell they haven't figured it out because it's hard to make it native. And that's really what everybody wants is for this to feel native. And even the 10 blue links have not been 10 blue links on Google for a long time. There's a lot of embedded native experiences along the way. It's been 20 years. Yeah. So I'm curious to see how that evolves. I'm dying to see how you try to solve it because it doesn't seem like anybody knows yet. And search advertising is the most lucrative business in the history of the world.

1:08:46Nilay Patel:So it feels like if that's up for grabs. The first draft of Scout is, I really, we've gotten a lot of great feedback on the UI. And, you know, we have a lot of things that we want to add to it and improve about it. But I think we came out with a good first attempt and we'll tweak it from here. And just to be clear, your plan there is you're going to grow the overall Yahoo user base. More Gen Z people are going to sign up for Yahoo Mail. And you're going to capture some of that search activity instead of trying to take direct share from Google search. The dream would be that they then start to prefer us for search and bookmark us and decide to go to us instead of one of the other guys.

1:09:24And, you know, for the people already using it, their usage is increasing. So more queries per day per user. So I know we're on to something with that, and I do hope that it gets there. But part of the thesis of the business plan for this was we have a huge user base, just like Google does, but in a, you know, smaller version. the poor man's version of being able to distribute the same way they've done with AI mode and put it on all the different surface areas. So that is the homepage and news and sports and fantasy sports and every single version of that. And we have new products coming. We launched three new fantasy products last year, one of which was a huge traffic driver.

1:10:07And we had the biggest year of fantasy ever. So it's like every one of those is a surface area to which we can bring an audience that can trial. scout and hopefully it goes from there.

1:10:17Nilay Patel:I want to end by talking about finance and sports. New fantasy products are great. The action in sports is, boy, you should just bet on sports now, right? You can see it with all these prediction markets. That is their big business. They have a lot of money to throw around. They've captured a bunch of lobbyists. I would say, politics aside, the sort of bipartisan nature of people feeling weird about sports gambling is unprecedented in my lifetime. Next to that is we should just bet on anything. And then next to that, you actually mentioned it earlier, you came to Yahoo with crypto and then Stonks and now there's just gambling.

1:10:57Nilay Patel:All of that has always felt like gambling to me. Crypto has always felt like one form of gambling. Stonks was like, what if we just gamble by doing Reddit threads until GameStop goes to the moon? And now we're just at, what if we just gamble on the outcome of the war? There's a pretty linear connection between all these ideas and how people feel about gambling. You run finance, which is home of stonks. You run sports, which could be the home of sports betting. Do you feel like you have an obligation to buffer against everyone's worst instincts here? To the extent everybody does, then yes. And by the way, we do that in all kinds of places.

1:11:32We really try extremely hard to be purple with news. Now, the algorithm may take you left or right over time. It's partially our job to help reset that every now and then so you don't get too far down the rabbit hole and you can see more neutral sources. I get complaints all the time from both the left and the right, so it probably means we're doing that right. I do think that's an important responsibility. I don't know if you know this, but Apollo historically owned Caesars and currently owns the Venetian and the Palazzo. And the sportsbook at Venetian Palazzo is the Yahoo sportsbook. Now we don't operate it.

1:12:09It's a branding thing and there's our content everywhere or whatever. We have had discussions since I got here about whether, because they are experts at it much more than we are. Should we do what Fanatics has done and get into the bloodbath of gambling? And should we do it ourselves? And we decided no, that not only is that a huge cost sink and it's already so far along, you're battling it out to be eighth in the state of Iowa. We'll stay away from that. We'll be a distributor and we'll be the top of the funnel for all of those. That's historically what we inherited about BetMGM. That's where we're going to play going forward.

1:12:45In some ways, those are ad deals. If you really think about it, we will incorporate odds and we'll incorporate some of the more news-driven things around the betting odds about a certain topic as a news item. But we don't operate in either space. We just announced a deal with Coinbase as well, where we are linking to them for, you know, if you're going to be buying stocks or crypto.

1:13:07Nilay Patel:Yeah, I'm just more, I mean, you have a long history here. I'm just asking maybe just about vibes, right? The finance, maybe the stock market has always been gambling, right? Some people would make that argument. Maybe it's always been gambling. But the idea historically is you should turn on CNBC and look at the fundamentals of a company and invest in a company that you think is going to grow for real. And we've kind of just let that be gambling now, right? That's what meme stocks have done to finance in a very specific way. Crypto maybe was just always gambling and we pretended it was going to be bigger than it was.

1:13:36Nilay Patel:And now crypto is part of finance and now it's like even more gambling. Sports was not supposed to have any gambling at all, right? There was like the reason the leagues kept gambling away and then the money is infected sports. And now everyone thinks there's an NFL script and all the games are rigged. And you can see players are getting in trouble. I wish that script would include the 49ers winning the Super Bowl. I wish it would include the Packers. I got some real issues about the Packers in the second half of games. Then I think we should talk to the script writers. Although Pat Mahomes does get calls that nobody else does.

1:14:06And frankly, maybe it is scripted.

1:14:08Nilay Patel:Everyone thinks it's rigged. And Taylor Swift won her first Super Bowl. That makes no sense to me. It's the presence of the gambling that has led to the perception of corruption. And even though the leagues know it, even though the players are starting to get caught up in like sting operations, the money is so convincing that that's a problem. And now it's going to happen to news. The prediction markets are coming for the news organizations, for the aggregators, are partnering with Reuters. Like something else is going to happen where you have insider trading betting on news at scale right now.

1:14:38Nilay Patel:You operate in these verticals. You're talking about your responsibility. You're talking about making the algorithm neutral. Here is the pressure and not just the pressure, the money from your PE owner that runs casinos. There's a real back and forth here. And I don't know if anybody has really thought about the lines. I'm asking you, where's the line? Because you could turn all of Yahoo into gambling tomorrow based on the assets you have and the pressures that exist in the world. It would have to be a really big check, which I don't think is out there. At this point, it really is information in a link.

1:15:13I think sports odds are incredibly fundamental. I've been in a college betting pool with all my friends from UCLA for 20-plus years. It's one of my favorite things I do every year, and I finally won some this year. You have to have the odds, and you have to have the information. And if you've looked on these properties, Yahoo Sports, ESPN, for years, like with Numberfire and all the different ways that you can analyze it, fantasy obviously is a game. It's not gambling, but it's a game. But it is very much part of the spine of the book for what Yahoo Sports is about. So I do look at it as adjacent to that.

1:15:50And I don't want to give a political BS answer. I just also don't want to act like I'm the expert. I know one of your last episodes was on this topic, and I listened to the whole thing. And I think every argument you guys are making for why something is gambling is a valid argument. And then I also understand the two-way contract side of it. And even on the insider trading, there's somebody on the other side betting the other way, betting. So I don't know where it's going to wind up. And if it winds up where this is illegal, then obviously we won't have it. And if it is legal, it's incredibly popular.

1:16:26and it's a popular way that people are, we always think about like, what's the next step somebody is going to take to accomplish whatever goal they're trying to achieve that day using our products. That actually is a cheesy thing that we talk about and try to build for and are trying to do a better job at always over time. I can't think of a more fundamental next step downstream than going to FanDuel or going to Coinbase after what you've learned on Yahoo Sports or Finance. So I do have to have it as a core part of the product. I have to. Where that heads is going to be decided at, you know, rungs up the ladder for me.

1:17:04But I do get your point for sure on it.

1:17:07Nilay Patel:Dino, to me, the comparison is to sugar or, I don't know, booze. Like, both legal, both incredibly popular, and both obviously bad for you in excess. And we've built a lot of norms around excess for sugar and booze. Like we're just good at it and people still fall off the edge all the time. There are no norms for prediction markets really, right? And the insistence that it's not gambling actually keeps a lot of the other norms away. You know, you've talked a lot about your values. And I'm saying it's refreshing to hear you talk about brand and sending traffic to the web. This is a place where I think your values will be under pressure because the norms aren't there.

1:17:47Nilay Patel:Is there a line for you? Well, I think the line would be something you have to think about more if you were us, if we were operating in either space, which, again, we looked at including trading and decided we're better as a partner, you know, saying traffic downstream. So maybe it's somewhere do we take ads from, you know, beverage companies, you know, from Bud Light. It's funny. Do you know why FDR won the 1932 election? It was Andrew Ross Sorkin's 1929 book. it wasn't the depression. It was prohibition. Yeah. You know, and I also don't think we're going that way. I think these things are probably at some level here to stay.

1:18:30And that way, I think they're a fundamental, you know, part of, you know, the next steps people take from our products. So I do think we're a very relevant place for that. At the same time, we're not the right company to operate them ourselves. So you won't see us going down that pathway, most likely. Maybe one of them will try and buy us and mung us into it. But I could see that potentially happening. But otherwise, we're back in the aggregation zone.

1:18:57Nilay Patel:So that was my last question, actually. You got there. We made it. You've listened to a lot of Decoder, I can tell. Private equity usually wants an exit. That might look like Yahoo going public again. It might look like an acquisition. Do you have a preferred outcome in mind or do you have a timeline? Yeah, you always forget how, I know you guys have rules on this, how nothing is off the record in the UK. And I remember I was being interviewed by someone in Cannes. And I don't know, I just one wrong turn of phrase. And all of a sudden there was an article that we were going public and it made its way to CNBC.

1:19:25And it was like not in any way where we were yet. So it does tend to be a catnip topic about Yahoo that people are like, oh, when's the IPO? And, you know, there's a lot of people out ahead of us who are trillion dollar IPOs that are probably first and others that people are wondering about. I'd say I am building this thing so that we can be a healthy public company again, you know, where you're not quarter to quarter struggling, which is, I think, what got Yahoo into trouble in the past. AOL got into trouble in the past. So, you know, we're building towards that for sure. And I think we have longer to go to get to the point where we are truly ready to be public five years after we go public, not just the day we go public.

1:20:08um you know that said i think the the history of pe is that they would probably much rather sell you know that that that really is more their model um you know because the cash out is more immediate they don't have to wait to sell down as the majority owner and that that just creates its own set of problems so that said i think there we talk a lot about ipo in our board meetings and and the board is much more than than just apollo um and uh and there have been people trying to kick the tires on us for quite a while, which also, by the way, winds up with all kinds of weird news. I get calls all the time because the other part of PE is they kick every tire and they allow every tire to be kicked.

1:20:46So they're always getting phone calls about different parts of Yahoo. But the truth is, Yahoo is way stronger together. The thesis originally was maybe you would break these things apart and you could sell finance, you could sell sports, but you would really have to do it on the same day. It all would have to go at once because it really is an ecosystem. The average Yahoo user uses two or more of our products. And they do, as we've talked about, send traffic to each other. And it's part of the data goldmine is because we have all of them together. And I think in the context of all the other companies out there, we're still incredibly undervalued for what we bring to the table.

1:21:24I really think because the brand is Yahoo, in some ways, it's part of why we're as big as we are. In other ways, it's still part of the challenge of where we need to go. That is really how we talk about it. and look at it. And the decisions we're making are for the future IPO. But if anybody is smart enough, I don't know they let us get there.

1:21:44Nilay Patel:Well, Jim, this has been great. I really enjoyed talking to you. It's good to talk to another internet OG, both with weird shared histories with AOL. I got to say, there's more of that burbling beneath the surface of this episode than anyone can possibly know. But I really appreciate the time. Thank you so much for being on Decoder. Awesome. I appreciate having me. Thanks. I'd like to thank Jim Lanzone for taking the time to join Decoder, and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line.

1:22:10Nilay Patel:You can email us at decoderattheverge.com. We really do read all the emails, or you can hit me up directly on Threads or Blue Sky. If you like Decoder, please share it with your friends and subscribe over to your podcast. Decoder is a production of The Verge and part of the Vox Media Podcast Network. We'll see you next time. The right window treatments change everything. Your sleep, your privacy, the way every room looks and feels. At blinds.com, we've spent 30 years making it surprisingly simple to get exactly what your home needs. We've covered over 25 million windows and have 50 ,000 five-star reviews to prove we deliver.

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