Facing Lackluster Ad Performance, Yahoo ReorganizesFacing Lackluster Ad Performance, Yahoo Reorganizes

Yahoo Chief Operating Officer Dan Rosensweig is out, and Chief Financial Officer Susan Decker stepped up to head one of three new business groups, as part of a reorganization announced Tuesday.

Yahoo started an immediate search for Decker's replacement. The six-year veteran will continue in her current post in the interim. Rosensweig is scheduled to leave in March to ensure a smooth transition, the company said.

The reorganization, which Yahoo expects to complete by March, apparently stems from the company's lackluster performance in the online advertising market. While Yahoo remains an Internet powerhouse, the company is playing catch-up with rival Google in the multi-billion-dollar market for text advertising tied to search results.

Under the plan, Yahoo will be divided into three operating groups, with the head of each unit reporting directly to Chief Executive Terry Semel. Decker will lead the Advertiser and Publisher Group, which will include the company's sales division.

The Audience Group will focus on creating new services for users of the Yahoo network, as well as enhancing existing products in search, entertainment and media, social networking, and communications. Yahoo launched a search for an executive to head this group.

Finally, Chief Technology Officer Farzad Nazem will head up the Technology Group, in charge of Yahoo's infrastructure development. In addition to developing technology to support Yahoo products, the unit also will also develop new advertising platforms beyond the recently released "Panama."

"Our new structure gives us the opportunity to draw more fully on Yahoo!'s deep bench of talent, both at the new group level and down through the organization, while also increasing accountability, reducing bottlenecks and speeding decision-making," Semel said in a statement.

Semel will lead the company's new senior management team with the help of Yahoo co-founder Jerry Yang. The management changes will take effect Jan. 1, 2007.

In announcing Rosensweig's plans to leave, Semel praised the five-year veteran as the "driving force behind Yahoo's phenomenal audience and advertising growth."

"Dan has been closely involved in our efforts to realign Yahoo's business for the next phase of growth, and has built a world class team under him," Semel said. "Dan was one of my first executive hires at Yahoo, and I am very appreciative of the friendship, leadership, vision and passion that he has brought to Yahoo."

On Tuesday, The Wall Street Journal, quoting people familiar with the matter, said Yahoo Media Group head Lloyd Braun would also leave the company.

Yahoo reported weakened ad sales in the third quarter, along with a drop in profits. The company's lackluster performance in general contributed to about a 30 percent decline in its stock price this year. Yahoo hopes to recover with a major upgrade of its search-based advertising platform, called "Project Panama," launched in October.

In addition, the company faces dissension in the ranks reflected in the infamous "peanut butter memo," a call by senior VP Brad Garlinghouse to cut staff 20% and for Semel to focus on fewer initiatives more effectively--lest its strategy be spread too thinly, like peanut butter.