Yahoo turns to PayPal boss in bid to change fortunes

Reuters Read more January 5, 2012

Yahoo has named PayPal president Scott Thompson as its chief executive, hoping the internet and e-commerce expert will replicate his success at eBay and turn around the struggling company.

Thompson, credited with driving growth at eBay’s online payments division PayPal, joins Yahoo during a period of turmoil, as the company ploughs ahead with a strategic review in which discussions have included the possibility of being sold, taken private or broken up.

The former Visa payments software platform designer joins the company four months after the firing of previous CEO Carol Bartz as the one-time web powerhouse struggles to compete with newer heavyweights Google and Facebook.

Whether the appointment can meet the expectations of anxious investors remains to be seen, but experts have their doubts.

The risk element is that his background was in payments. And this is not a payment company; it’s a marketing, technology company

“It’s a positive outcome, but not as positive as a sale of the company,” said Lawrence Haverty, a fund manager with GAMCO investors, which owns Yahoo shares. “The risk element is that his background was in payments. And this is not a payment company; it’s a marketing, technology company.”

At PayPal, Thompson was known as a leader who was not afraid to make bold strategic bets. He came up with the idea of taking PayPal beyond its online stronghold and into the physical world by allowing payments in retail stores.

That kind of strategic risk-taking could be particularly useful at Yahoo, which in recent years, has struggled to maintain its relevance and advertising revenue in the face of competition from rivals Google and Facebook.

“It really needs that push to the next level,” said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which includes the Jacob Internet Fund and counts Yahoo as one of its largest positions.

“Ideally what they would do is rather than just follow where today’s internet leaders are moving, try to really be on that front edge.”