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SCMP Reporter

A year ago, Jerry Yang was one of the richest men on earth. Today, he is looking at the silicon breadline, as his Yahoo! holding has slipped from US$9 billion to just US$800 million. And do not even mention his Cisco stock.

In many ways, Mr Yang is the archetypal dotcom billionaire.

Born in Taiwan, the 32-year-old Yahoo! chief grew up in San Jose, graduated from Stanford and adopted the laid-back valley style that led Fortune to label him 'no diplomat'.

In town for the Fortune Global Forum, Mr Yang found time to 'shoot the breeze' with both Chief Executive Tung Chee-hwa and President Jiang Zemin.

'I have met him [Mr Jiang] a couple of times,' Mr Yang said. 'We spoke a little bit . . . we just said hello. He said, 'how's business?' I said, 'been better'.'

Mr Yang is also a master of understatement.

After the dotcom implosion, Yahoo!'s over-dependence on advertising dollars became obvious. The exit of hundreds of start-ups had a disastrous impact on ad revenues and Yahoo! lost US$11 million in the last quarter. A year ago, it had profits of US$67.5 million.

The results were preceded by a series of high-level resignations in America, Asia and Europe. Former Asian head Savio Chow, who left in February, has still not been replaced. The biggest departure was Tim Koogle, the chief executive who took Yahoo! to its Nasdaq listing five years ago. Mr Yang said the two remained close friends.

'Tim and I agreed on just about everything about our strategy. He is someone who has taken just an idea into a billion-dollar business,' Mr Yang said.

'It is truly fantastic. What I think is important is that the leadership change and the leadership going forward is how do we take that billion-dollar run rate and how do we take that into a 10 billion-dollar company.'

That is exactly what new chairman and chief executive Terry Semel did at Warner Brothers.

'He understands the importance of the Internet, and honestly, he would not do this if he didn't think that this was the next big thing,' Mr Yang said. 'What he brings here is a very global view. He is a very global executive, wants to work passionately, wants to work hard and build the business, and he has been very successful at everything he has done. So we hope he can do that here at Yahoo! as well.

'While advertising will remain a crucial source of income, the firm is putting all its efforts into diversifying its revenue base. Content, communications, commerce. Those are the three basic premises on which we operate globally. We derived revenues from those services primarily through advertising, up until last year.'

The firm is adding subscription features to its free services, on top of established businesses such as Yahoo! stores, auctions and credit cards.

Yahoo! now sells PC-to-phone calls through its Instant Messenger, live data and bill payments on Yahoo!, finance and expanded storage and options on its free-mail service. As the broadband market matures, it could begin charging for streaming-video features.

In the small-business arena, it offers domain registration and Web hosting, enterprise portals and services, which Mr Yang hopes will contribute 20 per cent of revenues this year.

With 200 million visitors last month and more than a billion page views per day, First Call predicts revenues of US$903 million by next year.

Like many dotcom survivors, Mr Yang remains optimistic, particularly over Yahoo!'s Asian prospects.

'If you look at where the decline in the markets has been, it has largely been in the United States,' he said. 'Asia has been affected by the global slowdown in advertising; but it has been least affected by it.

'Asia has been extremely resilient in the last year, and if you look at GDP growth in China and the growth in Hong Kong, there is still a lot more growth here than other parts of the world.'

Surveys place Yahoo!'s network at number one across most of Asia, reaching 860,000 people in Hong Kong each week and 11 million people per month in Greater China.

Mr Yang believes the Asian market offers Yahoo! all the right ingredients for growth. Both broadband and wireless usage continue to grow, competitors are finding it harder to raise capital and many regional firms simply have bad business plans.

'We've been saying that the industry has to consolidate for almost two years now,' Mr Yang said. 'If you go up and down the Pacific Rim, you'll see lots of companies that are barely more than just ideas and really don't have business models . . . I think the tail wind of the US euphoria clearly caught Asia as well. So consolidation is happening. We believe it's something that ends up benefiting the healthiest of companies.

'So when the timing is right, you're going to find us to be very, very aggressive.'

Mr Yang said Hong Kong's diversity and the Government's ongoing efforts to foster a high-tech service industry were already paying dividends. But the city's reputation as a technology buyer, rather than a developer, needed to change.

'One of the great things about the Internet and about technology is that once the technology is open and once you have the proper infrastructure and critical mass, it does enable the local economy to blossom and to be creative,' he said.

'If you look at the numbers and at how Hong Kong has weathered the last couple of years, I think you will find the infrastructure has continued to be developed here; there continues to be a lot of creativity that is being generated.'

Yahoo! was among the original tentative anchor tenants at the controversial Cyber-Port. But with its business strategy in flux and regional operation without a head, Mr Yang was circumspect over Yahoo's commitment to Cyber-Port.

'Our regional headquarters is here . . . but the timing for us is a little bit different. I don't think our growth is nearly as big as we thought a few years ago. I think we are committed in the long term, but I can't tell you exactly when . . . but the fact that it is our headquarters in Hong Kong, that is something that we plan to keep.

'But there is more to Hong Kong than a good infrastructure and high-level friendships. Hong Kong continues to be perceived and is acting like a gateway for a lot of businesses into China, and that role is going to be more critical over time. And regionally, being part of China has tremendous advantages. As an American business, you tend to want to be where you have the best of Western business practices and access to Eastern markets in China.

'Hong Kong is really a fantastic place to be. Hong Kong stands in a pretty interesting position now. It has got the best of the West and the best of the East.'

But the Internet changes quickly, and Mr Yang warned Hong Kong to avoid complacency, particularly in view of the rapid growth of Shanghai.

'The question really is what role will Hong Kong play in that? Is it a partnership role or a competitive role? I think that has yet to be defined. But there is no question that Shanghai will play a key role in the next 10 or 20 years in China's economy. But I also don't think that Hong Kong is going to lose its place, because of the adaptability of the people here and in south China. It continues to be a hugely prosperous area. That is not going to disappear overnight.'

If the dotcom shake-out cleared away much of Yahoo!'s US competition, in China consolidation has only just begun.

The Lycos buy-out of mainland network Myrice pushed it into the top 10 China properties, while bigger rivals Sohu, Sina, Netease and Chinadotcom all appear ready to merge. The merger of Yahoo!with Taiwan's Kimo last year showed its willingness to buy market share when necessary.

'When we looked at Kimo, it inherently was a great business,' Mr Yang said. 'And it was going to get better by partnering with us. And that is the rule of thumb about buying companies. So we have to be very [aware] of the fact that whatever we do, we have to enhance that rather than close it. That would be the wrong conclusion to get to.'

Mr Yang said the dismal ends of Renren and Chinaren were lessons in how not to build a Web business. Without innovation or alternative revenues, he said, more of the mainland's portals could soon follow.

'China is an interesting place,' he said. 'I think you have regulatory challenges and you have business-model challenges and a lot of these companies are going to lose an unbelievable amount of money when the capital markets dry up. Their exit is not as clear . . . and it won't take forever before these companies rationalise their business plans or consolidate to try to get market share.'

In the past year, Mr Yang has lost more money than most countries have earned. Other people might find this depressing, but Mr Yang seems genuinely unfazed.

'Five years ago, I was worth nothing,' he said. 'If you are doing this for the money, you are doing it for the wrong reasons. I will tell you that I don't have to worry about money, no matter how you look at it, and that I am very fortunate, and that is a great thing for my family. But you don't measure success by what your stock is worth today. You measure success by how you can build a successful company. And if Yahoo! is successful 10 years from now, I will be all right, believe me.

'My life is with Yahoo! I can't imagine what I would be doing otherwise; I get bored out of my mind if I am not working and I would certainly drive my wife nuts.

'So this is it. This is a dream and this is a once-in-a-lifetime chance . . . Looking up at the future, it is hard to explain how much opportunity we see. And what we have to do is focus and build a business. And that's really fun.

'And if you are successful, there is nothing more rewarding.'

Biography
Jerry Yang was born in Taipei but moved to Silicon Valley with his family when he was 10. He attended Stanford University, where he took bachelor's and master's degrees in electrical engineering. While studying for his PhD, Mr Yang met David Filo with whom he created Jerry and David's Guide to the World Wide Web. They both took leave from their course and moved the site, now renamed Yahoo!, to Netscape Communications, which offered them US$3 million each to sell. They declined. Yahoo! listed on Nasdaq the following year.



Yahoo! dream lives