Breakfast with Yahoo

I’m at a Newhouse School/New Yorker event at Bryant Park with Ken Auletta interviewing Yahoo boss Terry Semel.

He says he talked to Google’s founders early on about buying them. Their first offer was $1 billion “and we don’t want to sell.” A few weeks later, he said, the price rose to $3 billion and they didn’t sell.

[CLARIFICATION: To be clear, Yahoo did not set a price; according to Semel, Google set those prices. I heard from Yahoo’s PR agent and apprenty I had an unclear antecedent. Google’s first offer was $1 billion and they said “we don’t want to sell” and Google’s second was $3 billion and they still didn’t sell. Sorry if I was unclear.]

What is Yahoo’s business, Auletta asks. “Our fundamental business is selling advertising… Our fundamental business is that we license content from around the world… and we sell advertising.” I always say that Yahoo is the last old-media company and this indicates that. In a distributed world, is aggregating content to sell advertising on a mass scale the real model for the future? What about distributed networks with control at the edge? (See: Google.) What about the value of relationships over content? (See: MySpace.) Semel is the last guy who will exploit the old model. He will succeed at that, because he has scale going in and does not have the legacy limitations and costs of old media. But there won’t be a dozen more Yahoos.

Auletta asks him about his quote in The Economist saying that the internet is a “media exachange.” Semel replies: “The 20th Century media companies had great content… and they had great distribution. The 21st Century media companies also have great media companies and they either license it or aggregate it… They have global distribution, which is even more powerful… They also have technology and to drive and create an experience on the internet, content alone will fail, content and distribution will fail, you have to have technology.” He’s right that content and distribution are not kings. But I disagree about technology, which will come and go and be copied and bested along the way and will never distinguish you. It’s the relationships — trust — that matters. That’s what the internet really enables that old, one-way media only thought it enabled.

If Yahoo is a network, it can succeed only if it enables people to share their trust, taste, and knowledge. They need to learn from Flickr and and they can, since Yahoo owns them now.

“Yahoo has been spending a ot of time asking, ‘Is web search the killer ap, or is it just the first?’ ” He says that social scearch, also known as knowledge search, may be the future. They strated on it in Taiwan and how have spread it. “Machines don’t answer the questions of people. People answer the questions of people.” Sounds good but it’s all in the execution, eh?

Asked about content, he talks about the importance of aggregation and then talks about video and broadband. “Please don’t make it look like television… This medium better look like something new…. If what we’re doing looks like television, that would be a huge mistake.” He says that in a year, video will be just as important as text and photos.

Auletta asks about Lloyd Braun backing off his promises to make content. He now argues that he hired Braun to look at all their sites and see how to improve them. Not what I remembered. But it’s nice to have a boss who’ll spin your loss of turf for you. But he then adds that he did cancel some things that looked too much like television.

“We don’t have the ambition to do a lot. We have the ambition to help lead the way and help others to do the work for us,” he says. “We don’t aspire to have 2,000 creative people working for Yahoo.” Fine, but he’s still trying to aggregate the content.

Auletta asks whether Yahoo envisions paying companies for their news content. They do license news content now and I say that the irony is that this doesn’t serve the licensors because the traffic stays on Yahoo vs. going to the sources.

Now he talks about citizen journalism from 7/7 and the litany of disasters. “The wire services around the world were contacting Yahoo in minutes” asking to take photos from Flickr he says.

“I and most of us were brought up on the idea that somebody programmed our lives,” he says, talking about news and entertainment. “My kids were born and raised on a new dynamic: ‘I’m the programmer and I want what I want when I want it.’ ”

Auletta asks whether Yahoo will join Google in antitrust action against Microsoft over search. He says not yet. He says Yahoo is in favor of open access.

Asked about Microsoft buying Yahoo, Semel says “that conversation never came up” and he snipes that Yahoo is a lot of people and “you’d better hope that they’re all sitting there” after a purchase.

For his last question, Auletta asks about China and says that Yahoo went further than Google. On the arrests: “For one thing, it’s terrible, it’s a tragedy, we are deeply concerned about it.” He says that of the three people put in jail, it’s now confirmed that what put them there in two of the cases came from Yahoo. Is this the firing squad defense? I could have been shooting a blank. Boy, that doesn’t cut it. His next defense: Governments get information out of phone companies. Also doesn ‘t cut it. A phone company isn’t built on trust, Mr. Semel, the way Yahoo should be. Next defense: He says that when they have an email address they don’t know who the person is and so they don’t know when this information is used to arrest someone. Also doesn’t cut it; it was enough information. Next defense: If you don’t abide by the law, people go to jail. So it’s our guy or your guy. But there was also a decision to go into China in the first place; if you know the law, then you are agreeing to the law if you enter China. He says his choices are all bad. He acknowledges the choice to “go home.” He now tells about long ago dealing with Russia and China. “I was overwhelmed about how much they know about us,” he says, meaning our culture. He says that when the people revoluted against Russian communism media helped. That’s the next defense. “I don’t think the answer would have been for us to go home. The answer… would have been for us to stay and to get as much news as possible” into the country. He now says that “we need help… governments change governments.” So now he’s shifting the responsibility to Washington. He says he appealed to the White House to put this on the agenda in its meeting with China.

Later, Lloyd Grove of the Daily News asks about China and says that what he’s hearing is that “there’s nothing we can do about it… and it’s really up to the United States government” to do something. Semel calls that “a poor man’s summary. He then talks about talking with foreign correspondents in China and asks them what they’re doing. He keeps trying to shift the responsibility.

Laurel Touby of MediaBistro asks him what the difference is between Yahoo Answers and Epinions. Turns out to be a sucker punch; he doesn’t know Epinions. I’ll be curious to see what she does with this.

I ask the question you’d expect me to ask: distribution, content, and technology are not king. Relationships are. In this edge-controlled world, where I don’t want my stuff to be part of Yahoo, what’s Yahoo’s relationship with my blog or your podcast or her vlog? He says that there are lots of blogs and people need some means to find the good ones and Yahoo enables rating of those blogs. “We don’t rate blogs, the people do.” He says that Yahoo sees itself as “an implementer with tools.” And he adds, “There may come a day when you say, ‘I might like to become a publisher, to have advertising and therefore I get paid. It doesn’t have to be Yahoo but a company like Yahoo could become the infrastructure for you to actually get paid. We see ourselves opening up our network — a big change with open APIs.”

: LATER: Video of the event here.