Why is Yahoo Obsessed with PayPal Executives?
Yahoo (NASDAQ: YHOO) will reportedly add Max Levchin, the co-founder and former Chief Technology Officer of PayPal, to its board. This begs one simple question: why?
It was not that long ago that Yahoo hired a former PayPal exec, Scott Thompson, to lead the company. He came to Yahoo with a stellar resume, touting years of success at PayPal, where he served as President. According to his bio on Businessweek, Thompson helped "scale it through its most rapid growth years growing it from $1 billion in revenues to $4.4 billion in revenues, and established it as the leading global online payment service."
Prior to his role as President of PayPal, Thompson served as the firm's Senior Vice President and the Chief Technology Officer. When he moved to Yahoo, some analysts believed that the company had struck gold. Trip Chowdhry, Managing Director of Equity Research at Global Equities Research, predicted that Yahoo (which traded for roughly $16 at the time) would go to $100. Chowdhry believed that if Thompson was given the freedom to reposition Yahoo as a mobile payments company, it could experience massive growth.
Roy Bostock, who was Chairman of Yahoo at the time, boasted about Thompson's appointment. "Scott brings to Yahoo! a proven record of building on a solid foundation of existing assets and resources to reignite innovation and drive growth, precisely the formula we need at Yahoo," Bostock said in a company release. "His deep understanding of online businesses combined with his team building and operational capabilities will restore the energy, focus, and momentum necessary to grow the core business and deliver increased value for our shareholders. The search committee and the entire Board concluded that he is the right leader to return the core business to a path of robust growth and industry-leading innovation."
All that praise came to an abrupt end when it was revealed that Thompson lied on his resume.
Now Yahoo wants to hire Levchin, another PayPal exec. While it would be unfair to assume that all PayPal employees are the same, Levchin is somewhat of an unusual hire.
At first glance, Levchin's credits seem to be very impressive. In addition to his role as the CTO of PayPal, Levchin founded Slide (a media-sharing service for social networks) and sold it to Google (NASDAQ: GOOG) for nearly $200 million. He helped in creating one of the first commercial implementations of CAPTCHA. Levchin also provided venture capital to Yelp (NYSE: YELP).
Yahoo might be wondering if Levchin can bring a similar degree of success and innovation to its company. However, not all of Levchin's creations have thrived. Google closed Slide just one year after its acquisition. CAPTCHA may be used by thousands companies but it is highly regarded as a time-wasting nuisance. Yelp, the company Levchin helped fund, has lost more than 20 percent of its value since its IPO in March.
If Yahoo hopes to become a leader in mobile payments as Chowdhry predicted, Levchin might be a good guy to have on the board. Even so, it is rare that one person has the level of skill, talent and luck that are necessary to produce two success stories within the same industry.
Levchin may be one of the smartest men in technology. He may be able to provide Yahoo with billions of dollars in value. It is very unlikely, however, that he will be able to help Yahoo become the next PayPal.
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