The Breakdown | Explaining Southern California's economy

Why Yahoo should leave Silicon Valley and call Santa Monica home

Carol Bartz is out as CEO of Yahoo, reportedly fired by phone call yesterday. Bartz was brought in to turn the Web pioneer around and redefine its identity after founder Jerry Yang and his board failed to sell company to Microsoft in 2008 and former Warner Bros. executive Terry Semel failed to turn Yahoo into a kind of full-service online media machine.

Back in 2008, when the Microsoft deal fell through, I wrote about how Yahoo, the key company of the Web 1.0 era, hooking up with Bill Gates and all that was definitely not of the Web 1.0 world was the only hope we had of beating back Google and its total dominance of Web 2.0. But that was before Facebook achieved critical mass. 

Now Yahoo looks even more desperate and confused — even as observers acknowledge its still-massive Web presence. The company's identity crisis — which Bartz, a Silicon Valley veteran, tried to cure by returning Yahoo to its core as a tech firm — took root during the Semel years and culminated in 2006 when an executive wrote a scathing memo now referred to as the "Peanut Butter Manifesto."

But what's fascinating about Semel's reign, from 2001-2007 after more than two decades in Hollywood, was how close Silicon Valley and SoCal seemed during this period — and how far apart they seemed afterwards.

It's always been a tempting California nexus: Silicon Valley's tech engineering and venture-capitalist culture joined to Hollywood's iron grasp of popular entertainment. If MySpace now stands as a tarnished example of how SoCal can't do tech, Semel's Yahoo reminds us that at one time, Silicon Valley thought it needed to do media.

Yahoo still hasn't figured out what it is. And there's been speculation for months that it's going to be put up for sale (again), either whole or in pieces. That prospect has been met with skepticism, which my old BNET colleague Erik Sherman nicely summarizes.

Given that both Google and Facebook have completely overwhelmed Yahoo in terms of tools, new products, and the brave new world of online sharing, Yahoo now looks completely unlike an engineering-driven operation and more like an incredibly complex media and communications hub with incredible traffic but no real means of accessing the "Splinternet," as Forrester Research Shar VanBoskirk ably points out in a wide-ranging Forbes post on all that's amiss with Yahoo. Under Bartz, the company even appeared determined to wreck its successes, notably photo-sharing site Flickr.

So here's a proposal: Forget about what Bartz was supposed to do. Yahoo isn't going to regain its lost value as a tech company. And don't merge with AOL, either — if Yahoo is Web 1.0 and Microsoft is Web 0.0, I'm not sure what AOL is. Maybe dial-up BBS prehistoric Web or something. The Web when it was still the World Wide Web.

Leave Sunnyvale and relocate everything to Santa Monica. Bring back the Semel years! (The middle, good ones.) After all, that was the last time when Yahoo seemed to have a vision of its future — and was watching its stock price climb rather than stagnate or tumble. Hollywood has struggled mightily to figure out the Internet. Maybe this is the moment when Yahoo can help.

Photo: Justin Sullivan/Getty Images