When Ms. Bartz finally began negotiations, Mr. Ballmer presented two options: a large upfront payment or a higher percentage of revenue tied to ads sold on Yahoo Web sites. “He wasn’t going to pay twice,” Ms. Bartz said.
Ultimately, Mr. Ballmer, who was unavailable to comment, and Ms. Bartz ended up on the phone debating minute details, like how fast things like search results and ads would appear, at one point haggling over a margin of 100 milliseconds.
Ms. Bartz also fought to play down Microsoft’s Bing brand on the Yahoo search results page, with just a bit of text instead of a logo, and she pushed Mr. Ballmer hard to make sure that Yahoo retained the right to sell its own display ads to big advertisers like Procter & Gamble and Unilever .
“I had to get Steve through the, ‘we get to sell part,’ ” she said. Meanwhile, Ms. Bartz has plenty of other work to do at Yahoo. She has picked up on the dysfunction throughout the company during her eight months on the job.
For one, Yahoo has not poured enough money into creating a top-class technology infrastructure capable of delivering a variety of services to consumers. “We are actually behind in investing,” she said. “We should have invested more.”
Ms. Bartz also complained about a lack of balance among the different product groups. Motivated employees in the company’s sports section have turned it into a must-visit Web destination by breaking news stories and providing witty commentary. Other sections have languished.
This is often a result of what Ms. Bartz sees as insufficient communication and barriers among the company’s various American and international properties over sharing videos and other content. “We had a fight for 18 months here on what a video button should look like,” Ms. Bartz said.
Spending money to fix these problems made more sense to Ms. Bartz than hemorrhaging cash in a bid to keep pace with Google and Microsoft.
Microsoft has backed its new search engine, Bing, with billions of dollars in infrastructure and marketing investments. So far, the search engine has been well received. While encouraged by some of Bing’s innovations, Ms. Bartz figures that Google will most likely match them soon. “That is the arms race I don’t want to be in,” she said.
But some investors fear that Yahoo may be trading one of the most profitable businesses of the 21st century — search — for a deflating, hypercompetitive media business that appeared to peak in the 20th century.
“I don’t think the surviving pieces are very interesting,” said Michael Lippert, manager of the Baron iOpportunity fund, which acquired Yahoo shares earlier this year on the anticipation of a lucrative search partnership. Mr. Lippert was disappointed by the terms of the deal but did not make out too badly; his fund also owns Microsoft stock, which rose slightly last week.
“Ballmer got himself a fantastic deal,” he said.