Can Yahoo Sign On to Hollywood?

The difference between Hollywood’s glitzy sensibilities and the smarty-pants culture of Silicon Valley was distilled in a 20-word e-mail to workers in Yahoo Inc.’s Santa Monica office.

Sent this year on behalf of a Yahoo executive recently recruited from Fox Broadcasting Co., the e-mail noted that “SOMEONE” had parked in his space. For some who received it, the all-capitals dispatch read like a scream: “PLEASE MOVE OR YOU WILL BE TOWED.”

After all, Yahoo prides itself on being the kind of place where the billionaire founders shun private offices. At Yahoo’s Sunnyvale, Calif., headquarters, top executives eat in the cafeteria with rank-and-file employees.

And no one has an assigned parking space.

But as Yahoo strives to enter the league of Walt Disney Co., Viacom Inc. and other media giants, success hinges on its ability to merge two inherently different cultures: the brash, flashy ethos of entertainment executives and the rumpled, brainiac realm of computer nerds.

In the year since the company consolidated its Santa Monica office and began hiring a slew of former Hollywood executives bent on “convergence,” Yahoo’s leaders have sought to downplay the tensions. But the union has sometimes been rocky.

In Sunnyvale, it’s “a cubicle society,” said a person close to Yahoo, referring to the willingness of people at all levels to work in cramped workstations. Speaking on condition of anonymity for fear of retribution from Yahoo, this person said the Santa Monica office, by contrast, was about “ ‘How big is my office? Where is my parking spot? You report to me. I don’t need to talk to you.’ It’s very much the studio hierarchy mentality.”

Yahoo’s ability to blend the cultures, milking each for what it does best, will be key to reaching its ultimate goal: to build on its success as the most visited destination on the Web by leveraging the links between content and the technology used to create and deliver it.

“The interactive industry and the traditional media companies are on a collision course, and Yahoo is the first and best example we can look at to see how it’s going to shake out,” said Jeff Lanctot, vice president of ad agency Avenue A/Razorfish. “They’re a microcosm of what we’re going to see in the media business in the next three to four years.”

Hollywood and Silicon Valley are equally hierarchical, but they differ in how status is measured -- and flaunted.

In Hollywood, where you’re only as good as your last hit and projects flounder for years in “development hell,” signifiers of where one stands in the pecking order take on added significance. A good table at a hot restaurant, a conspicuously expensive car or a roster of assistants are about more than bragging rights. They telegraph success.

In Silicon Valley, who’s on top is just as fiercely watched. But with a few notable exceptions, the ways of strutting one’s stuff could not be more different. In an industry that prizes innovation and collaboration, it’s de rigueur to dress down, drive an energy-saving car and set up your own computer equipment simply to show you know how.

“We’re often asked, ‘Is Yahoo a media company or a tech company?’ said Jeff Weiner, a Yahoo senior vice president and former Warner Bros. executive who runs the search and marketplace groups. “The answer to that is: ‘We’re both. We’re a media business that is technology driven.’ ”

Founded in 1995 by two Stanford University graduate students, Jerry Yang and David Filo, Yahoo employs a fleet of computer engineers to create and improve services for Web search, instant messaging, digital maps and other functions.

Those efforts have attracted 411 million registered users worldwide -- and brought in $3.8 billion in revenue this year. Central to Yahoo’s growth strategy, though, is to lure viewers and advertisers away from rival websites and, increasingly, television networks by creating or commissioning its own content.

Yang and Filo took the company down that path in 2001 when they hired Terry Semel, former co-chairman and co-chief executive of Warner Bros., as chairman and CEO.

Silicon Valley insiders immediately whispered that Semel didn’t understand the Internet or the Yahoo way: His assistant printed e-mail for him to reply to by hand; he flew in each week from his Bel-Air mansion; he stayed in a suite at the Four Seasons Hotel in San Francisco.

“Everything I read about when I came in was, ‘This Hollywood guy is coming into Silicon Valley and is destined to fail,’ ” he said in a recent interview. “I didn’t take that personally.”

Semel surprised many Yahoo observers -- and impressed employees -- by not trying to remake the company in the Hollywood mold. Instead, after 18 months on the job, he began investing nearly $2 billion to build a search engine to displace that of Google Inc., which had powered searches on Yahoo websites for years.

That gave the company’s many computer geeks a crucial role in charting Yahoo’s future.

Consequently, search has become a big part of Yahoo’s media strategy -- it’s the launch pad for many people to find video, music and websites -- and a big revenue generator. Yahoo is locked in a battle with Google to persuade movie studios and television companies to release their material to search engines -- one arena in which Yahoo’s show-business connections are supposed to pay off.

Last fall Semel kicked Yahoo’s Hollywood efforts up a notch by hiring a well-connected creative executive as a top lieutenant: Lloyd Braun, former chairman of ABC Entertainment Television Group. Braun was known for his sharp eye for spotting hits. He had a central role in developing such breakout shows as “The Sopranos,” “Desperate Housewives” and “Lost.”

He also developed a reputation -- unfounded, he says -- as a difficult boss. His abrasiveness served him well at the bargaining table as a lawyer, a talent agent, president of Brillstein-Grey Entertainment and at ABC, but he also got under people’s skin.

“He has his supporters and he has his detractors, because he is an impact player,” said Santa Monica-based executive recruiter Stephen Unger, noting that many Hollywood executives shared that trait. “Sometimes he has impacted people in a positive way, and sometimes he has run over them.”

Braun quickly made his mark, announcing in January a lease worth as much as $100 million in Santa Monica’s Colorado Center -- soon to be known as the Yahoo Center. He consolidated the media and entertainment operations there, in the newly formed Yahoo Media Group.

Braun, who declined to be interviewed for this article, said then that the Santa Monica office could help him “put a supercharger on this area of the company” in a way that executives couldn’t by telephone or visits from Sunnyvale. But there may have been a subtler motive for creating a distinct satellite office far from the mother ship.

“The other reason to keep it separate is to acknowledge the fact that, in their quest to be a successful company at technology and media cultures, there are benefits to nurturing the tech company culture in Silicon Valley and the media company culture in Hollywood,” said Brian McAndrews, CEO of Aquantive Inc., an interactive advertising concern.

Yahoo has worked hard to make the employees in both groups feel valued. Because the Sunnyvale headquarters has free coffee bars on the premises, the company gives its Santa Monica employees gift cards to a local coffee shop each month.

Braun and the executives he hired came to Yahoo after the meteoric stock rise that made many in Yahoo wealthy. But with many of their stock options worth little barring another big run-up in Yahoo’s stock, the Santa Monica folks got extra, Hollywood-style perks.

Shortly after he was hired, Braun converted a conference room with a patio into his personal office. He also reserved a parking space close to the elevators for his car. His top executives followed his example, fueling derision among some in Sunnyvale, where only Semel and lawyers who handle confidential matters have offices.

Yahoo’s top executives drew the line when Braun asked for a corporate jet.

“The reaction was basically, No,” said Semel, who does not ask Yahoo to foot the bill when he flies to Northern California in his own private plane. “A lot of the more traditional media companies are doing their best to scale back on some of the perks and put the investment into the products and the consumers.”

Braun’s long career in Hollywood has led to some awkward moments and misunderstandings inside Yahoo -- and provided gossipy fodder for critics eager to cast him as a technically illiterate egomaniac.

According to one widely recounted tale, on a rainy day Braun took an umbrella from the Yahoo merchandise store without paying for it. Then, when asked for payment, he reportedly berated the store clerk, asking, “Do you know who I am?” In fact, Braun’s representatives say, it was an innocent question to ensure that the clerk knew he was good for the money.

A Yahoo spokeswoman said the umbrella ultimately ended up in a pool of umbrellas available to all employees.

Another story involved Braun reportedly dressing down a computer-support employee for suggesting that if Braun wanted a wireless network in his home he could buy the gear and install it himself. A Yahoo spokeswoman said computer support in homes was a perk all of Yahoo’s top executives received and that Braun had waited six weeks for the equipment to be installed.

“Content is a specific trade, and creative people are very often not computer programmers,” said Gary Adelson, a Los Angeles-based investment banker who oversees Houlihan Lokey Howard & Zukin’s media, sports and entertainment practice. “What Lloyd’s trying to do is meld the two, and that’s going to be a challenge.”

Braun found someone to guide him: Bharath Kadaba, a Yahoo veteran and vice president of media engineering. During their first dinner at a Vietnamese restaurant in Palo Alto, Braun said, “Bharath, tell me how a PC works.” Kadaba gave Braun a tutorial on integrated circuits and a brief history of the Internet.

“We’ve been seeing eye to eye since day one,” Kadaba said. “He and I are ... both focused on what’s possible next, me from the technology perspective and he from the consumer experience perspective.”

In return, Braun has been taking Kadaba to meetings with talent agents and to the homes of celebrities who are developing entertainment projects for the Internet.

But Braun has butted heads with some at Yahoo.

As Braun began inserting new leadership in nearly all sections of the media operations, longtime general managers got the hint and began leaving -- often jumping to competitors, including the interactive divisions of Fox Sports, HBO and Dow Jones & Co. Yahoo said turnover under new leadership was normal.

Braun’s initial projects have included dispatching two journalists to far-off lands for the first of Yahoo’s efforts to blend the entertainment of TV with the interactivity and personalization of the Internet.

Some efforts have faltered.

Google beat Yahoo to a deal to let Web surfers watch the UPN network’s new show “Everybody Hates Chris.” Google scooped Yahoo again a month later, when it signed an agreement to add to its search engine celebrity interviews from the Academy of Television Arts and Sciences Foundation.

Some Hollywood executives are still trying to size up Yahoo’s intentions. One broadcast TV network executive said he couldn’t figure out whether Yahoo was trying to be a partner to traditional entertainment companies or “trying to kill us.”

“If Terry wanted to get into Hollywood, hiring Lloyd was smart, regardless of how much Sturm und Drang it causes, because he causes people down here to take Yahoo seriously,” the TV executive said. “The question is, now that they’ve got their foot in the door, what are they going to do with it?”