Update: Semel gives up Yahoo CEO title to Yang

Terry Semel ended his six-year run as Yahoo's CEO on Monday, and the company's co-founder Jerry Yang will take over from him, the company said.

Semel has been the focus of intense criticism in the past two years due to Yahoo's inability to capitalize as much as expected on the fast-growing market for search engine advertising. By contrast, Google has enjoyed eye-popping revenue growth and enviable profits almost exclusively from the search advertising market.

By moving Yang into Semel's position, Yahoo gets a CEO of the caliber of Steve Jobs and Bill Gates who can match Google's triumvirate of engineers, said Allen Weiner, a Gartner analyst, referring to Google's CEO Eric Schmidt and co-founders and presidents Larry Page and Sergey Brin.

"I always felt that the best CEO for Yahoo already worked there: Jerry Yang," Weiner said. "He is far and away the best choice they could have made."

Last week, at Yahoo's annual shareholder meeting, Semel fielded stinging criticism from shareholders in attendance, leading to tense exchanges at times.

Semel resigned from his position as CEO and chairman and will become the role of non-executive chairman and serve as advisor to the management team.

Semel became chairman and CEO in May 2001.

Previously, Semel spent 24 years at Warner Bros., where he was chairman and co-CEO. Prior to his Warner Bros. stint, he led Walt Disney's Theatrical Distribution division and CBS' Theatrical Distribution division.

Semel was brought in primarily to create a bridge between the Hollywood entertainment industry and Yahoo, which never happened as originally envisioned, Weiner said. "That strategy didn't work," he said.

Because Yang is an engineer who fully understands the Internet market and Yahoo's business, Weiner predicts the company troops will rally behind him. "This is a seminal event in the history of Yahoo," Weiner said.

The board of directors appointed Yang, who cofounded the company 12 years ago, as CEO, and Susan Decker, former executive vice president and head of Advertiser and Publisher Group, as the company's president.

This change is something that the market obviously wanted, according to industry analyst Greg Sterling from Sterling Market Intelligence. When he joined Yahoo, Semel helped bring the company back from the brink, but recently he seemed to have lost the magic touch he had earlier.

"If Yahoo had another lackluster quarter, the chorus of calls for Semel's resignation would have gotten louder. This might be seen as a preemptive move by Semel," Sterling said. The question that remains is whether this executive change will have the desired effects, he said.

In a webcast, Semel said he had told the board that he wanted to step back from his executive role "sooner rather than later" and that he and the board agreed this would be a good time for him to step down as CEO.

"I've long been talking to the board about the importance of ensuring a smooth succession to Yahoo's senior leadership," Semel said.