red garlg house is the author of the peanut butter manifesto in charge of resuscitating america. and you'usually on the cutting , a trendy coupon craze. our reporters are tim nichols and tom giles, this week on "prees he "press here." >> good morning. i'm scott mcgrew.

you probably had that day at work when you decided you knew what was wrong with your company and how to fix it. turns out many bosses don't want to hear it. giving you a choice, you can drop it or make it your manifesto. >> i entitled it the things we think but do not say. >> as the fictional sports agent, jerry mcguire found out -- >> that's how you become great, man. >> manifestos usually do cause a change at the company. mainly, the manifesto author does not stick around to see that change. >> what are they doing? >> they fired jerry mcguire. >> the peanut manifesto written by garlghouse, comparing it peanut butter spread too thin by too many efforts. it was picked up by the press for its unflinching accurate

portrayal of a company in trouble. garlghouse actually stayed for two years following the manif t manifesto leading a mass exodus in 2008. now, he's at a company with even bigger problems, america online. once an internet giant, they suffered through a disastrous merger, probably one of the worst in american business history and a radical shift in the way people use the internet. garlg house is now aol's highest ranking man in silicon valley. fred garlghouse, president of consumer applications to yahoo and once so loyal, he shaved a y in his head and it has peanut butter. joining us from forbes, you are one of the first people to lead aol because you are willing to

say, here's what we need to do. is that fair compliment? >> i think one of the key things about any turn around environment is being comfortable speaking very candidly about the problems very iently. i think sometimes, particularly a company like aol that is today a very different company than 18 months ago, people forget, america obanline, we were the people that brought america online, aol. we lost our way, i can't point to how and where and why and sometime in the timewarner merger, aol lost its way. we're in the process of getting our mojo back. three time theres capture that. tim armstrong from google was a major step doing that. he's hired key leaders and described a strong management team rebuilt. the second thing that does touch

on, as you introduced, the contrast india hoo and-- in yah aol is how people use content on the internet. culturally right now, aol is very much living as we describe internally as the show me state. we have to put points on the board. we hired a lot of strong people from companies like google and like digg and apple. we have to change the products we shipped. >> you mentioned goingal couple of times, bringing in people from google. you announced the search agreement from google, that worked out. is going them right company to be importing from right now. isn't the way forward in silicon valley and internet more about social, more about facebook, getting people to interact with each other, not just search

better. >> trying to do it through life stream. >> lifestream is a product -- we have been an importer of talent without a doubt. for me, it's less about do we get people specifically from social companies or non-social companies, people with proven track record of winning. if you have people with a rough 10 year stretch at a company, bringing in people is very important. >> i realize we have a question on the table. i want to further refine tom's question. people don't generally leave to go to aol. there was a point in which having an aol e-mail address was kind of dorky. first, it was cool and then dorky. why would you leave google to go to aol? >> i left yahoo to go there eventually. people leaving, i think see the

opportunity. aol has 100 million in the united states who actively use its products. the opportunity is dramatically improve the products we ship, like life stream we didn't have in market a while ago and it's focused on solving consumer pain. the online social experience, whether linked in, facebook, twitter, youtube, a fragment of experiences. we launched lifestream a year ago and gone from zero to 5 million users in a short amount of time. it's demonstrative of hiring people very entrepreneurial. >> are the users using it on a daily basis, or trite and decide it's not for you. >> the 5 million we measure as active users. we pay attention to who we signed up and we want to retain them and do a better job of

that. but it is active users. >> who is aol? it is in an identity crisis. i cannot define this company. when you think of aol, what should we be thinking of? >> no doubt they're in transition. we aim to change the way content is consumed and saying aol.com to gadgets to see its like patch. >> patch is an aol property. >> it is an aol property, a hyper local website we launched 25 different markets in the united states, nine in the bay air, pleasanton, ramon, mill valley and instead of going to sites like san francisco, the journalism that used to happen 40, 50 years ago of the small town, the editor was the true north of the town doesn't exist anymore and we have hired

hundreds of millions of people and this is three or four months, we're going into towns like those and they're the ones reporting on the city council and school board. >> it's a cool product but wouldn't my fred, fred garlghouse have to say we have to determine what we are? >> patch is changing on a local level. >> patch can be a start-up, doesn't have to be a big company like aol. >> i agree with that. the way we're managing it is very start-up appointed. but has the benefit of aol tail wind in a traffic point of you. if you're in a town that has patch content, when you logon to aol mail, you're seeing content for your local town. it doesn't exist.

they can be entrepreneurial and run and help it. >> journalism costs a lot. it will take more than going to locals to gather it and arbiters. we've seen companies go down this route and xensee seen yaho it. it hasn't really panned out. how are you keeping the quality control with regard to letting it be gathered widely. >> we think about that quality control, we use the word cureration, not different from editorial is how do we cure it a content, literally hiring high quality people with experience in market and ideally from the towns and they're curating both what's going on in the market. it's up to us to hire the right people, make sure set the right

standards how that will work. we're very cognizant making sure it scales effectively. and the markets we launched in 18 months we have very good results from the revenue model. >> we'll be back after a commercial break. en r fr.

we will continue our

conversation wit brad garlinghouse. you write this memo as an internal memo. did you know it was going to get leaked? did you leak it? what was your reaction knowing you were the peanut butter memo guy? >> it was an internal document, 18 weeks. the "new york times" wrote a very critical article about yahoo! and i attended a senior staff meeting later that day. i was a vocal minority, where people thought this isn't a fair article, this isn't accurate. i felt it was dead on. i said, articulate that challenge. i shared that document with a small number of people i thought could effect change. over time, it ended up being unfortunately a very public document. it gets, to the heart of a lot of companies, having clarity of true north, what is our goal and how will we achieve those

things. it's unfortunate, it ended up being a public document. i look back and stand by many of the things -- >> they adopted many of the things, ironically, after you had left, many of the things you suggested. >> i have been gone for two years, so i don't know the details. there are hard decisions that have been made. the first step to solving any problem is admitting you have that problem. that is one of the things gratifying about being at aol, we have no problems with what we need to solve. i think yahoo! still struggles with that and carol says, we need a refresh. no, we have real issues we need to address. >> do you think they are adjusting as quickly as they need to, in terms of getting out of the businesses where they were spread too in the. i think the same question app applies to aol, where are the

areas they need to de-emphasize a bit more? >> it happened to aol. we sold three or four things this year and increasingly de-emphasizing. yahoo has done some of that. i even think, you know, as you referenced earlier, the announcement recently about the search deal with google. when i hear yahoo talk about it, they're in the search business or not. we have a deep partnership and very deep one as of this week with google. we're very excited about that. we want to invest in that. all this boils down to company culture and how do you change the culture. the biggest challenge for aol and yahoo! is how do you turn that around, changing the culture to be one comfortable with risks and entrepreneurship. we worked hard to do that at aol and have visible ways the

company has changed. it has a good waycapturing that. when you used to visit the aol campus, guard booths, and you had to stop and check in and check out. and they close the gates at 7:00, i had trouble getting out. in february, we literally tore down the booth with a bulldozer. the idea was have a visual sig nool employe -- signal to workers, we are open for business, we don't close at 7:00 p.m., very important. aol certainly embraced our inner, we need to change and other companies headed in that direction. another thing is look adventures, you're the waste coast head of. as you looked around, israel, india, two areas of interest.

why those countries and what types of businesses are you looking to invest in. >> we view aol getting its groove back is getting a better pulse on the entrepreneurial community. if you go back te10, 15 years, l was partnering with these companies. we launched aol ventures and made six or seven investments this year, early stage and making investments in india and israel and companies synergist stick, in line with what we're doing. we just lead a new building in aloe alto in the bay area and created new space for start-ups, incubator spaces, stanford has space. the culture is bring that innovation to aol having a pulse on that and aware of what's

going on. >> i'm still not sure exactly what aol is, not sure what types of companies and investments you're looking for. do you see aol as being this destination? if so, are you facing resistance from companies to what you're doing anding a grating grating -- and aggregating them to your page? >> we actually find facebook, many of the companies out there, they need and want more content. we have hired, literally, i think there's data out there, we are probably the largest hirer of journalists in 2010 because we feel like increasingly, all those links, whether on facebook or google searching for something, they go somewhere. we think there's an touopportun to have a myriad of different content, gadgets, stylists

around style. we think there will increasingly be that opportunity to invest in that. tore me, for me, we're a means to an end and you log into mail, you find, here's the local foregoing on in your market, here's the foremost interesting to you, whether start-up in israel or san ramon. >> has anyone written you a memo yet? >> i actually have not had specific memos. back to culture, not to emphasize that too much. i have a very open culture and open door policy and hear a lot of things from people that are very direct and i'm glad. >> still doesn't like peanut better. >> greg is the president of aol. >> absolutely spectacular for small business, yelp launched

its group on a few days ago. we an in'll fi we'll find out how that went.

welcome back to "presshere." a few days ago, the controversial yell..com launched offering discounts. they're the new craze online. dozens of companies have adopted it. vince solido dropped by. you're still testing this. what's a the big deal about a coupon. >> we tried it in santiago the last few months, few weeks. and we did our first one out of san francisco and blew it out of the water. the response was phenomenal. >> one of the questions i have and come up with group on is

small businesses getting inundated and not fully able to deal with all the requests and putting off some customers. how are you handling it? >> that's a great question. so yelp is about is online reputation. our business is more savvy and engaged with our customer base and we work closely to make sure they know they're set up to handle because yelp will drive traffic to their door. >> i did talk to a small business owner, group-on she was using, advertising i have done more than any other format was coupons. >> we did a coupon effort for massage this week and sold 1616 of them. >> why? it's a coupon.

one-half, they're amazing, is it a huge discount? >> it makes sense. it's consumers and local businesses and now we add a great deal. when you're talking about less than half, it's a pretty good value to the customer and they respond dramatically. >> the deal on that one day yelped offered made more money than group on made? why do you think that is? >> it speaks to our customer base. people come to yelp not looking for pictures of their next girlfriend, where to spend money. so we already have an engaged consumer base and picked and highlighted the best businesses in their market. you have consumers and businesses pro-disspeeds as an

accelerant and add a tremendous deal and it ig nighnites. >> we have one after another, and what was the conversation at yelp, you said we need to do this and why? >> we thought we had a great business we were directing consumers and local businesses. it's been pretty big expanding it in markets in america. we felt we had this installed consumer base. 38 million consumers come to our market every month. businesses would love 0a way to reach to that consumer base monthly and it makes total sense. >> what do you guide businesses to do? take a loss on this one and get out in front of all these customers? discounts are very significant. >> what as a small business

owner, should i expect to lose money on this deal and get out in front of people. >> the concept some call a loss leader is purely designed for new customer acquisition and the idea is get a new customer in the door and try to retain them. it's important they manage the expectations and delivery of that service and make sure you do a good job so they come back. folks have a fuel year to exercise their coupon and work with the small business owner to understand the liability. >> and the liability is for the coming year they have all those out there. >> a liability but a lot of leads. 1600 people that will come to your studio in the next year. >> too many to know how they will convert. >> i spoke with the business owner the morning of the deal and already had 100 voice mails for appointments by noon.

clearly, i expect people to return. >> you were -- i'm trying to be polite. >> you talk about coupon, can you talk about the competition from the location based services? yelp is blessed we are having a lot of exciting things, the most well-known we connect consumers with local business, local search engine with commerce, expanding internationally and seen a mobile platform shift. one of the search engines is yelp into a mo bril bile device. it's another way for consumers to provide data as to their spences. >> vince sollitto, we appreciate

the business update.

i'm allowing two very quick questions. >> we wouldn't let you leave without asking the ipo question. it's a tough market out there. are you putting it off, waiting a while? >> we're very fortunate. we took a significant investment from elevation partners the beginning of this year with $25 million into the company's coffers, we're starting to expand in launching into france, germany, uk and canada and moving into markets in the midwest and america. it took us a bunch of money to ipo quickly. do i need to do it soon? the point is to be able to choose your spot. >> i would imagine you would be a takeover target. >> i'm sure we are a very attractive business to a number of people. unfortunately, we're focused as a stand alone company and growth. >> think they would be a great

partner with facebook places. >> and google. it's been talked about a number of times. go ahead and answer that question. >> i'm sure it's been talked about. the nice thing about yelp, it's been talked about here an internationally and we're going to go it alone. >> that's our show for today. thanks to brad garlinghouse. we can watch some episodes back on our website, this episode 11 tom and kym will be back next .we ekseu thyoen. thank you for making us part of your sunday. en