For Yahoo's Yang, news keeps getting worse: Eric Auchard

-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

By Eric Auchard

LONDON (Reuters) - Jerry Yang's elevation to chief executive at Yahoo Inc (YHOO.O) after a long period of decline at the Web pioneer had the air of a fairy tale where the noble prince grows up and restores his kingdom's faded glory.

But Yang has worn his leadership like an ill-fitting coat since coming to power last year, appearing reluctant to make the dramatic restructuring moves analysts and investors have long considered vital to get Yahoo to reaccelerate its growth.

Yang made no concessions to the growing chorus of angry investors and media pundits calling for his ouster at a Web industry conference in London this week.

Avoiding questions about Microsoft's recent rebuff to renewed merger talks between the two, Yang posed for photos in front of dancing singers in oddly chosen surgical costumes singing "Staying Alive," the never-surrender disco anthem.

It was the kind of goofy humor cultivated by a company that turned a yodel into one of the biggest brands in Internet media but lately has seen little go its way as it attempts a turnaround in the midst of a 15-month-long downturn in online advertising.

In his speech to the Internet Advertising Bureau, Yang reiterated plans to boost Yahoo's audience and drive more advertising sales. But his underlying message was of deeper and deeper gloom for his company and the Web industry.

The slide into global recession looks likely to delay the adoption of advertising on mobile phones and on the latest generation of Internet televisions, Yang told the conference. It's an open question whether advertisers will keep spending on Web search advertising if consumers stop buying, he added.

"Yang is basically capitulating unless he can articulate a strategy for how to survive the next two years," said Jeffrey Lindsay, an Internet analyst with brokerage Sanford C. Bernstein in New York.

As leader, Yang, who recently turned 40, has failed to spark the kind of turnaround that companies like Apple Inc (AAPL.O), Dell Inc (DELL.O) and Starbucks Inc (SBUX.O) saw to greater or lesser degrees once their legendary founders or early leaders returned to the top job.

Unlike Steve Jobs who used NeXT Computer, his intervening company, to test out many of the hardware and software ideas he later implemented in his triumphal return to Apple, Jerry never really stepped outside the company he founded 14 years ago.

Given a second shot at power, Jobs and Michael Dell focused relentlessly on operating efficiency, something Yang appears reluctant to do on the scale demanded by rapid industry change, voracious competition, and a falling economy.

"I don't think Yahoo has made the kind of drastic restructuring it needs to win investor confidence back," said Dona Roche-Terry, a managing partner at executive recruiter CT Partners in London. She formerly ran Heidrick & Struggles' North American telecommunications recruiting practice.

The economy has admittedly given Yang no breaks. As the top supplier of online brand advertising -- accounting for almost half its sales -- Yahoo has suffered more than rival Google Inc as advertisers slash spending on corporate marketing campaigns. This is because Google focuses largely on Web search advertising seen as more effective for advertisers to locate new customers.

Yang has lost credibility with investors after he scotched Microsoft's bid to acquire his down-on-its-luck company earlier this year. Yahoo shares trade just above $10, less than a third of Microsoft's best offer six months ago for Yahoo of $33.