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The blogosphere and news media are abuzz today over the management overhaul at Yahoo!. Starting Jan. 1, the company will be organized into three main groups: a customer-focused group, an advertiser and publisher group, and a technology group. CFO Susan Decker will run the advertising and publishing group, and SVP of Connected Life Marco Boerries’ role will grow. COO Dan Rosensweig will meanwhile leave the company along with Lloyd Braun, who heads Yahoo!’s media group.

The reorg in essence takes some of the fiefdoms and singular initiatives of Yahoo! and funnels them into three channels, whose targeted focus is hoped to eliminate some bureaucracy that was perceived to exist under the previous structure. More importantly, this could cause the company to be more effective at developing, integrating and marketing some of its products.

No one gets more traffic than the overall Yahoo! network. But it has some products that have floundered in meeting their potential. Despite Yahoo!’s emphasis on social media, its own social network, Yahoo!360, doesn’t hold a candle to MySpace and Facebook usage. And as we’ve pointed out in the past, My Yahoo! hasn’t reached its potential in becoming a personalized portal as a launch pad to daily Internet experiences, including news, classifieds and multimedia content. The consumer-focused division, for one, could create a more holistic strategy of integrating many of Yahoo!’s great products that right now aren’t getting the traction they could.

The advertiser and publisher division will presumably run Panama, although the reorg shouldn’t take hold in time to affect its rollout. It will, however, affect its eventual market positioning and long-term deployment. Panama is a robust SEM platform that could gain ground on Google AdWords if marketed effectively. This will be a challenge, given advertisers’ established habits (like search behavior and lots of other online activities). The opportunity for Panama is to appeal to a new batch of search engine marketers with a simpler and more user-friendly way to get online and start advertising. The features of the platform are certainly in line with this goal (see TKG Advisory “Search Wars: Microsoft and Yahoo! Strike at Google’s Leading SEM Position“).

Overall, this is the right time for a management shake-up; delays with Panama, slipping stock price, and falling behind Google in SEM share and revenues, all culminated with the well-publicized peanut butter manifesto a couple weeks ago. The reorg is part PR and part necessary shift. It should have immediate PR benefits and raise investor confidence in the short term. But in terms of the actual effects it will have on the organization, the real proof will be in the execution, and it should take a while given the organizational inertia inherent in such a large company. It will be interesting to watch this unfold.

You can read the press release here, and more from The New York Times, BusinessWeek and Red Herring.

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