Terry Semel never won much respect from Silicon Valley insiders.

He was a consummate Hollywood power politician, schooled in Time Warner power games when he ran the group's Warner Brother studio. And he is, by all accounts, relatively unflappable, a low-pulse guy, says one confidante. True, he presided over Yahoo's recovery from the last internet downturn.

But insiders regarded that as luck, rather than skill. Even when Yahoo was riding high, other internet execs described him as the Forrest Gump of the industry, someone with a charmed life, but a limited understanding of the new medium to which he'd come, late in his career. After the jump, where Semel went wrong.

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For a long while, it didn't matter that Semel had missed the chance to acquire Google for $1bn, before the search engine upturned the internet sector and reduced Yahoo to an also-ran. Semel's pet project, a misconceived Hollywood operation run by Lloyd Braun to make the internet giant a fully-fledged media company, was endured. Sure, insiders at Yahoo's Sunnyvale headquarters joked about Semel still being a Hollywood guy, commuting reluctantly to Silicon Valley, but the recovery in internet advertising lifted Yahoo, and tempered criticism of Semel.

It's only been in the last year that the Yahoo CEO really came under pressure. Wall Street talk that investors would prefer Sue Decker, the company's CFO, to run the company. Delays in a key paid search initiative, Panama, which was designed to bring Yahoo some of the gigantic profits that Google was making from text ads next to search results. Yahoo, a Merrill Lynch analyst reckons, generates 4 cents in advertising for every search query, dwarfed, embarrassingly, by the 11c that Google earns. Google now has a market value five times that of Yahoo.

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And Yahoo, despite personal publishing tools such as Geocities, largely missed out on the social networking phenomenon. Myspace became the place that teenagers and music fans went to make their personal web pages, and connect with friends, leaving Yahoo with an indistinct mainstream audience. The internet company, though its audience remained huge, was all things to no particular people.

Then there were smaller reverses. Yahoo, having missed out on earlier acquisition opportunities, tried to buy both Youtube and Facebook. But the Youtube negotiations dragged out, giving Google an opening to take over the online video service. Semel's disastrous meeting with Mark Zuckerberg, Facebook's founder, was another example of the culture gap between the Hollywood exec and the internet entrepreneurs on whose creativity Yahoo's future now depended. Another deal, a giant acquisition of Yahoo by Microsoft, which would have provided Yahoo shareholders with some relief, was stymied by the need to provide Semel with a suitable role, or a graceful exit.

The final blows: an internal memo by Brad Garlinghouse, calling for new focus, and, between the lines, for new top management; and a play by opportunistic hedge funds, who saw a chance to take positions in Yahoo, on the cheap, force a change in management or direction, and make a quick profit. Yahoo was in play. And, with Semel going, it is still in play. Even more so. Yahoo may say it is looking for a permanent CEO to replace Semel, while senior execs Dan Rosensweig and Sue Decker fill the breach. But Yahoo, which as good as invented the internet back in 1994 with its basic directory of cool web sites, is now an acquisition target.