The rise and fall of Yahoo: how it went from about to buy Google to crashing

It was synonymous with the Internet, the king of advertising and had the technology of what are now YouTube, Instagram, Spotify and WordPress.

In 2021, a brand that was synonymous with the Internet and was worth a few $125 billion returned to the media with new negative news: the closure of one of its most popular services.

It was Yahoo Answers, one of the last survivors of the glory days of a company that lived through golden times but fell apart due to a series of wrong decisions, which culminated in July 2016.

Some 22 years after it began as a hobby for graduate students at California’s Stanford University Jerry Yang and David FiloYahoo agreed five and a half years ago to sell its core operating business to US telecommunications operator Verizon. Few today remember how gloriously this company began. Before Google or Facebook, Yahoo was the king of the Internet.

Jerry Yang, one of the founders of Yahoo.

Origins and rise

Jeremy Ring was one of Yahoo’s top sales executives from 1996 to 2001. His memoir, We Were Yahoo detail the rise and precipitous fall of what was once the largest internet company on the planet.

“Our company was five years old,” Ring wrote. “We were worth more than Ford, Chrysler and GM combined. Hell, we were worth more than Disney, Viacom and News Corp. combined. Every single one of those great American brands could have been swallowed up by us.”

Thanks to its entrepreneurial instincts and strategic acquisitions, Yahoo was way ahead of the curve in almost every Internet category. But he failed to capitalize on his early advantages, leaving the field dominated by later entrants. Yahoo Briefcase, for example, did cloud storage long before Dropbox, Box, and Google Drive.

To many in the 1990s, this company with the funny name was synonym of Internet. It started as a web directory, manually curated and categorized by humans, known simply as “the navigators.”

Email is one of the few brand services that survives today.

Email is one of the few brand services that survives today.

Much more than a directory

Yahoo was the first site to add news, sports and finance sources to your web directory. Those three services remain very popular as part of Oath, Verizon’s name for its AOL-Yahoo media mix. By early 1998, Yahoo had added:

  • Email.
  • Shopping.
  • Classified ads.
  • Personal ads.
  • Games.
  • Travels.
  • Weather.
  • Maps.
  • Search for people.
  • Celebrity chats.
  • A version for children called Yahooligans.
  • An online magazine.

At that time, it was competing with search portals like Excite, InfoSeek y Lycos to provide everything on the web in one place. It didn’t want to define itself as a portal, because a portal is a doorway to another place, and Yahoo wanted people to stay there.

Pioneer of videos, photos and advertising

Along the way, Yahoo broke new ground. In addition to being the first web directory, it was the first portal to offer localized directories for major cities and the first to allow users to customize their own versions of the site. Many of the apps and services we now take for granted they were invented at yahoo or they quickly found a home there.

Before there was YouTube, there was Broadcast.com, which became Yahoo TV. Before Instagram, there was Flickr. Before Evernote, there was Yahoo Notebook. Before Spotify, Yahoo Music. And so on.

More important from a business standpoint, Yahoo pioneered the pay per click advertising which soon became ubiquitous on the Internet. The first click banner on Yahoo was an MCI ad; to make sure people clicked on it, they embedded the word “naked” within the ad text.

In 2001, Yahoo bought a startup called Launchcast and made it the basis for its own streaming music service. Before there was Spotify or Pandora, it followed a freemium model: listen to up to 1,000 songs a month for free or pay $4 a month for CD quality, no ads, and unlimited skips.

A symbol of Silicon Valley

Although Yahoo didn’t exactly invent Silicon Valley culture, it quickly became its representative. It was informal at the university level. David Filo he didn’t wear shoes. Shorts and flip-flops could be worn to work. He was super entrepreneurial, which is now kind of a cliché. Early employees used to sleep at their desks after spending all night writing code or updating content.

To the American public, Yahoo was the company with the funny tv commercials. He had personality in spades, which was rare for tech companies in the 1990s. It was those early TV ads that turned Yahoo into a global brand overnight.

When Yahoo launched a television campaign in the US, there were at least other 130 search engines. But none of them had that cheeky name, and they were the first to go out and announce themselves in a big, memorable way.

When Yahoo was about to buy… Google and Facebook!

The good times didn’t last. Yahoo lost many of its advertisers, and nearly all of its value, in the dotcom bust that began in April 2000. It never really recovered. Now what people remember most are the missed opportunities.

In 1998, Yahoo had the opportunity to acquire an innovative new Internet search technology created by a couple of Stanford graduate students for a million dollars.

Instead, David Filo convinced Sergey Brin and Larry Page, who had asked Yahoo for a financing fund for that million dollars, so that they could start up on their own and introduced them to one of Google’s first investors, Michael Moritz, of Sequoia Capital, who invested that amount. .

In 2002, Yahoo got a second chance to buy Google. This time, the CEO of the company, Terry Semel offered $3 billion for the company. Page and Brin turned it down, because they expected $5 billion.

But even that wasn’t Yahoo’s most famous missed opportunity. That was in July 2006, when Yahoo tried to buy Facebook, then a college-oriented network with roughly 7 million members, for $1.1 billion.

Internet lore says that Mark Zuckerberg walked away from the proposed deal when Semel cut the offer to $800 million after a drop in Yahoo’s share price. According to Peter Thiel, one of three Facebook board members at the time, Zuckerberg never seriously considered selling.

Microsoft slammed

Yahoo turned down offers, most famously when the company’s then CEO, Jerry Yang | aggressively rebuffed Microsoft’s attempts to buy Yahoo for $44.6 billion in 2008. It was one of the most famous slams in Internet history.

Yahoo was flushed with big acquisitions. For example, bought GeoCities for $3.7bn, he splurged $5.7bn on Broadcast.com, spent $1.1bn which he then dropped on Tumblr.

In light of the fate of those purchases, it can be deduced that Google or Facebook would be the giants they are today if they had become part of Yahoo. If Yahoo hadn’t screwed up those acquisitions, it might have ended up being the most valuable company in the world. Or it would have set the Internet back a couple of years, because Google and Facebook would have been lost, and the world would have had to reinvent them}.

For example, in 1999, GeoCities allowed millions of people to build their own websites, with enthusiastic but ugly results. WordPress allows today to create sites that are much more attractive, but the web lost some of its soul when GeoCities was eliminated by Yahoo in 2009.

Why did Yahoo fail?

Perhaps Yahoo’s biggest mistake was disallow paid search ads to co-exist with organic search results. During the early years of its existence, search results were considered editorial content, which was not meant to be clouded or watered down by advertising.

When Yahoo realized its mistake and acquired Overture, the company that invented paid search advertising, for $1.6 billion in 2003, Google was already leading that market. Instead of fine-tuning Overture to compete with Google’s more sophisticated system, Yahoo decided to build its own advertising platform almost from scratch.

Codenamed the Panama Project, the new platform took nearly three years to complete. By then, the battles for the web search market were over: Google had won.

But beyond that, Yahoo never really decided what it wanted to be when it grew up. Was it a technology company? A search advertising platform? A flourishing social network?

Its second CEO, Terry Semel, tried to turn Yahoo into a new media giant. Its eighth and last CEO, Marissa Mayer, wanted to transform it into a mobile technology company. Neither was willing to divest Yahoo’s legacy revenue-generating businesses, and both ultimately failed.

Marissa Mayer was the last CEO of Yahoo before its sale to Verizon.

Marissa Mayer was the last CEO of Yahoo before its sale to Verizon.

Yahoo Answers, the swan song

The dismissal of Yahoo Answers, which closed on May 4, 2021, was understood as a exhalation more on the way to the last breath of what was one of the greatest giants of the Internet.

After 16 years of knowledge exchanges, the platform stopped supporting new questions or answers on May 20 and kept the possibility for users to download its content until the end of June. After more than 15 years of being an Internet reference, the question-and-answer site argued that it had become less popular.

In its heyday, Yahoo had the idea of ​​creating a platform where people could ask all kinds of questions for other users to answer. The page of questions and answers par excellence, or at least the best known and used by millions of users, was born in 2005.

Ante la social media popularityNot surprisingly, one of the reasons, if not the most basic, is that the platform has become less popular over the years and the company is looking to redirect its investments into other products.

Yahoo Answers closed in 2021.

Yahoo Answers closed in 2021.

footprint of a giant

Today, Yahoo’s DNA can be found throughout Silicon Valley and beyond. You can’t go to any company in the California valley and not find Yahoo’s footprint. The list of startups launched by former Yahoo employees includes WhatsApp y Slack. And former Yahoo executives sit on the boards of LinkedIn, Facebook, Google, Microsoft, Twitter, Airbnb, Dropbox, and Sequoia Capital, to name just a few.

One could even argue that Alibaba, China’s massive online marketplace, might not be a $160bn company without Yahoo’s $1bn investment in 2005.

The one that covers a lot, squeezes little and… fails

Trying to be everything to everyone was Yahoo’s downfall. It had some basic products like the mail, which survives today and was best in class, but most of its products were second and late to market.

With the right leadership, Yahoo could have evolved into a combination of what Google, Facebook and Netflix are today. But he lacked vision.

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