The Rise and Fall of the Yahoo Empire

It began as a college start-up before it became a giant in the Internet world.  But with its recent problems and increasing competition, is Yahoo on its way to becoming irrelevant?

How It Started

 

The company began innocuously, with Stanford graduate students Jerry Yang and David Filo browsing around in 1994 the then new world of the Internet. Yang then began posting random stuffs online, including his golf handicap, his name in Oriental characters and a list of all the websites he follows. Soon, he organized these into a list of other websites, naming it “Jerry and David’s Guide to the World Wide Web.” These garnered the attention of other users as it provided an easy link to other useful and relevant sites.

Barely two months later, the site had been renamed as Yahoo, an acronym for “Yet Another Hierarchical Officious Oracle.” It was also a slang for rural Southerners, a description applied to Filo by his girlfriend back in college.

The company grew fast in a short amount of time. Before the end of the year, Yahoo was already experiencing more than a million hits in one day. Yang and  Filo recognized this unique opportunity and got support from Sequoia Capital, which invested $2 million in the company.

Yahoo quickly became one of the most popular sites in the Internet. It employed around 50 people by 1996, with these people tasked to add sites to the directory. That year, the company had its initial public offering, raising $33.8 million in the process. By 1999, both Yang and Filo were worth more than $8 billion each. Yahoo stocks were trading at $118.75 per share in the beginning of 2000. The company became so strong that it rendered its competitor, AOL, useless.

Then Came Google

 

Google came along just as the dotcom bubble was about to burst. These twin scenarios hit Yahoo hard. Google proved itself to have a better and simpler search engine that spits out relevant results. Google also made use of Internet crawlers that yielded automatic results. At that time, Yahoo was still using humans to add to its directory.

Around that time, the dotcom bubble also burst. From the $118.75 per share in January 2000, Yahoo stocks dipped to as low as $4.05 per share barely 21 months later in September 2001. With Google growing cheaply because of its superior search engine and cheaper overhead costs, Yahoo was forced to lay off some of its workers.

Keeping Calm and Surviving

 

Still, Yahoo survived this onslaught. It recognized its problems and took a strategy of both confrontation and collaboration. It even made use of Google’s search engine starting in 2000 as Yahoo developed its own technologies for its search engine. This was then launched in 2004. 

It also expanded its role in the Internet by gobbling up smaller companies in allied fields, like Hotjobs, a job finder in the web, Oddpost, a provider of webmail services, and Flickr, a popular photo-sharing website.

It also enhanced its web portal by partnering with different content providers from around the world. Information was categorized into Yahoo! Sports, Yahoo! Music, Yahoo! Movies, Yahoo! Finance, Yahoo! Weather, Yahoo! News, Yahoo! Games and Yahoo! Answers. It also added a personalization service called My Yahoo!, which allows users to create their own combination of all their favorite features, content, information and feeds into a single page. 

It also enhanced its Internet communication services, like Yahoo! Messenger and Yahoo! Mail, with Yahoo! Mail facing Google’s Gmail service challenge head on by offering unlimited data storage. It also provided social networking and user-generated content services, like My Web and Yahoo! Personals. 

Yahoo also provided shopping services like Yahoo! Shopping, Yahoo! Autos, Yahoo! Real Estate and Yahoo! Travel, which allows users to garner important information and conduct commercial purchases and transactions online, it even briefly had an eBay style service called Yahoo! Auctions, but this was discontinued in 2007, though the service was maintained in Asia. 

By 2007, Yahoo’s share of all online searches stood at 22 percent. This was still way behind Google’s 54 percent, but substantially ahead of Microsoft’s paltry 10 percent. During the first quarter of 2008, Microsoft offered $45 billion to take over the entire Yahoo group.

Missteps and Miscalculations

 

Yahoo has had its share of missteps and miscalculations. Several of its products and services were forced to close down in the past few years, like Yahoo! 360, Yahoo! Buzz, MyBlogLog and several others.

It bought the popular web hosting service called Geocities in 1999, only for it to close shop a decade later, thus deleting a huge amount of information from seven million web pages. It also had a brief phone application that ran on Java called Yahoo! Go, but this was closed in 2010.

Other discontinued services from Yahoo include Yahoo! Tech, Farechase, Audio Search, My Web, Pets, Kickstart, Live, Briefcase and Yahoo! for Teachers. it also ran a geo-tagging website called Yahoo! Koproi, but this was discontinued as it did not help with the company’s bottom line, with most of its users based in Indonesia. 

But it is its rejection of Microsoft’s offer to take over for $45 billion that may loom a large dark shadow over Yahoo. Microsoft had dropped the offer due to disagreements in the amount involved. Yahoo’s share price slowly but surely dipped. While Microsoft came back with newer offers, all of them were at substantially lower amounts. It moved the billionaire investor named Carl Icahn to lambast Yahoo for its corporate irresponsibility in rejecting the original offer made by Microsoft. 

In 2008, Jerry Yang stepped down from his post as Chief Executive Officer, though he did retain the title of Chief Yahoo. He is still involved with the company, though at a much lower level. In 2010, Yahoo decided to power its search engine using the facilities of Bing, the new search engine created by Microsoft. 

Such is the dizzying ride of Yahoo. The college start-up turned Internet giant may soon follow the footsteps of AOL, the company that Yahoo consigned to irrelevancy back in its heyday.

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The Rise and Fall of the Yahoo Empire