There was a time when Yahoo was the king of the Internet. Users flocked there to begin their journey on the Internet and used their other services religiously. And they had a catchy jingle to boot. You might even know someone who still has a yahoo.com email address. At one point they were the most visited site on the Internet and future prosperity as well as the domination of the Information Superhighway seemed assured. So, what happened?

The Beginnings

Yahoo was founded in 1994 by Stanford students Jerry Yang and David Filo as a directory of websites organized in a hierarchical fashion. At the time there were not a lot of websites and by establishing a directory for users it made looking for whatever it was that they were looking for just a bit easier. By 1998 Yahoo became the most visited site in the world surpassing its closest rival Excite three times over and was worth more than Disney, Viacom and NewsCorps combined.

What Worked In 1994 Didn’t Work In 2000

The problem with a directory listing should be obvious as it required a lot of human time and effort to maintain and as the web became more popular with more websites being created it became almost impossible to maintain. A search engine was the logical next step, that is letting an algorithm handle it. With hindsight being 20/20 their first major mistake was to refuse to purchase page ranking technology from two other Stanford alums Larry Page and Sergey Brin in 1998 for one million dollars.

Of course you know that Page and Brin founded Google which became Yahoo’s chief rival and eventually surpassed them. Yahoo could have put a stop to this again in 2002 but they refused to pay the $3 billion to acquire Google considering this sum to be far too much. This came despite the fact that they acquired both Geocities (a service used to create web pages) and Broadcast.com for more than that total. 

At the time Yahoo’s directory service was still king but they still saw the value in the technology. Google’s technology was used as part of Yahoo’s search engine in the early 2000s helping Google to gain notoriety as Yahoo was still the most visited website on the Internet. Yahoo was a pioneer of what would become cloud computing with its own Yahoo Briefcase service and other services like Yahoo Notebook and Yahoo Music were early versions of services that we take for granted today. Yahoo made Silicon Valley.

They also pioneered the pay-per-click method of advertising revenue that became the standard across the Internet and can still be found today in some places. Things still seemed good.

Lacking A Vision

You could argue that Yahoo lacked a true vision for where they wanted to take their company and if so they were certainly not the only company that has existed that you could say that about. But it is more than that. Google relied on automation and valued their engineers highly. For Yahoo media people were valued more importantly and engineers were devalued. That meant that Google attracted the best and brightest which allowed them to innovate new and exciting features. It also helped that there was not much that went into their website, which meant less maintenance was needed and thus less overhead.

In 2000 the dot-com bubble burst. Both companies during the time hired new CEOs. Google’s came with a strong technical background that was comfortable with the new Internet economy. Yahoo’s (Terry Semel) came from Warner Brothers and did not know how to use the Internet. This is partly why they pursued Geocities and Broadcast and passed on Google. Perhaps they would have been better off trying to become an early version of YouTube instead. 

Both Geocities and Broadcast turned into poor investments while Google soared. Yahoo attempted to rectify the problem by acquiring the search engine Overture which also (surprise, surprise) turned into a poor acquisition. The bubble bursting caused Yahoo to lose many of its advertisers and thus much of its revenue. 

Another Major Miss

Of course with the bubble bursting a lot of tech companies were in bad shape and Yahoo did manage to survive but things were not going well. As if watching Google surpass them was not enough Yahoo had another chance to get in on a future trend before it took off. Mark Zuckerberg offered to sell his social service Facebook to Yahoo for one billion dollars. A clear lack of vision exacerbated by a CEO who was not familiar with the Internet caused Yahoo to pass and made lower price acquisitions like Delicious and Flickr instead. Flickr was intended to be turned into a photo sharing and social space but as seems to be a common theme Yahoo leaders thought differently. Semel departed Yahoo shortly thereafter.

They also made attempts to buy eBay and YouTube and apparently even entertained purchasing Apple. Given Yahoo’s track record just imagine what the Internet would look like today had they made those acquisitions. Would the iPod have ever been created?

Rejecting Microsoft

At this point Yahoo was still doing well despite its missteps. They were one of the most visited sites on the planet and were still valuable. Microsoft made a pitch to acquire Yahoo for $44 billion in 2008. Co-founder Jerry Yang dithered and Microsoft lost interest before making a last ditch effort to buy Yahoo’s search division which also was rejected. It was at this point Yahoo’s stock price plunged.

That made the 2009 announcement of a partnership between Yahoo and Microsoft all the more surprising. Microsoft was given full access to Yahoo’s technology and used it to develop their own search engine Bing after years of their own failures in that regard. While Bing has not surpassed Google in the battle to be the top Internet search engine it is one of the most used on the planet.

Attempting A Comeback

In a case of if you can’t beat them, hire them, Yahoo hired Marissa Mayer as CEO in 2012 away from Google. At the time she was the youngest CEO of a Fortune 500 company and her first moves like acquiring the blogging site Tumblr were hailed as positive moves. She was attempting to turn Yahoo into a mobile technology company but at the same time she was also unwilling to completely revamp the company and shed its revenue generating services. The positivity from the acquisition was short lived as Yahoo never was able to develop Tumblr into anything more than what it was and in the end consumers were confused as to what kind of company Yahoo was exactly. It seemed like they were trying to compete in every facet of the Internet rather than finding their own niche and excelling at that. 

Despite all of the failures Yahoo was still a popular web service. The final blow came in 2016 when it was announced that they had been hiding a data breach since 2014 of 500 million users and this total was later upped to 1 billion users. This was the largest data breach in the history of the Internet and one of the early cases that brought data breaches and cyber security into the public consciousness. At its lowest point Yahoo was purchased by Verizon for the paltry sum of $4.48 billion in 2017.

How Does This Relate To You?

Now, how exactly does this relate to your business or your website? There is little chance of your website becoming the most popular site on the planet, even if it is for only a day and there is little chance of your business being valued in the billions of dollars (though that does not mean that you shouldn’t try!). Yahoo made many poor business decisions exacerbated by having no real vision for what their business and their website was supposed to do.

There may come a time that you will need to update what your website can do and the features that your website contains. Having a vision for what you want for your site can greatly help that so that you do not just do upgrades willy-nilly. As Yahoo found out, that can be a waste of time and money that could be better devoted elsewhere and when a genuinely good opportunity comes along it may prevent you from pulling the trigger. There is also a lesson in that sometimes that opportunity comes to you. It may not seem worth it at the moment but you should at least listen. You don’t want someone else to take advantage of your missed opportunity.

At the same time you have a certain industry that you work in. What you do needs to be clear to anyone that comes to your website so there is no confusion as to what it is that you do. You have an area of expertise and you may just want to stay there until you are confident that you can compete in another area.

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