The King of the Internet Before Google and Facebook: Yahoo!
When you want to tell someone to look up something on the internet, what do you say?
'Web-browse it?' 'Fire-fox it?'
No. You say 'Google it'.
Obviously, Google is today's king of the Internet - but has it always been this way?
If you're older than 30, you know it hasn't, and you might be familiar with another term:
Yet Another Hierarchically Organized Oracle(!)
1994, Stanford University.
Two geeky electrical engineering grads at Stanford University, Jerry Yang and David Filo, decided to make a website for fun, using their university's computers. It had the most bizarre name: Jerry and David’s Guide to the World Wide Web.
Sure, good luck with that one!
Their website was the first version of something resembling today's search engines. It was a directory of manually-curated and hierarchically-organized websites you could browse through. It was the first site ever that hosted news, sports, and finance feeds, so it's hard to tell who their first users were. It could be anyone with access to the Internet at the time, but most likely - their university colleagues.
As early as that same year, the guys realized they were on to something big with this website, so they decided to change its name into something searchable and memorable.
If you read this section's headline once again, you'll see it's actually Yahoo!'s backronym.
What they especially liked about this name, was the fact that it was 'rude, unsophisticated, uncouth.'
Sugar, Spice, and Everything Nice: Development, Funding, and Challenges During the Internet Revolution
As 1994 was coming to an end, Yahoo! reached 1 million hits. They didn't even have a domain yet, using the University's subdomain akebono.stanford.edu/yahoo instead. They made it in 1995 when they decided to incorporate Yahoo! as a legit business. One of the problems that occurred was that Yahoo was already trademarked for different kinds of products: barbecue sauce, knives, and human propelled watercraft. That’s why the guys added the often omitted exclamation point to the name to create the name "Yahoo!".
Although the two founders were super-skilled in tech and knew exactly how to develop the site further, they weren't as skillful in business. That's why they sought advice from the famous entrepreneur Randy Adams, who instead directed them to seek financial support from Michael Moritz, the head of the Sequoia Capital venture capital company. They received two rounds of investments, raising some $3 million.
Just a year later, Yahoo! had its IPO - it raised $33.8 million by selling 2.6 million shares for $13 each.
Yahoo! was extremely important for the Internet’s look today. During the nineties, for most people, it was the Internet. All of it. Just look at all the apps we use and adore on a daily basis: Youtube, Spotify, Evernote, Instagram, they all had their predecessors among Yahoo’s services: Broadcast.com (which later became Yahoo! TV), Yahoo! Notes, Yahoo Music, Flickr, etc.
The founders received major support from Stanford University. As they grew, the university provided them with a trailer and a bunch of computers, so they could operate their business outside the faculty building. This, however, lasted only a year. When Netscape created the Navigator browser, which linked directly to Yahoo!, their directory grew to over 10,000 website links, and more than 1 million visits daily. Stanford’s servers couldn’t handle this, so Jerry and David had to look for their own - so they had to get a Carlson server.
The years of expansion for Yahoo! were actually pure luck. Many experts criticize them for not having a plan and a vision. In the beginning, when they had no competitors, everything was going well: during the late nineties, they acquired several companies including the Four11 communicational company that later became Yahoo! Mail, GeoCities, and eGroups (which became Yahoo! Groups). Not only was this expansion going great, but by the end of 1999, Yahoo! Managed to double its price, so in January 2000, during the dot-com boom, their stock closed at $118.75 per share!
The Downward Spiral
In February, Yahoo! was a victim of a denial of service hacker's attack, but this left them almost intact, as the next day, their share price rose another 4.5%. They seemed unstoppable, with their daily revenue crossing millions of dollars.
However, most of this money was coming from the dot-com ad space investments and many of the businesses investing were either just starting, or on the verge of failure, and they all put their hopes on Yahoo! to help them boost their business. The problem with this was that many users simply stopped clicking on Yahoo! banners, so clicks declined from 5% to 0,5%.
In 2002, the dot-com bubble popped, which caused Yahoo!'s stock to drop 87%, and investors started moving away from the company because it was heavily reliant on the dot-com. Yahoo!'s board of directors initiated Yahoo 2.0, with COO Jeff Mallett and CEO Timothy Koogle spearheading the initiative that was supposed to fix the company.
However, they both resigned only a few months later.
Although the company lost a lot, they still expanded during the post-dot-com period. They formed partnerships with telecommunication and Internet providers, providing various dialup and DSL services for their customers. They also acquired several companies and turned them into new features, including Inktomi and Konfabulator, which later became Yahoo! Widgets.
Over the next couple of years, the Internet market was rapidly expanding, as more and more users were coming online, and it needed more of everything: email service platforms, communicational channels, free online storage space, etc. Yahoo! was no longer alone in the industry, they had quite a lot of competitors, so for every new release by Google, for example, they had to make a new release at Yahoo!. In 2004, Google released Gmail, and Yahoo! responded with upgraded storage for free Yahoo! mail accounts. Then, they purchased Flickr, launched the Yahoo! 360 social network and kept up.
Although they were competing with Google, they still started using their services for Yahoo!'s search engine, allowing Google to gain notoriety and develop much faster. They kept making major acquisitions, without any idea on how to develop them further.
This lack of vision among the company's executives was best visible in 2002, when they refused to buy Google for $3 billion, stating that it was too expensive, although they previously paid double that money to purchase Broadcast.com and Geocities!
Between 2006 and 2008, besides releasing new features and beta versions of their homepage, Yahoo! also negotiated a potential merger with Microsoft, which was another wrench in the cogs. After three years of discussions and disputes, the guys from Microsoft finally gave up, and Yahoo!'s ego won. Merging was seen as impossible and unproductive.
Throughout the next couple of years, the storyline doesn't change too much. Yahoo!'s policies remained the same, only changing a few CEOs: Carl Bartz (2009-2011), followed by Scott Thompson (2012), and then finally Marissa Mayer, who was active on the position until 2017.
During the Scott Thompson period, there were a couple of controversies that stained Yahoo!'s name. For example, in early 2012, a couple of executives and team-leaders suddenly left the company, which was followed by a huge worker lay-off: 2000 people, 14% of their workforce.
The CEO said it had to be done in order to save $375 million per year, but he didn't have time to craft a better response, as another scandal ensued, this time about Scott’s diploma: it turned out that he lied about having a degree in Computer Science, having graduated only accounting. The board of directors formed a commission to review his academic credentials, resulting in his replacement. Ross Levinson became the company’s interim CEO.
Up and Down Again
However, Ross wasn't meant for the position either, and soon he got replaced by Marissa Mayer. Under her leadership, Yahoo! purchased Tumblr and relaunched Flickr, while also acquiring the RockMelt web browser along with all of its featured apps.
In 2013, they finally outperformed Google for the first time in a few years: more people visited Yahoo! websites than Google’s in a month, and this was calculated without Tumblr.
It seemed like the company was getting back on its feet, but it faced even more challenges. In 2016, Yahoo!'s platform was hacked twice in a couple of weeks, and the private data of more than a billion users was compromised.
This was the heaviest strike this web giant ever took - and they never recovered.
In 2017, they got acquired by Verizon for $4.48 billion. Compared to what Yahoo! was during the early and mid-2000s, this was a silly amount of money. However, the company's shares in Alibaba and Yahoo! Japan were not a part of the deal, so they remained safe in a separate company you've never heard of: Altaba.
Marissa Mayer claimed she'd resign from the CEO position if this acquisition went through, and that it would result in Yahoo!'s name being changed to Altaba. However, the former did happen, but the latter did not.
She resigned as Yahoo!'s CEO in 2017, when the company was bought by Verizon for $4.5 billion. Former AOL CEO Tim Armstrong took over, making amazing promises to compete with Facebook and Google.
You have to admit: this is not a story of amazing success. It was, for a while, during the 1990s, up to the mid-2000s. Its downfall was caused by its leadership - the executives at Yahoo! never had a clear vision or clear plans, and their egos played a more important role than making the right decisions.
We can't say they didn't succeed, because they still make annual revenue of $1.33 billion and they're still relevant online, but when was the last time you heard about someone using Yahoo?
When was the last time you used it yourself?
Most of you said 'years ago'.
That's why, except for some amazing and still active separate features such as Yahoo! News or Yahoo! Finance, this former internet giant is all but gone from the big player table in the internet world.