Yahoo - the former Internet king fell asleep on victory

Yahoo once dominated the Internet, but sleeping on victory and not having the right strategy forced them to sell themselves.

In July 2016, Yahoo agreed to sell its core business to Verizon. Forbes then commented that this was "the saddest $5 billion deal in the history of the technology industry". Today, not many people remember the glory days of Yahoo. But before Google or Facebook appeared, Yahoo used to hold the throne on the Internet.

Yahoo was founded in 1994 by two Stanford University graduates - Jerry Yang and David Filo. Originally, the website was called "Jerry and David's Guide to the World Wide Web", with a list of websites sorted by group. A few months later, Yang and Filo changed their name to Yahoo. On March 2, 1995, Yahoo officially became a company.

Starting from just a web directory, Yahoo later became the first website to add features such as news, sports, and finance. By early 1998, they had services including email, shopping, classifieds, games, travel, weather, maps, search.

"We don't want to be called a portal. Because a gate is a door to another place. We want people to stay here," said Shannon Brayton, Yahoo's senior director of communications from 1998-- 2001 said on Fast Company .

Yahoo co-founders Jerry Yang and David Filo. Photo: AP

The Wall Street Journal assessed that in the 90s, Yahoo was quite similar to Google today. Because this is the first website users open when accessing the Internet. To expand in the early stages, Yahoo continuously acquired dozens of companies.

One of their most successful deals was Four 11. Yahoo bought the webmail service for $92 million in March 1997. It eventually became the basis for the Yahoo Mail email service.

In January 1999, Yahoo bought GeoCities - helping many Internet users to set up websites. GeoCities was the 3rd most visited website in the world back then, after AOL and Yahoo. But later on, it was quickly surpassed by later social networks, such as MySpace and Facebook.

Yahoo also bought Broadcast.com in April 1999 for $5.7 billion, making businessman Mark Cuban a billionaire. This service was quite advanced at the time, allowing the broadcasting of radio and TV programs on the Internet. Yahoo later split Broadcast.com into several sub-arrays, none of which survive today.

In terms of business, Yahoo is also a pioneer in PPC (pay-per-click) advertising model, Jeremy Ring – a sales leader at Yahoo from 1996- 2001 said in the memoir We Were Yahoo. This model then quickly became popular on the Internet.

And while Yahoo isn't the creator of Silicon Valley's culture, they've adopted it very radically. Tom Parker - Yahoo employee from 1998 - 2004 said on Fast Company : "The company is like a university. David Filo doesn't even wear shoes. We can wear shorts and flip-flops to work. , just like a startup."

In 1996, Yahoo did an IPO, raising $33.8 million. Their stock price then was only $13. By January 2000, this price peaked at $118, bringing the company's capitalization to a record $125 billion.

Yahoo Broadcast interface in 2000. Photo: Fast Company

However, this good time did not last long. When the dotcom bubble hit in 2000, Yahoo lost a lot of advertising customers. Their capitalization has almost evaporated. The stock price was just over $4 in September 2001.

As Google began to become popular, Yahoo's dominant position in the search engine segment also gradually shook. In 2002, Google replaced Yahoo as AOL's default search engine. That same year, Terry Semel - then CEO of Yahoo - offered to buy Google for $ 3 billion. However, two Google co-founders, Sergey Brin and Larry Page, disagreed.

This wasn't even the most lucrative opportunity they missed. In July 2006, Yahoo tried to buy Facebook when the social network had only 7 million users. They bid $1.1 billion. However, Peter Thiel - one of the three Facebook board members at the time - said Mark Zuckerberg had never thought of selling. Yahoo also missed the opportunity to buy eBay and YouTube.

However, their M&A picture still has some bright spots. Yahoo bought a small company called Ludicorp in 2005 for $25 million. The company has a photo-sharing website called Flickr. Flickr quickly became one of the largest photo-sharing sites on the Internet.

A few years later, even though it was struggling to find a way to grow, Yahoo changed its CEO again and again. In 2007, Semel resigned, Yang returned to the company. In 2008, Yang rejected Microsoft's offer to buy it for $44.6 billion. He thinks Yahoo is undervalued.

In 2009, Carol Bartz replaced Yang. She also had to resign two years later when the company's revenue continued to decline. Display advertising began to slide.

Former PayPal president Scott Thompson joined Yahoo in January 2012. Thompson wanted to turn Yahoo into a media company. But just four months later, he was fired after a scandal over degree fraud. However, he also managed to fire 14% of Yahoo employees.

In 2012, Yahoo selected former Google leader - Marissa Mayer as CEO. She immediately wanted to change the company culture, focus on improving the user experience, change the logo, hire media talent. Mayer also directed the acquisition of Tumblr for $1.1 billion in 2013.

In 2013, the company had many positive growth signs when revenue reached 1.13 billion USD, profit increased by 150% (137 million USD). After a year under Mayer, Yahoo shares rose from $14.6 to $26.9.

However, Yahoo under Mayer still cannot return to its heyday. They lost the title of website with the highest traffic in the world to Google in 2011. In 2015, Google's US search market share was 72.4%. Meanwhile, Yahoo has only 4.8%.

In July 2016, US telecom giant Verizon announced it was buying Yahoo for $4.8 billion, ending Yahoo's 21-year history as an independent company. Back then, Yahoo still had more than a billion monthly users, both on phones and on PCs. Two years later, the Yahoo Messenger service shut down. In 2021, Verizon continues to sell Yahoo to Apollo Global Management after 5 years of ownership.

There are many reasons why Yahoo fails. Ring says its biggest mistake was not letting its paid advertising results appear with normal results. In the early years, Yahoo treated search results as content with no advertising interference. By the time they realized this mistake, and bought the advertising agency Overture for $1.6 billion in 2003, Google was ahead.

Then, instead of tweaking Overture's technology to compete with Google's sophisticated system, Yahoo decided to build its own advertising platform from scratch, said Garry Flake - a scientist working for Yahoo in 2003- 2005 said. This project, called Project Panama, took 3 years to complete. At that time, the advertising war was over. Google is the winning name.

Another cause, is the crisis of recognition. Yahoo hasn't really defined what it wants to be as a company? A tech firm? An advertising platform? A social network?

Its second CEO - Terry Semel - wants to turn Yahoo into a media giant. Meanwhile, the last CEO - Marissa Mayer - wanted them to be a mobile technology company. Both have failed.

In 2006, when Yahoo executives gathered at a hotel in San Jose (California, USA), to rest, there was no sign of the company going into crisis. At that time, the Internet giant had just ended 2005 with $1.9 billion in profit on $5.3 billion in revenue.

Then they started playing a game, asking people to say the first word that came to mind when a company name was mentioned. So eBay comes with auction, Google is search, Intel - processor, Microsoft - Windows. But when it comes to Yahoo, "some people say Mail, some say News, others say Search," Brad Garlinghouse - Yahoo senior vice president told Reuters .

This incident is considered a harbinger of the end of the former Internet king. Parker thinks that Yahoo's desire to be everything led them to this end.

"We have very few core products that are the best on the market, like email. But most of the rest are second-best," he said.