Yahoo! A Story of Missed Opportunities
Jerry Yang and David Filo, electrical engineering students at Stanford, started one of the biggest internet sensations from their college dorm in January 1994. What began as a hierarchically arranged curated directory of websites called ‘Jerry and David’s Guide to the World Wide Web’ was renamed and incorporated in 1995 as ‘Yahoo!’ an acronym for ‘Yet Another Hierarchical Officious Oracle’.
At its peak in 2000, Yahoo was one of the most popular websites globally, valued around 125bn dollars; a pioneer during the early era of the internet. In 2017, Verizon Communications acquired Yahoo’s core internet business for approximately 4.48bn dollars. And this year in 2021, they sold Yahoo (along with AOL) to private equity firm Apollo Global Management in a 5bn dollar deal.
Yahoo is a business story filled with missed opportunities. Perhaps the most defining lessons from the company start and end with a lack of vision which led to confused branding, unclear messaging and misaligned hiring decisions.
In spite of the strong start in an evolving space with barely any competition, poor choices plagued Yahoo throughout its two decades. A good CEO should have a holistic vision for where a company is heading and the leadership at this company struggled to focus on their key strengths, which lay in search optimization, online news and email. They also grappled with hiring good quality programming professionals; the backbone of any tech company.
But Yahoo’s demise ultimately rests on faulty acquisition strategies and some rather expensive missteps. It started with their inability to pull through on a 1bn dollar deal to acquire Google in 2002. Confusion on whether they were a tech start-up or a media company precluded them from seeing search as a meaningful investment. This was followed by acquiring Flickr in 2005 and failing to carry out their goal of turning it into a social media application, a story that resonates once again with their investment in blog sharing platform Tumblr in 2013.
The trend of directionless acquisition strategies continued with Microsoft and Facebook. Yahoo tried acquiring Facebook in 2006 for 1bn dollars but negotiations fell through in spite of the knowledge that Facebook CEO Mark Zuckerberg was facing pressure from his board and would have taken a slightly higher offer. In 2008, Yahoo rejected Microsoft’s proposal to acquire them and instead created a partnership with them for their search engine Bing the following year. Although there was some traction following the tie-up with Microsoft, they were unable to compete with fast growing rival Google.
Simply put, Yahoo tried to be everything to everyone and landed up with nothing. In business, one starts with a clear vision and lack of one, like in the case of Yahoo, leads to confusion for the end user, and less-than-optimal hiring choices. Yahoo’s journey shows us that all creative visionaries don’t necessarily make strong leaders, and the ability to choose the right person to take on each role is vital for a company to succeed.
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