Yahoo! Icon no more

Yahoo failure - going in trash

This week we learnt that Yahoo! had agreed to sell itself to Verizon for $4.1 billion. We give you an approximate timeline of the birth and growth and decline of yahoo, along with a tongue-in-cheek rendering of the internal discussion at each juncture.  Our take away lessons are in dark blue.

 

What Happened At Yahoo! – A partial timeline. Top Secret Internal Memo
1994 – Yahoo is established as Jerry and David’s Guide to The World Wide Web. Born at Stanford University. Cool! But this name? Jerry and David’s – sounds like an ice-cream!
1995 – The company is named Yahoo! Ok, sounds better. Much easier to tell who we are. My meetings are taking 50% less time now. 
Being the first in the market, Yahoo! had no competition. Nothing whatsoever worth the name. So far So Good. We are the world’s best directory for information.
1995 – Got initial funding from Sequoia Capital. Now we have money to hire a proper CEO.
Tim Koogle is hired to run the Company. Both founders take the position of Chief Yahoo! Let him take care of the public – and the investors – and other stake holders. We’ll have fun doing nerdy stuff.
Mistake? Maybe. Founders should probably not have given up control so soon.   Especially in a fast moving industry like the Internet was at that time, founders are required to be at the helm so that they can help with the important decisions to be taken – and help the company pivot when needed. Hired CEOs often don’t have the drive or the passion to match the founders.
1996 – IPO issued. Yay! We are on our Way! Time to go shopping.
1997: Yahoo! acquires Four11 for about US$94 million in stock Now, we have email – and the millions of customers too. 
In 1999, Yahoo was still a directory! They had humans sitting at computers, surfing websites and adding links to their directories with classifications.  These were the days when you could easily create a website – apply to Yahoo; and have your website found by users. And when users come, they see our ads. And we make money.
Moving away from being a Search Company – to being a Content Destination was a short-sighted move; as there was only so much that Yahoo could do to provide content. The whole world was opening up to the internet and millions of websites were being created daily.
January 28, 1999: Yahoo! acquires Geocities for US$4.58 billion in stock.

April 1, 1999: Yahoo! acquires Broadcast.com for US$5.7 billion in shares

Now we are going to rule the world! Yes!
January 3, 2000: Yahoo stocks close at an all-time high of $475.00 (pre-split price) a share. The day before, it hit an intra-day high of $500.13 (pre-split price) That will show them.  Let me see how much I am worth. Ok, I need a bigger calculator.
2001: Dot Com bubble; Everybody is hurting. Let’s bring in a “proper” CEO to run the company.
Terry Semel is hired. He remains CEO till 2007. He gets stock options worth USD 110million to join Yahoo! Yeah, he is the guy we can depend on.
Yahoo! buys HotJobs.com for USD 436 million. At least I can find a job if things go wrong here. Not that anything will – go wrong!
Google comes into the picture with a Search Technology to rival what Yahoo was doing manually. Hmm interesting. They are starting to look like a threat.
2002: Yahoo offers to buy Google. Sergey Brin and Co. asks for USD 3 billion. What really!? For a startup like you?
Terry Semel offers USD 1Billion.  The Google founders walk.  Yahoo! fails to properly estimate the threat posed by Google. There, that should put you in your place. Threat, phreat – we can take care of ourselves.
Here is where one of the biggest gaffes happened. When Google founders walked, Yahoo! missed the bus – and along with it went any chance of arresting the biggest threat/competition that it faced at that time.  Obviously, Yahoo! had money to spend, But it just didn’t have the vision.
Google continues to improve its search algorithm. Two factors are going for Google; They have a laser focus on customer benefit and they exclude everything that is extraneous. Unlike Yahoo’s cluttered directory pages, the Google Search page was minimalist. Let’s license their search technology for our use.
Alarm bells at Yahoo? Not quite. Yahoo is still content driven; doing things the old way. Yahoo! at one point was ahead of the search game. All they needed to do was to throw people and money (on the problem) and they could create or buy the technology required to sustain Yahoo as the #1 search company in the world.
Yahoo is not a Search Engine any more. It has become a Content Destination. So instead of being the gatekeeper (collecting tolls), they became the destination (displaying ads). That’s ok. In the end, we are still making money off our content – and we still have lots of advertisers paying us good money for displaying their ads.
Not having a strong founder to lead the company at crucial periods made it lose its momentum. CEOs are essential to lead a company, to execute on operational plans, but vision is a must – and founders are after all the ones with the vision.
Jerry Yang purchases 40% stake in Alibaba.com for USD 1 Billion on behalf of Yahoo! Are you sure? I mean, come on. It’s a huge amount of money. Can we afford this?
Jerry Yang proves his astuteness with this deal.  This turns out to be probably the only deal that went well for Yahoo! in the long run.
Yahoo! picks up a number of companies along the way. Unfortunately none of them really help it in its core business.  Yahoo also solidified its advertising platform. But the business stayed down. What’s going on? Why isn’t it working?
2007: Jerry Yang comes back as CEO I built this company once. I can do this again.
2008: Microsoft offers USD 44Billion for Yahoo – at a premium of 62% of Yahoo’s share prices. No way, Jose!  Me not sell my baby.
Founders need to recognize opportunities when they arise. In this case, Jerry Yang was too close to the company and hence refused to sell out. Not a wise decision; in hindsight.
2008: Yang Steps down as CEO. Remains Chief Yahoo! This not working out. Need to find someone else.2009: Carol Bartz joins as CEO.
2009: Carol Bartz joins as CEO. She is really what we need. If anyone can help our company, She can! She will do magic for us.
2011: Carol Bartz is fired. It wasn’t magic. Just old tricks in a new box.
2012: Yang Resigns from Yahoo!  Scott Thompson is the new CEO. This time, he is going to deliver.
Problems with Scott Thompson’s resume not matching his history. He has to leave.  Marissa Meyer is appointed CEO. Some might call this lying. But who cares?
Practically a revolving door for CEOs. This does not bode well for the company.  Any change at the top is usually disturbing for the entire company. But the rate at which things changed made the company employees nauseous; to say the least.
Yahoo! sells half its stake in Alibaba for USD7.1 Billion. Yeah baby. A profit of over 6 billion USD. That’s what you call good business!
Slowly but surely, Yahoo is losing relevance. It takes quite a lot of time for your new site to appear in Yahoo’s directories. Often it is miss-classified. People are leaving Yahoo! for Google. That is not good. How do we fix this?  May be we can buy Google now?  – Not a Chance.
2013: Yahoo Buys Tumblr the blogging website for USD 1.1Billion. I know you don’t see the point, but wait until its value appreciates.
Not a very good decision again.  But of course at that time Marissa Meyer probably thinks it was for the best. Also, a new CEO has to do something to show that she is willing to take risks for the good of the company. Not having Jerry Yang to seek advice is also a problem now.

Founders still need to be available to the CEOS – even if they have handed over power. That helps the CEO follow through on the vision set by the founders.

2016: Yahoo stock is now at $25 to $40 range. Well, we did the best.
July 2016: Marissa Meyer announces sale of Yahoo’s core business to Verizon – a telecom company for about USD 4.1Billion. Really, they are paying that much for our company? I say go for it.
Where will Yahoo! go from here? It’s anyone’s guess.  But one thing is certain. Yahoo! will not be the internet icon it used to be.

 

Though I have tried to be flippant about the goings-on in Yahoo over its history for the sake of entertainment, you should understand that there are myriad possibilities for any company.

At any given point of time, the decisions taken by founders and other office-bearers of the company depend on the information available to them, their feelings about each of these information points, their overwhelming interests, the alternatives available to them and the pressure of external factors.

 

They say hindsight is 20/20. We having the awesome power of hindsight can accurately pin-point what they should and should not have done.  But if you put yourselves in their shoes at the given juncture, I wouldn’t bet that we could have taken decisions far different from what they have taken.

 

In the end, Yahoo was laid low by a slew of mistakes. Probably, the most important of them was not moving decisively towards owning Search. Yahoo had the #1 domain on the web, and then they lost it due to inaction and short-sightedness. 

 

Yahoo did lose focus on its core business. It could have been what Google is today. But as it turns out, all the distractions of new acquisitions made it lose its way.

 

Taking Stock:

Your company needs a strong vision to guide it in the long term. This vision should then be translated to action on the ground.

 

When the market changes, the vision has to change along with. Stagnancy and slowness will only hurt your company. Always keep moving.

 

The leader at the top should be someone who can take the calls and run with it; not wait around for things to decide themselves.

 

When you give control to a strong CEO, the board must allow him/her to execute. Constant removal of CEOs is damaging to the company.

 

Technology companies live on innovation. Just because you were great once does not mean you will remain great for ever. You must move and keep moving to stay on top.

 

You have to be wary of competition. If you are successful, there will always be someone knocking at your door, luring your customers away. You must take decisive action against such threats.  Eg. Facebook paid USD 19Billion for Whatsapp.

 

Your house must stay united. Co-founders will always differ, but there has to be a way to sort out such differences privately. There usually is one high-profile co-founder and multiple others in the background. Eg. Paul Allen & Bill Gates.

 

Don’t forget your core business. No matter how many side businesses you begin, your bread and butter should be taken care of first. Microsoft made forays into so many businesses, but even now, Windows and the software products are still its primary core focus.

 

Author Bio:

Deep Janardhanan is the founder and CEO at International School of Success – a startup training and advisory firm set up in Mumbai, India. He has vast experience of creating and managing startup companies as well as projects for multi-nationals. His one day classes for entrepreneurs are a hit with startup founders who want to get going in a hurry – while minimizing risk of loss and failure.

Want to start doing SEO for your website? Go to Deep’s website at http://ischoolofsuccess.com and download the Basic Search Engine Optimization e-book for Free!

 

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