Yahoo’s Accidental Beginnings

David Filo and Jerry Yang started Yahoo in 1994. It didn’t start out to be a business. It was a diversion, a way for Yang and Filo to avoid working on their dissertations.

They tried to catalog everything on the web. In 1994 that didn’t seem impossible. The result was “Jerry Yang’s Guide to the WWW.” I was on the web then and I remember how exciting it was to find that “guide.” A lot of other people felt the same way.

Jerry’s guide became wildly popular. That wasn’t planned. It just happened. They changed the name to “Yahoo.” Lots of people who styled themselves as investors threw money, lots of it, at Yang and Filo. They launched the “commercial” version of Yahoo in August 1995.

I put “commercial” in quotes because there was no plan for making money. None. A whole lot of otherwise bright people didn’t seem to think you needed a real business plan. Around that time, I actually had an investment banker say to me that “profit really doesn’t matter anymore.”

Yahoo brought in Tim Koogle as CEO to provide “adult supervision.” Koogle’s main credential was that he’d worked at Motorola. That seemed like it was enough.

Yahoo went public in April 1996. The stock closed the first day of trading up 270 percent from the IPO price. Within a year, Yahoo was getting more traffic than its top three competitors put together.

Yahoo in the Dot Com Era

Everybody, it seemed, wanted to advertise on Yahoo and so Yahoo actually made money for a while. Without much of a plan they were in the advertising business. They used the money to buy up companies like GeoCities.

Tom Evans was the CEO of GeoCities when Yahoo bought them. He was a media business vet. He ran companies like U. S. News and World Report and The Atlantic Monthly.

Advertising is incredibly cyclic. The revenues go up and down with the economy and with the fads of the industry. Evans knew that from experience. He warned Jeff Mallett, Yahoo’s President, about how advertising revenue wouldn’t always be on the upswing.

According to the Wall Street Journal, Mr. Mallett responded by exploding in anger and telling Evans, “You don’t get it. You’re old media.”

He was. He was also right. And he didn’t stay at Yahoo any longer than he had to. So he wasn’t there when the chickens started coming home to roost.

The Dot-Com Glow was starting to fade as lots of companies began to analyze returns from their investment in web advertising. In early 2001 Yahoo warned investors that it would only make about half of its revenue projections for the quarter. The Dot-Com Bubble was bursting.

Ad monies were drying up as the business cycle that Evans had warned them about started the downslope. To make things worse, the dot-coms that Yahoo depended on were in trouble, too. Many went out of business. Just about all of them saw their unearned funding sources drying up like a puddle on hot asphalt pavement.

Yahoo the Media Company

In March of 2001, CEO Tim Koogle announced that he was leaving. The board passed over Jeff Mallett and brought in Terry Semel as CEO. He was a movie executive. Yahoo had decided, without a plan, that it wasn’t an advertising company anymore. Now it was a media company

Semel lasted six years. By then it was clear that Yahoo the media company wasn’t doing so well.

Jerry Yang as Clueless CEO

Jerry Yang took over as CEO. He was pretty sure that Yahoo wasn’t a media company, but he doesn’t seem to have had any idea about what kind of business it was or ought to be.

That was painfully obvious when Walt Mossberg, at the time the Wall Street Journal’s technology columnist, asked Jerry Yang a simple question: “What is the business of Yahoo?” Here’s Yang’s reply.

“We want you to start your day at Yahoo. That is homepage, that is mail, that is search, that is mobile. That is an incredibly powerful position that happens to be a position that we occupied for a lot of our history. That’s our consumer goal, dream, aspiration.”

That’s all wonderful stuff, but it’s not a description of a business. Jerry is a very bright guy, but it was soon obvious to one and all that running a business is not his thing. He stepped down in 2008 and the quest for a savior began.

Yahoo Looks for a Savior, then Looks Again

In 2009, Yahoo hired Carol Bartz as CEO. She had a successful career at Autodesk before Yahoo, but she didn’t last long. Less than two years later, she was fired, by phone. Yahoo hired Scott Thompson in January 2012.

Thompson lasted until May when he was fired for lying about having a degree in computer science. Ross Levinsohn became acting CEO. Marissa Mayer was hired as CEO in 2012. The media used words like “savior” and “new hope” to describe what was expected.

Well, that’s what people hoped for. After all, there were three CEOs in the year before her, two of whom were fired. But she was in her thirties. She had only worked for Google. She never was responsible for running a business. And she never did manage to come up with a strategy. Here’s how Kara Swisher described Mayer’s tenure as Yahoo’s CEO.

“a herky-jerky series of strategic moves that have swung Yahoo to and fro. It’s included an intense focus on media by making big bets on digital magazines to pricey video deals to a questionable race to compete with giants like Google in search. It has also been characterized by a lot of seemingly disjointed acquisitions that appear aimed more at bringing in talent to the company than any cogent direction.”

Yahoo’s End

Yahoo has sold its core business to Verizon and will now shuffle off into business history. Fittingly, Yahoo ends as it began, with lots of promise but no strategy.