Yahoo – Yet Another Hierarchically Officious Oracle.
Funny, but that’s the complete form of Yahoo.
Yahoo could be one of the most significant companies in this world.
There was a time when Yahoo was the most visited website in this world. Yahoo was started in 1994, & in the year 2000, i.e., in just six years valuation of this company crossed 128 billion dollars.
In fact, at that time, they even got the opportunity to acquire Google for just 1 million dollars. But they declined it. Today just imagine the world without Google.
Internet was a mess in the mid-90s as one person needed hours to find a website. And actually, it would have been the same if Yahoo wouldn’t be there. Most people today also believe that Yahoo failed because of Google, but the reality is something else.
Now the question arises, Why did Yahoo fail exactly?
So hardly anyone of you might know that today Google, Facebook & Yahoo would have been a single company If Yahoo would accept their offers. But if you see it in today’s time, hardly anyone uses Yahoo.
In the 1990s, a company named Netscape created a browser named Netscape Navigator. If this company wasn’t there, then Yahoo could never be a company with a valuation of 128 million dollars.
So now the question arises that Yahoo was one of the most valued companies in this world, then what happened with Yahoo that it is left with no value & significance today?
So this story begins in 1994 when two friends called Jerry Yang & David Filo were exploring the internet. Internet used to be very messy in those days & one person needed hours to find a website. So these two friends made a list of some websites, so they don’t need to find them and can visit there very quickly. This thing was a type of website directory being divided into different many different categories. When Jerry & David made this directory, they felt it very useful, and When their friends asked them for help, they shared it with them. And slowly, their friends started sharing this directory with their other friends, In a short time, thousands of views started coming on this directory & this directory got named “Jerry & David’s guide to the world wide web.”
Jerry & David’s guide to the world wide web is not made for business purposes. Jerry & David made this directory to get convenience to find these websites, but fortune was up. Netscape Navigator created a web browser named Netscape Navigator. Many people started using that web browser slowly & parallelly, and Jerry & David’s directory got popular.
Looking at their popularity, Netscape Navigator linked their website directory in its top columns. After doing this, lakhs of views started coming to their directory. This thing was fantastic, but there came a significant problem called “Traffic Overload.” As their directory was linked to Netscape Navigator, lakhs of views started coming on their directory. When so many people started visiting that website that traffic on it increased a lot, Jerry & David needed even more big servers to manage it.
They started hiring more people & teams as well Because now they need to update those websites in the directory which people are submitting to them. And this was when Jerry & David had no other option but to convert this thing into a business. Then this thing was called Yahoo.
Slowly traffic started increasing on Yahoo & companies started paying Yahoo to put their advertisements. But Yahoo experienced a massive realization in a small time & a huge twist came into the story.
Yahoo realized that now they have a lot of data that tells them that people love visiting which website more. How frequently do they visit those websites, on which websites do they do transactions & staying where they don’t love at all? By keeping all this in mind, Yahoo launched its self-made products & positioned them very strategically. Slowly a time came when instead of linking products of others, Yahoo started linking products of its own.
So look, How Yahoo Made its products?
Back in the ’90s, people loved a lot to visit chat room websites. Looking at this, Yahoo made a chat room of its own & started placing it on its websites. Slowly Yahoo expanded this by keeping consumer preferences in mind. Slowly they built their own Yahoo file sharing, Yahoo Shopping, Yahoo games, Yahoo finance & many other such services, and many more.
But Jerry & David realized that if they ran Yahoo as a traditional organization, Then Yahoo would not be able to maintain good products.
Amie Wilkinson also told about Yahoo in her audiobook “The Creator Code.”
How did Yahoo manage all these things?
So first of all, Jerry & David hired many people, and after hiring them, they divided them into different product teams. After doing such division, they made the primary leader in this team in every team & that team leader will act as CEO of that team. Now all these things look very impressive on paper, but the reality is something else; this one step turned the whole fortune of Yahoo.
The question arises, How?
Until the year 2000, Yahoo got more than 400 products, i.e., you will end up using the internet the whole day but cannot leave Yahoo’s website ever. Those days Yahoo’s whole model looked something like this.
Yahoo’s total page views, their directory in it consists of only 20% of total page views, Rest of the 80% of views were using other services of Yahoo. Now it has a simple meaning: Yahoo was earning to the fullest at that time.
Yahoo was not an internet company then; instead, it was the whole internet. This company got started in 1994 & till 2000 valuation of the company crossed 1 billion dollars. Yahoo became the most valuable company in the world at this time.
It would have been today as well if this incident shouldn’t happen. When Yahoo was spreading in the market, at the same time, two students came to them to sell their small start-up. But Yahoo rejects them, but who knew that the same start-up would become a trillion-dollar company today date. That start-up was Google, as this one incident changed everything for Yahoo.
But interestingly, Google isn’t the reason behind the failure of Yahoo. From 1995 to 2000, the Dot-Com boom was running & main reason for this boom was funds influx. Those days the internet was a new thing & people were very excited about it. And where people are there & for which people get excited there, only more investors are seen. Investors invested in internet companies with their blind money. Investors invested their blind money even in the companies whose business model was not well built & wasn’t even sustainable. And due to the fund influx of these investors, the valuation of these internet companies started touching the sky. But if there’s a boom, then there’s a crash as well & in 2001, the Dot-Com bubble finally started crashing. And till the arrival of 2002, 90% of internet companies got bankrupt & the valuation of the rest 10% was crawling on the ground.
Luckily Yahoo was one of those 10% companies. And due to this Dot-Com bubble crash, investors got a significant change in their mentality, Due to which Yahoo was about to face a huge loss. So basically, after this crash, investors lost their trust totally in internet companies, And 90% of advertisements on Yahoo were done by internet companies only, and as I told, 90% of internet companies got bankrupted at that time due to which 80% advertising revenue of Yahoo was dropped.
So look, Yahoo’s working model was something like this till 2005. So there were lakhs of websites on the internet & Yahoo’s employees used to feed these websites manually into the directories. This method was highly inefficient, especially in the tech business.
On another side, Google has already worked on its algorithm & launched it. So this algorithm will automatically scan all the websites on the internet & feed them automatically into the directories. i.e., there is no need for any type of manual labour. And as this algorithm scan & feed the websites into the directories automatically, So when people will search, then they will always get proper search results. Due to this user experience, Google got much better than Yahoo.
People using Yahoo started shifting to Google & game was changed to web search from web services. This time Yahoo came to Google & made a collaborative deal that Yahoo would integrate Google search on its home page, as the idea behind this offer was straightforward. Instead of going directly to Google, people will first come to Yahoo’s home page, And then will search Google & Yahoo will earn Ad revenue easily. But this collaborative deal strategy fell on Yahoo itself, This strategy worked very well in the short term, but in the long term, people who came on Google through Yahoo loved Google a lot.
They just loved it because it was very user-friendly. So unknowingly, Yahoo provided strong advertising to Google & that too for free.
Yahoo realized this thing very late & when they realized it after that, they removed Google search from their website. And Yahoo started working on its algorithm.
But the question arises that what Google was doing at that time. Yahoo was unable to Google introduced Ads in its search results; these Ads were very relevant for users. Because whatever users are searching, they are getting advertisements regarding that only. And these Ads were very much cost-effective for advertisers Because they are showing their Ads only to those who are enquiring or searching about them on Google. i.e., due to this, many advertisers started coming to Google, which means more profit.
Google then cracked deals with other internet companies using the same profits. Like making Google a default search engine on Mozilla Firefox and Internet Explorer, All these deals were only done by Google with the money they earned from advertisers. Yahoo’s banner Ads were not relevant for users, nor were they cost-effective for advertisers. So Google was not only practical but was also robbing Yahoo’s investors. When Yahoo saw all these things happening, they were left with no options but to go to Google.
They reached out to Google again & this time, they asked what money it would take to buy Google. Google said, “1 billion dollars”. Yahoo said yes & was agreed to buy, but the CEO of that time, Terry Semel, took so much time to crack this deal that the valuation of Google reached 3 billion dollars from 1 billion dollars. And honestly, Yahoo could also buy Google for 3 billion dollars, but they said No & this deal never happened.
So now, Yahoo had already lost in this search war, so they were left with only one option: people shift their whole business towards their products & services.
All these things were going on and Yahoo got a massive opportunity again. In the year 2006, executives of Yahoo were about to crack a deal with Mark Zuckerberg on the same bench; they were about to acquire Facebook for 1 billion dollars. But Zuckerberg didn’t want to sell this company, but there was a lot of pressure on him from investors & board of directors. He was told that if you got an offer to buy a company for 1 billion dollars, then it was on the spot. This deal was about to be completed, but at I last moment, Yahoo changed its quote from 1 billion dollars to 850 million dollars.
Looking at which Mark Zuckerberg got a smile on his face & rejects to complete this deal. Because he nevertheless didn’t want to sell the company. And not only this as Yahoo get an opportunity to buy eBay & YouTube as well, but the people rejected it. But as I told you in the beginning, Google is not the reason for Yahoo’s failure at all.
The real reason for the failure of Yahoo was an Internal mess. In the year 2007, an employee of Yahoo sent a memo to their top management in which he listed, That how many problems are running internally in Yahoo, and solving & address those problems is very important for the company.
Later this memo got the name “The peanut butter manifesto” because as peanut butter spreads on the bread, Just like that, it was told in this memo that how Yahoo has wholly spread out all of its resources And is unable to focus on anything.
Yahoo takes all of its employees to a company retreat. And there, they get their employees to do an activity for the survey.
They were given the company’s name in the activity, and as soon as he heard the name, the first thing that came to his mind was to write it on paper, so look what people wrote. People wrote Search for Google, Auctions for eBay, Payments for PayPal. But do you know that when it came to Yahoo, every single employee wrote something different things about Yahoo?
Most of the employees at Yahoo had overlapping responsibilities. Yahoo acquired a photo-sharing application called Flickr, but they already had a different team for yahoo photos. And a different team for Flickr. Although both the applications’ roles were the same, Yahoo had a lot of teams, but they never correctly integrated these teams & a significant reason was hidden behind this. The reason revolves around management. So Yahoo changed 5 CEOs in only six years. Till 2007.
The CEO of Yahoo was Terry Semel. He was an exciting person; why? Because first, he missed the deal with Facebook; after that missed the deal with Google, and Then he missed the deal with Double click as well. Double click is the same company that Google acquired. Double click was an internet advertising agency, an internet advertising company that Google acquired. And in today’s date advertising business of Google is only due to Double click.
2007-2009 Jerry Yang, the founder of Yahoo, became the CEO.
Then 2009-2011, Carol Bartz handled.
Then 2011-2012, Scott Thompson handled. He was an exciting person as well; why? Because Jerry Yang acquired a considerable stake in Alibaba group, whose worth was approximately 36 billion dollars. All the stakes were sold by Scott Thompson & Marissa Mayer joined in the summer of 2012. i.e., in 6 years, they changed 5 CEOs.
Yahoo didn’t have a clear vision. The people have changed their mission 24 times, but their productivity & efficiency program was their greatest disaster. This program was made to increase productivity & efficiency. Due to this program, Yahoo managers had to give their teams ratings.
Some % people gets good ratings & some % poor. i.e., whether the team performs anyway but still some people will get poor ratings, Due to which employees started competing in themselves except teamwork & started doing dirty politics. Yahoo didn’t have any clear direction. In total, Yahoo was solving a genuine problem, By providing people with a search directory because at those times internet was a lot messy. But when web search arrived after that need to directory finished, Yahoo was only wandering.
Yahoo did a lot of things, but it wasn’t the best in anything; as a result, other companies beat 90% of its products. Yahoo’s messenger was beaten by WhatsApp Messenger, Gmail beat Yahoo’s mail, Amazon beat Yahoo’s shopping, and Quora beat Yahoo’s answer. Yahoo didn’t fail due to Google; instead, it failed due to a combination of these five things.
No.1 – Mediocre products were very mediocre as there were no products for which yahoo could commit to being the best.
No.2 – Indecisiveness, in simple words, not taking any decision as didn’t take any decision on took & got very late for the same.
No.3 – Lots of competition; when Google came, the competition climbed a lot. As Yahoo wasn’t only in search & was dealing in many other products & services, Yahoo wasn’t competing with Google only but with many others as well, Whether it’s Facebook, eBay, messenger & many others.
No.4 – Poor leadership, Yahoo changed 5 CEOs in 6 years & in fact, some made losses for the company instead of profit. And such poor leadership gave birth to bad decisions; when leadership is poor, how can the decisions be wise?
And last, a company whose valuation was 128 billion dollars at a time, Verizon bought that company for only 4.46 billion dollars.