The Decline of Yahoo!...What Happened?

[Music] do you yahoo that was their tagline and i'll tell you to this day every time i hear the name yahoo i can't help but yodel in my head you all know what i'm talking about that was fun all right now i'm gonna bring everyone down because yahoo is kind of a sad story they were one of the first truly big names associated with the internet they predated google and amazon and most of the big ones here's a couple of troubling facts that'll help express how far they've fallen in 2008 microsoft offered to acquire yahoo for 44.6 billion dollars which would have been by far the biggest acquisition either one of them had been a part of yahoo said that they were not interested so the deal never happened well you see where this is headed they probably should have taken that deal because less than 10 years later in 2017 verizon did buy yahoo for almost exactly 10 of that previous offer the price was 4.48 billion and just to recap they went from saying no to 45 billion to saying yes to 5 billion i can't imagine that anything else can illustrate their fault quite as well as that so today i want to talk about the rise and the fall of an internet giant how they grew so big and what happened to them the two guys responsible for starting yahoo are jerry yang and david filo jerry yang was born in taiwan and despite not knowing any english when he was 10 years old in 1978 he immigrated to the us with his family by 1994 he not only spoke fluent english he had completed his bachelor's and master's degrees in electrical engineering at stanford university and was now working on his phd on the other end david philo had a bit of a different background he was born in the u.s but the two found themselves in the exact same place david was also working on his phd in electrical engineering at stanford and in fact the two of them had become good friends a big hobby that they shared was sort of ignoring their studies a bit in favor of exploring the internet now remember this is 1994 so that statement isn't exactly what you're picturing the internet was in its early days and hardly even resembled what it looks like today there was no google or any popular search engines so it was hard to get around the websites were out there but in general the internet was an unorganized mess jerry and david knew this all too well so they had an idea of starting their own website where they would post all of their favorite websites it was not intended to revolutionize the internet but rather simply make it easier for them to use and maybe some of their friends it didn't take long before they had built it into an impressive directory it had categories and subcategories you could search it and it served as an early way to navigate through the internet they originally called it david and jerry's guide to the world wide web but after only a few months they changed it to yahoo if you want to know where that name yahoo comes from it's a tricky answer it's said to stand for yet another hierarchial officious oracle which to me is a very strange and complex way of describing it it almost sounds like they started with the word and then tried very hard to assign a meaning to each letter and i guess it's a take off of yet another compiler compiler which was a popular computer program i don't know about any of that but when asked about it jerry yang said we thought it fit well with what we were doing it was irreverent it was reflective of the wild west nature of the internet a lot of people found it easy to remember and besides it's exactly what me and jerry are a couple of yahoos so they had all these reasons behind it but when it comes down to it i think it was simply a way to cut down in that lengthy nine word name in favor of a catchy single word even though it wasn't their intention they started attracting a lot of attention by the end of their first year over 170 000 people were visiting their site every day and the number just kept growing they found themselves in what i would imagine to be a very stressful situation i mean they know about computers and electrical engineering but not much about running a business which makes sense because they never set out to start a business for lack of a better word they stumbled into a potentially huge opportunity all at the same time they were trying to perfect the directory figure out how to turn it into a money-making business and by the way keep up with their phd program in electrical engineering it was too much they eventually dropped out of the program and hired an experienced executive from motorola named tim coogle to take over a ceo he would run the business end of things and those were some bold moves a quote that i like from jerry yang himself says when i told my mom that i was stepping out on my phd to start a company and basically sell internet advertising for a living she wasn't too keen on the idea but she supported me these days she doesn't complain very much yet he is a billionaire now unlike many of their competitors yahoo was free to use early on they raised about a million dollars from investors to keep things running but like jerry said internet advertising became the core of their business they were getting a ton of traffic to their site so companies were willing to pay yahoo to place their ads on there it was simple enough by 1996 two years after it first started everything was in place they had the directory they had the advertisers and they had the management in place and they were ready to take the next big step in april of that year they had a public stock offering and after one day of trading the market valued them at nearly 300 million dollars the stock price rose from 13 to 43 dollars at one point and that was one of the biggest first day trading games of all time that same year they had their first nationally televised commercial and that name yahoo was starting to become very recognizable to the general public and then they became the world's most popular website in 2001 and stayed on top for the next five years their peak revenue was in 2008 when they made 7.2 billion dollars which happens to be the same year that they famously turned down that offer from microsoft ah that's a lot and i wish that there was a single glaring reason that we could look at that would perfectly encapsulate yahoo's failure but i'm afraid to say that that perfect reason doesn't exist there's a lot to it but the easiest way that i could make sense of it is by saying that yahoo is not very good at making decisions i know that's a broad statement but we've already seen some of it and i would like to explain that further see at its core yahoo is a portal when you first get on the internet you start out on the yahoo page and go where you need to go from there that first page is just filled with things that you can click on that'll lead you to different places a great way that yahoo sought to grow was to become the owner of all these different places if you're looking to do some shopping you can do it through yahoo shopping if you need some stock quotes you can do it through yahoo finance ideally they would like you to have your full internet experience without ever leaving yahoo to build this collection of services sometimes they would develop it themselves but oftentimes it was simpler to acquire a company that already provided them it allowed them to offer it faster and they could focus their efforts on something else as a result it was hard for yahoo to have a real focus they became this blend of different internet companies that provided much different services with the one common thread being that they were generally something that a yahoo user might want to click on an example of this working out well was in 1997 when they bought this company 411 spelled in a way that you would never guess for 95 million dollars yahoo bought this because they had existing email capabilities that led to the creation of yahoo mail an example of this not working out quite as well was in 2002 when they bought hot jobs do you remember yahoo hot jobs well they bought it for 436 million dollars and then sold it for 225 million eight years later they had over a hundred of these acquisitions and it was a real mix of good and bad ones but let me point out some of the excessively bad ones broadcast.com it was this internet radio company that yahoo bought in 1999 for the price of 5.7 billion dollars which must sound like a high price for something that i'm guessing most of you have never even heard of mark cuban was actually on the winning end of that deal so if you have heard of it that's probably why in short yahoo hardly did anything with it and then shut it down a few years later another bad one was buying geocities in 2002 for 3.56 billion that was like a website building service that again was just not worth the price in 2013 they bought tumbler the micro blogging site for over a billion dollars and things just haven't gone well they made these very weak half-hearted attempts to get involved in social media but not surprisingly they all fell short and then on the other end of this we have a few acquisitions that could have been huge for yahoo but they turned them down like owning google would have been big they actually had multiple opportunities to either become heavily involved in them or purchase them entirely notably in 2002 they could have bought it for about three billion dollars but refused which i know sounds like a lot of money but knowing what we know now that could have been the deal of the century facebook is another one it's a little more complex because mark zuckerberg was never fully on board with it but it's believed that they could have bought facebook for around 1 billion in 2005 they actually made that offer and then lowered it so the deal obviously never happened now i normally don't like putting too much emphasis on these missed opportunities it's so easy for all of us to feel smart by looking back at someone else's oversight and making fun of them for it but that's not fair if any of us were actually in that position at that time it wouldn't have been such an easy decision with that being said i'm just gonna point out that yahoo could have been the owner of google and facebook for significantly less money than they paid for broadcast.com a few of the reasons that may be worth mentioning is maybe their failure to get involved with smartphones that is a big part of their market that they were late to how about changing leadership it's like when a basketball team gets a new head coach every other year they know that changes need to happen but they just can't get it right yahoo found themselves changing their ceo just about every other year most of which were heavily criticized it's probably not the cause of the issues but it could have made things worse at a pivotal time alibaba is another thing we could look at it's a popular chinese e-commerce company that yahoo bought heavily into back in 2005. i'll admit it was a good investment but probably didn't do much to help their core business in fact the alibaba thing became the main part of their business there's just so much to talk about here but let me try to summarize things a big reason that they grew so large in the first place was because they were one of the first going back to the mid 90s they offered this free and effective way to spend your time on the internet as the internet grew so did yahoo but as the competitors came such as google or facebook that by the way both use the same model where it's free but they use ads it didn't take much for them to fall behind yahoo is still around today it's owned by verizon but it'll never be like it was so we can say that stronger competition poor selection of acquisition targets splitting their attention into too many directions and many times in the wrong directions complicated by questionable and changing leadership can all come together to help explain the decline of yahoo let me know in the comments do you agree with my reasons behind the downfall of yahoo now it's not a complete list it never is but does it hit on the main reasons also were you a yahoo user i'd like to hear about that experience and if you left them i'm curious as to why i'd like to hear what you have to say all right that got too depressing so let's end this on a happy note by playing that yodel one more time you just can't hear it without smiling alright thank you for watching

Channel: Company Man

Views: 444,349

Rating: 4.9516625 out of 5

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Id: Z2yr0W0BQXE

Length: 12min 22sec (742 seconds)

Published: Wed Dec 23 2020