How Yahoo Took Wrong Turns To Only See A Dead End

Business

Understand how a series of wrong decisions combined with a lack of visionary leadership, bad business purchases and inability to grow with the leading curve led to the eventual failure of Yahoo!


Crux of the Matter

Background
Owing to stricter FDI regulations, Yahoo’s parent firm Verizon Media decided to cease Yahoo India’s operations as of 26th August, 2021.

The question is: What led to the failure of Yahoo – one of the world’s earliest search engines and web portal, and an internet media leader?

How Did It Start?
Founded by Stanford graduates, Jerry Yang and David Filo in 1994, Yahoo started as a website, which soon emerged to become internet’s one of the foremost web portal. It was like a one stop shop for news, mails, entertainment and web search services.

Left Behind The Curve?
Yahoo’s major avenue for earnings was via search and display advertisements. However, rivals Gmail and Hotmail were quite agile to take over its ad revenue. Yahoo’s flagship offerings, news and search engine too faced intensive competition from the likes of Facebook, Twitter, Microsoft, etc.

The Beginning Of The End?

  • 1998: Yahoo declined to purchase Google, which was then Pagerank – a search engine algorithm – for mere $1 million.

  • 2006: Yahoo had a chance to acquire Facebook for $1 billion. Reportedly, Yahoo failed to navigate through the deal and the offer was eventually declined by Mark Zuckerberg.

  • 2008: Microsoft offered to acquire Yahoo multiple times between 2005 – 2007. Yahoo in 2008 turned down Microsoft’s final hostile takeover bid of $44.6 billion.

    Not to forget, Yahoo in 2017 was acquired by Verizon Media at a mere $4.48 billion.

Worst Purchases

  • Geocities for $4.58 bn (1999): The site enabled users to build their personal websites.

  • Broadcast.com for $5.7 bn (1999): Online television site, much like present day YouTube and Netflix.

Ancillary Factors That Caused The Fall