The history of Yahoo! summed up in five blunders

There was a time not too long ago Yahoo! It was the company that seemed to be able to handle everything and everyone. At the end of the last century, there was no one to cough it up, but despite having a fantastic future ahead of them, Yahoo! has been relegated to a shadow of what it was.

The fault, eye, is only Yahoo!. The company did not stop making blunders in critical decisions that would have made it a technological giant perhaps greater than any of those that exist today. But again and again, raised the option, in Yahoo! they always chose the wrong one. Here are the big mistakes of a company that it may have been much more than it is.

A company that was everything in the late 90s

In 1996 Yahoo!, which had created one of the first Internet directories (forerunner of search engines) became a public company.

The company began to create parallel services (Mail, Messenger, Groups, Answers) and its value grew astonishingly in the following four years, and from that initial market value of $848 million It was worth 125,000 million in the year 2000.

He had so much money that he became a protagonist of the dotcom bubble. In 1999 he bought Geocities for 3.6 billion dollars (they would close their doors 10 years later without having achieved anything) and Broadcast.com (does anyone remember her?) for a whopping $5.7 billion. One of the worst acquisitions in history.

Decisions like those were not the most appropriate, but the worst was yet to come, because after the bubble burst those blunders by Yahoo! began to occur. Let’s take a look at the top five.

1. Not buying Google for $1 billion

Larry Page and Sergey Brin had barely started to get their browser up and running when in 1998 they offered AltaVista to buy it for just $1 million.

They wanted to continue studying, but AltaVista was not interested. Not even on Yahoo!, where they didn’t want people to find what they were looking for and go to other websites (which is what Google’s search engine did until recently), but they will stay on their platform.

Yahoo! ended up starting to use Google’s search engine on its own platform and decided that it would be best to buy from Google. Terry Semel, the then CEO of Yahoo!, had been negotiating for months, and was outraged when Brin and Page turned down $3 billion buyout offer. They asked for 5,000 million, an offer that they considered much more reasonable.

Semel he refused roundly. Yahoo! bought Inktomi, a search engine, for $257 million, believing that would be enough to put its searches where they deserved. They also bought AdWords competitor Overture in 2003, but took a long time to get it up and running and let Google license a key patent of that platform that would allow them to dominate the market in the long run. They believed that this was enough.

They were wrong.

2. Do not offer more for Facebook

Something similar happened in 2006 when they rightly saw the potential of Facebook (others had already seen it too and tried to acquire the company from Zuckerberg) and tried to buy it for 1,000 million dollars according to the book ‘The Facebook Effect’, by David Kirkpatrick.

It wasn’t a bad deal, especially considering that Facebook was two years old, had some 9 million users and $20 million in revenue. Facebook investors thought the offer should be accepted, but Zuckerberg made it clear in a meeting with the team that they were not going to sell. In fact Yahoo! did not maintain its offer: after poor results in the second quarter of that year they decided to lower their offer: now they offered 850 million dollars.

If Zuckerberg was initially unconvinced, he was now even less so.

3. Hire CEOs who failed to build the company

The list of top managers of Yahoo! it is a list of great failures. The last one starred Marissa Mayer, but in reality she is the latest of a few very unprofitable signings.

Carol Bartz, hired in 2008, was succeeded by Tim Morse, who would end up being replaced by Scott Thompson. in 2012. This manager lasted 130 days in the company, announced a restructuring with layoffs of 2,000 people, and he won 7.3 million dollars (not bad) after being fired and replaced by Ross Levinsohn as interim CEO, who would soon be replaced by Mayer.

Before all of them, before all those disastrous transfers at a strategic level, there had been another even worse for the future of Yahoo!. Terry Semellwho had spent 24 years as a director of Warner Bros., had been hired as CEO in 2001 to turn the company into a multimedia content giant.

The comparison with Eric Schmidt, ex-Novell and ex-Sun before signing on as CEO of Google, is remarkable. Semel focused on an area that allowed Google to take control of everything that Yahoo! she was destined to dominate. He never did. Some call Semel the worst CEO of an internet company in history.

Still, it must be said, Semel managed multiply by seven the value of the company’s stock, but his many mistakes doomed the company’s future.

4. Reject the offer to sell Microsoft

In February 2008, Microsoft offered $44.6 billion to Yahoo! to buy it and thus convert the binomial into a true competitor for a Google that increasingly dominated the market. The price of $29.40 per share was 62% higher than the price of the shares the previous day. There had been an offer before, which Terry Semel had turned down in January 2007. He was offered $40 a share and Semel immediately rejected that price.

Neither the second time was the charm, nor the third. The negotiations caused Microsoft to increase its offer to $33 per share, but in Yahoo! they wanted 37 dollarssomething that caused the withdrawal of the negotiations. The value of Yahoo! It would continue to fall irretrievably from that moment.

By the way, that bad decision was accompanied by another almost as bad: Microsoft ended up even arriving collaboration agreement with Yahoo! which allowed Ballmer to obtain all i really needed from Yahoo! without having to spend the money that would have been spent buying it.

5. Do not take advantage of the purchase of Flickr

Flickr was founded in 2004 by Stewart Butterfield and his wife at the time, Caterina Fake. Neither of them expected it to be the success it was, but millions of people signed up for a service that glimpsed the relevance of platforms for posting and sharing photos.

A year later Yahoo! made what was probably the best acquisition in its history, and bought Flickr for $35 million. The platform had many ups and downs and although in 2013 it received a series of important improvements, it never managed to recover its initial shine and was unable to adapt to the mobile environment.

Curiously, the same day that they announced that Flickr impulse, the tumblr purchase by Yahoo! for 1,100 million dollars (while Facebook bought Instagram for 1,000 million, compare).

The purchase never worked out and ended up leaving this blogging platform in economic irrelevance: Automattic, the parent company of WordPress, ended up buying it recently for an amount that is rumored to have been so only 3 million dollars. On Gizmodo recounted the story of this particular failure that was one more face of the failures of Yahoo! In Internet. Flickr could (should) have become what Instagram is today, but it never did.

Yahoo! facing a dark future (except in Japan)

It is surprising the number and magnitude of the mistakes of a company that had everything to remain an internet giant but whose course has been disastrous in recent years. Already in October 2006 the director of Yahoo! Brad Garlinghouse exposed the problems facing the company in his famous ‘Peanut Butter Manifesto‘. Nobody paid attention to him. Paul Graham, famous investor, would delve into the wound in 2010 with that ‘What Happened to Yahoo‘.

Drifting away from search, not moving fast in the advertising segment (having ballots for it), not making the right acquisitions (or sales) and that mismanagement of its CEOs have ended up turning Yahoo! in a shadow of what it was.

There are more important mistakes: the clever participation in Alibaba was followed in 2012 and 2014 by the sale of part of those shares. Not to mention the daunting security holes that compromised the privacy of millions of users.

The company ended up being bought in 2016 by Verizon, which paid 4,830 million dollars for most of a company that less than a decade earlier could have been sold for 10 times more. In verizon at least they have known, how he praised Automattic’s Matt Mullenbeg, ceding the future of Tumblr to a much more appropriate company to get the most out of it.

Those oversights have cost a Yahoo! that only survives with the brilliance it once had in Japan where Yahoo! Japan operates independently and has managed to become an absolute benchmark for Japanese users. Perhaps there are lessons to be learned there for those who now govern the future of a Yahoo! that it is more difficult than ever to compete with the current market leaders.

Image: Haimie Harmsen