Who Killed Yahoo ? | Why Yahoo Failed ? | Business Case Study
Yahoo – Yet Another Hierarchically Officious Oracle. Funny, but that's the full form of Yahoo. Yahoo could be one of the greatest company of this world. In fact there was time when Yahoo was the most visited website in this world. Yahoo was started in 1994, & till year 2000, i.e, in just 6 years valuation of this company crossed 128 billion dollars. In fact at that time they even got the opportunity to acquire Google in just 1 million dollars. But they declined for it. Today just imagine the world without Google. Internet was a mess in mid 90's as one needs hours even to find a website. And actually it would have been the same if Yahoo wouldn't be there. .
Most of people today as well believe that Yahoo failed because of Google but reality is something else. Now the question arises that, Why Yahoo failed exactly? So hardly anyone of you might know that today Google, Facebook & Yahoo would have been a single company If Yahoo wouldn't have rejected their offers. But if you see in today's date then there's hardly anyone who uses Yahoo. In 1990's, a company named Net Scape created a browser named Net Scape Navigator. If this company wasn't there, then Yahoo can never be a company with valuation of 128 million dollars. So now the question arises that, Yahoo which was one of the most valued company of this world What happened with Yahoo that it is left with no value & significance today? So this story begins in 1994, when two friends Jerry Yang & David Filo were exploring internet altogether. .
Internet used to be very mess in those days & one needs hours to find a website So these two friends made a list of some websites altogether so that they don't need to find them they can visit there very easily. This thing was a type of website directory being divided in different categories. When Jerry & David made this directory they they felt it very useful, When their friends ask them for help then they use to share this directory with them. And slowly slowly their friends started sharing this directory with their friends, In a small period of time thousands of views started coming on this directory & this directory got named “Jerry & David's guide to worldwide web”. Interestingly, this thing was never made for business purpose. .
Jerry & David just made this directory to get convenience to find these websites but fortune was upto something else. In year 1994, a company named Net Scape created a web browser named Net Scape Navigator. Many people started using that web browser slowly slowly & parallelly Jerry & David's directory got popular as well. Looking at their popularity, Net Scape Navigator linked their website directory in it's top columns. After doing this, lakhs of views started coming on their directory. Now this thing was very fantastic but there came a great problem as well which was, “Traffic Overload”. As their directory was linked on Net Scape Navigator, lakhs of views started coming on their directory. When so many people started visiting that website such that traffic on it increased a lot, That Jerry & David needed even more big servers to manage it. .
In fact, they started requiring 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 the point when Jerry & David were left with no option but to convert this thing into a business. Then this thing was called Yahoo. Slowly slowly traffic started increasing on Yahoo & companies started paying Yahoo to put their advertisements. But Yahoo experienced a huge realization in a small period of time & a huge twist came into the story. Yahoo realized that now they have a lot of data which tells them that people love visiting which website more. How frequently they visit to those websites, on which websites they do transactions & staying where they don't love at all. Keeping all this mind, Yahoo launched it's own products & positioned them very strategically. .
Slowly slowly a time period came where instead of linking products of others, Yahoo started linking products of it's own. So look, How it works? Back in 90's people loved a lot to visit chat room websites. Looking at this, Yahoo made chat room of it's own & started placing on websites. Slowly slowly Yahoo expanded this by keeping consumer preferences in mind. Slowly slowly they people Opened Yahoo file sharing, Yahoo shopping, Yahoo games, Yahoo finance & many other such services. But Jerry & David realized a thing that if they will run Yahoo as a traditional organization, Then Yahoo will not be able to maintain good products ever. In fact, Amie Wilkinson also told in her audio book “The Creator Code” which is also available on Kuku FM, .
That organization & it's people are more important than idea because ideas are not a monopoly of any single person. Although you will get subscription of a year in only 200 Rs by using ADI50 coupon code on Kuku FM, Where you will get lots of audiobooks but my personal recommendation will be that you try these 3 audio books for sure. No.1 – “The Creator Code”, This audio book will tell you that how the brain of a creator should work whenever he/she makes that company. Second – “Start at the end”, this book is very amazing. This book will tell you that how the reverse engineering of anything is done. If you visualize, “How everything will be in the ending” in starting then reaching it's ending gets more easier. And No.3 & my favorite – “Free to focus”, this audio book will tell you how to build a razor sharp focus in life. Well coming back, How did Yahoo managed all these things? .
So first of all Jerry & David hired a lot of people, after hiring them they divided them into different product teams. After doing such division, a team leader was made in every team & that team leader will act as CEO of that team. Now all these things looks very amazing on the paper but the reality is something else, This one step turned the whole fortune of Yahoo. Question arises that, How? Till the arrival of year 2000, Yahoo got more than 400 products, i.e, you will end up using internet whole day but cannot leave Yahoo's website ever. Those days Yahoo's whole model looks something like this. This is Yahoo's total page views, their directory in it consist of only 20% of total page views, .
Rest of the 80% views were using other services of Yahoo. Now it have a simple meaning that Yahoo was earning to the fullest at that time, In fact, Yahoo was not an internet company at that time instead it was the whole internet. This company gets started in 1994 & till the arrival of year 2000 valuation of the company crossed 1 billion dollars. Yahoo became the most valuable company of the world at this time, In fact it would have been today as well if this incident shouldn't be happened. At the time 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 will become a trillion dollar company in today's 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 too 2000, Dot-Com boom was running & main reason of this boom was funds influx. Those days internet was a new thing & people were very excited for it. And where people are there & for which people gets excited there only more investors are seen. Investors invested in internet companies at their fullest. Investors invested to their fullest even in the companies whose business model was not strong & wasn't even sustainable. And due to the fund influx of these investors, valuation of these internet companies started touching sky. But if there's boom then there's crash as well & in 2001 finally Dot-Com bubble started crashing. And till the arrival of 2002, 90% internet companies got bankrupted & valuation of rest 10% was crawling on the ground. .
Luckily Yahoo was one among those 10% companies. And due to this Dot-Com bubble crash, investors got a great 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 from internet companies, And 90% advertisements on Yahoo were done by internet companies only, And as I told 90% 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 internet & Yahoo's employees use to feed these websites manually into the directories. This method was extremely inefficient specially when you are in tech business, .
And in between this Google already worked on it's 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 of any type of manual labor. 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 which user experience of Google got much better than Yahoo. People who were using Yahoo, started shifting on Google & game totally changed to web search from web services. Now this time Yahoo came to Google & they people made a collaborative deal, That Yahoo will integrate Google search on it's home page as idea behind this offer was very simple. .
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 strategy fallen on Yahoo itself, This strategy worked very well in short term but in long term people who came on Google through Yahoo, loved Google a lot. They just loved it, because it was very much user friendly. So unknowingly Yahoo provided a strong advertising to Google & that too for free. Yahoo realized this thing very late & when they realized after that they removed Google search from their website. And Yahoo started working on it's algorithm but question arises that what Google was doing at that time which Yahoo was unable to Google introduced Ads in it's search results, these Ads were very relevant for users. Because whatever users are searching, they are getting advertisements regarding to that only. .
And these Ads were very much cost effective for advertisers, Because they are showing their Ads only to those people who are enquiring or searching about them on Google. i.e, due to this thing lots of 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, Internet Explorer All these deals were done by Google with the money which they earned from advertisers. Yahoo's banners Ads were neither relevant for users nor they were cost effective for advertisers. So Google was not only users, but was also robbing Yahoo's investors. When Yahoo saw all these things happening then they were left with no options but to go to Google. .
They reached out Google again & this time they asked what money will you take to buy Google? Google said, “1 billion dollars”. Yahoo said yes & was agreed to buy but CEO of that time, Terry Semel Took so much time to crack this deal that in between that valuation of Google reached 3 billion dollars from 1 billion dollars. And honestly, Yahoo could also buy Google in 3 billion dollars as well but they guys said No & this deal never happened. So now, Yahoo was already lost in this search war so they were left with only one option, That they people shift their whole business towards their products & services. Well all these thing were going on that Yahoo got a very huge opportunity In year 2006, executives of Yahoo were about to crack a deal with Mark Zuckerberg on the same bench, They were about to acquire Facebook in 1 billion dollars. .
And Zuckerberg didn't wanted to sell this company but there was lot of pressure on him from investors & board of directors. That he was told that if you got an offer to buy company for 1 billion dollars then it on the spot itself. This deal was about to be completed but i last moment Yahoo changed it's 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 wanted to sell the company. And not only this as Yahoo got an opportunity to buy eBay & YouTube as well but they people rejected. But as I told in the start that Google is not at all the reason for the failure of Yahoo. Real reason for the failure of Yahoo was, Internal mess. In year 2007, am employee of Yahoo sent a memo to their top management in which he listed, .
That how many problems are running internally in Yahoo and to solve & address those problems is very important for the company. Later this memo got the name of, “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 completely spread out all of it's resources, And unable to focus on anything. In fact, Yahoo take all of it's employees to a company retreat. And there they make their employees to do an activity as companies are given to all the employees. They will be given name of a company & as they are told and given company's name what the first thing comes to their brain They need to write that on the paper, so look what people wrote. People wrote Search for Google, Auctions for eBay, Payments for PayPal, Audiobooks for Kuku FM. I am kidding, Kuku FM is just launched recently as in those days we didn't use t get so many audiobooks in 399 Rs. .
By using ADI50 coupon code, today so many audiobooks are availed only in 200 Rs. Earlier nothing use to happen like this in those days. But do you know that when came to Yahoo then every employee wrote something different. In fact most of the employees in Yahoo had overlapping responsibilities. Yahoo acquired an application Flickr which is a photo sharing application but they had a different team for yahoo photos already. And different team for Flickr although role of both the applications was same Yahoo had a lot teams but they never integrated these teams in a proper manner & a great reason is hidden behind this. Reason is revolving management. So Yahoo changed 5 CEO's in only 6 years Till 2007, CEO of Yahoo was Terry Semel. He was very interesting person, why? .
Because very first he missed the deal of Facebook after that missed the deal of Google, After that he missed the deal of Double click as well, Double click is the same company which was acquired by Google. Double click was actually an internet advertising agency, an internet advertising company which was acquired by Google. And in today's date advertising business of Google is only due to Double click. 2007-2009 Jerry Yang, who was original founder of Yahoo became the CEO. Then 2009-2011 Carol Bartz handled. Then 2011-2012 Scott Thompson handled. He was very interesting person as well, why? Because Jerry Yang acquired a huge stake in Alibaba group whose worth was approximately 36 billion dollars. .
All the stakes were sold by Scott Thompson & Marissa Mayer joined in summer 2012 . i.e, in 6 years they changed 5 CEO's. Yahoo wasn't having any clear vision. They people have changed their mission statement 24 times But their productivity & efficiency program were their greatest disaster. Although this program was made to increase the productivity & efficiency but just opposite to this happened. Due to this program, managers of Yahoo needed to give rating in their teams. Some % people gets good ratings & some % poor. i.e, whether team performs anyway but still some people will get poor ratings, Due to which employees started competing in themselves except team work & started doing dirty politics. Yahoo wasn't having any clear direction. In total starting Yahoo was solving a genuine problem, By providing people with search directory because at those times internet was a lot messy. .
But when web search arrived after that need to directory finished at all since then Yahoo was only wandering. Yahoo did a lot of things but it wasn't best in any thing as a result 90% of their products were beaten by other companies. Yahoo's messenger was beaten by WhatsApp messenger, Yahoo's mail was beaten by Gmail, Yahoo's shopping was beaten by Amazon, Yahoo's answer was beaten by Quora. Yahoo didn't failed due to Google instead it failed due to combination of these 5 things. No.1 – Mediocre products, they were very mediocre products as there were no products for which yahoo can commit of being best. No.2 – Indecisiveness, in simple words not taking any decision as didn't took any decision on took & got very late for the same. No.3 – Lots of competition, when Google came then competition climbed a lot. As Yahoo wasn't only in search & was dealing in many other products & services, .
So actually 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 CEO's in 6 years & in fact some of them made loss for company instead of profit. And such poor leadership gave birth to bad decisions as when leadership is poor then how can the decisions be wise? And in last a company whose valuation was 128 billion dollars at a time, Verizon bought that company for only 4.46 billion dollars. Although even WhatsApp is not totally pure as there's such a dark side of WhatsApp about which hardly anyone knows about. If you want to know that dark side then you can watch this right side video of your screen, Else to know about the secret strategies of Tesla, left side video of your screen is the best.