The Story of Yahoo: Part 2

it about Yahoo. Yes, and it was an epic episode, the longest we had ever recorded up to that point, which is saying something because I think our longest one before that was an hour and seven minutes long. Yeah, So we decided maybe we shouldn't inflict a gigantic episode on everyone, you know. We thought that maybe we should spare people and split that into two episodes and make it a little easier to digest. So we have done that.

And uh, in our previous episode, if you if you're just joining us for the very first time, the episode immediately preceding this one, we've talked about the founding of Yahoo, how it started as a company, very much like a couple of other notable companies, in the search engine world, and how it went from a tiny to man operation to quickly escalate into a force to be reckoned with on the web, especially in the advertising world, which is exactly where we were as we were letting off at

the very end of that episode, and we're gonna pick up in two thousand three and Yahoo's pioneering work in online advertising. So in two thousand three, Yahoo begins to work at proving that the online advertising model does in fact work and actually shows that there are real world effects from online advertising. And they also launched some new products like Yahoo Maps launch it launched in that year,

as well as some chat rooms. And that's when Yaho began to go beyond curating content and went to content generation. They began to hire bloggers and journalists to write content exclusively for Yahoo. So Yahoo again continuing to be a portal to the web, but now not just finding cool information out there and cool stories to share, but generating them. Yeah.

At the time too, they also started reaching out to the uh meat space, if you will, in addition to cyberspace for advertising purposes too, because they started working with the um major advertising companies that weren't advertising online, so they were you know, basically sort of doing partnerships with with people in the real world, so not just online. Um. And then you know who has always been, as we said earlier, at the forefront of advertising online and they

started in two thousand four to look at behavioral targeting. Yes, so basically this is when we start talking about things like cookies that track what you do. Well, hey, he went to a website from a car manufacturer. Maybe he's shopping for a car car ad, Let's deliver an AD that's for a car. Yeah. This is a the very early days of targeted advertising, which has become something of a science today, but at the at that moment, was

really a new idea. And again yeah, who was a pioneer in this space, you know, just as they were with web advertising in general, and um, it was you know, it was a powerful tool, you know, saying that, well, not only can we deliver your ad to X number of people, but we can deliver it to x number of people who are specifically interested in what you have to offer, Like these are people who are actively shopping

for a product that you happen to make. So if you want them to go to your site, why don't you advertise with us. Yeah. I got even creepier a couple of years later too, and they started getting into the the the location base exactly, and that was when we all started going, wait, how did you know? I'm in Dallas? So now it's now now it's not just what I do, but where I live. So now you can actually advertise a local business as opposed to just some national chain that happens to offer whatever it is

I'm looking for. And that doesn't sound like much to you the end user, or maybe not as much because you're going, oh, hey, that's kind of cool. They advertised for the business just down the street, but for the business just down the street, especially small businesses, um the money and and advertising small businesses to local people um

rivals that of sending ads out nationwide. In fact, probably just I don't know the numbers, but I would guess that it may even dwarf that amount because you have people willing to spend locally and if they can reach their local customers online, that's really cool, and people are willing to pay for that. Yep. And in two thousand four, that's when they created some you know that they had

hired the bloggers and journalists. Well, in two thousand and four, they started launching news and sports and entertainment UH sections on their page where that had stories written by these bloggers and journalists. It's also when their deal with Google was up in two thousand four that that four year deal was had expired and instead of renewing the license, Yahoo chose to employ a company called ink Tony to

create a new search algorithm. So they had been behind one of the other UH major search engines online, but it you know, hadn't been as successful as say Google. Yeah, so Yahoo decides to cut ties with Google get tell Me to to provide the the horsepower for their search algorithm.

And they also hired ABC executive named Lloyd Brown or Lloyd Braun if you prefer to uh to head the media operations arm of Yahoo because at this point they're still looking at getting into producing media outside the web, like they were looking at potentially doing you know, media production in the form of movies or perhaps television. Because again, you know, they're their CEO came from that world. He was a Hollywood executive, and there didn't seem to be

any reason why they couldn't get into that. But that particular arm of Yahoo's business. Let's say it failed to get traction. You could also say it flopped miserably but failed to get traction. Is is probably the nicer way of saying it. One of the nice things about being accompany the size of Yahoo back at that time was that you had lots of people and lots of money and you try. Yes, you had the you had the

luxury of failure. You could you could afford to fail at something, but you know, you know, you could take big chances and if they paid off, that's awesome, and if they didn't, you could absorb it um to a point. So in two thousand five, that's when the first major scandal, UH that involved Yah whose presence in China starts to unravel. And this would actually take place over the next few years.

And the story is pretty grim. Um. The story is that, Okay, so the government in China is let's say it can be a little invasive, okay, and that the government of China wanted to be able to monitor what citizens were using the internet to to do, like what they were what they were accessing online. And yeah, who had a presence in China, know, So the government said, we want to be able to access your information to find out what people in China are searching for and what they're

looking at on Yahoo. And Yahoo apparently complied with that request, which would lead organizations like the World Organization for Human Rights to protest and ultimately sue Yahoo, stating that essentially what Yahoo had managed to do was be complicit in human rights violations of Chinese citizens by giving the Chinese

government private information. Yahoo's response was that it was a global company and that it would have to comply with whatever local laws were in place in whichever regions Yahoo operated. So it's a it's a complicated issue. On the one hand, you've got a company that's trying to do business in another country, and in to do business, it has to follow the laws of that country. On the other hand, you have human rights issues, which many people would argue

transcend the law. And what do you do when you are a business? Yeah, yeah, and it's uh, you know, it was done in the in the name of doing business in China, and which is an enormous market, and it's it's impossible to ignore because there's so many people who live there m and they're also enormous competitors there as well. Um Ali Baba for one, which has a

relationship with Yahoo. Um, so yeah, I mean Google. I mean well, I mean Google too, as I also had conflicts with the Chinese government and publicized ways and and that the two companies have had to endure. Um, questions from shareholders and questions from the public. A lot of scrutiny. You've got. On the one Hey, you've got the business side where people are saying, hey, I'm investing in you,

and I want to return on my investment. On the other side, you've got people saying, hey, do the right thing, don't don't perform actions that are going to lead to suffering. And uh and Google and Yah who had two different approaches to this this problem. Not not that either of them were necessarily uh perfectly ethical or unethical. You know, they were different approaches, and there was there's a spectrum there.

And and frankly, I can tell you I would hate to be an executive having to make these decisions because you know, you have responsibilities as a human being and you have responsibilities as a business owner. And sometimes those

responsibilities don't overlap in a nice vind diagram. That's that's true. Um. And one of the arguments I've heard for doing business in China for these companies is that, um, it does open people's world up to a lot of information that they may not have had otherwise, can stretch people's minds and maybe make them more open. If the problem is that access to that information also leads to their imprisonment or otherwise harassment from the Chinese government, then there's uh

that issue as well. Yeah. Now, frankly, if I have to come down on a side, I would say that I don't like what Yah who did. I mean, I personally, as a just my own personal opinion, I value human rights over that. But I was not in that position, and I cannot honestly say how I would have acted had I been in that position. And thank I'm thankful I've never been in that position because I can't imagine

what that stress would be like. Also, in that year less controversial, Yeah who bought a photo sharing site called Flicker. Hm hmm, I seem to remember them. That's one of the one of the stories where Yahoo actually I think I saw a more success than Schmoogle did. No Google had had photos Google and Picasa just doesn't have have

the same same presence as Flicker. Now Granted today even Flicker isn't necessarily as big a name when you have photos sharing services out there like Instagram or even stuff like Facebook or Google Plus, which Google Plus is built on top of other services like Picasa. But that's you know, it's an evolution. Uh So, Yeah, that was That was two thousand fives, big year for y'all. Who tough year

with the whole China story starting to unravel. Now, granted that would continue, like I said, for a couple of years with the lawsuit really coming to a head in two thousand seven. Um in two thousan two thousand six, Yahoo and uh and Schmoogle got into a little big war. Yeah, that's that's true. And and this is I don't know why I keep saying Smoogle other than that I just like saying it. Okay, but Google obviously, if you think back,

I mean, this is six years ago now. As as of the time we're recording this, Yahoo was still very much an Internet giant. They were still one of the big big players, and then they kind of still are now. But I don't think people think of them that way

like they did in two thousand six. To get a lot of visitors, but man, the drama behind the website has has sort of eclipsed the site itself, and I think I would argue that the stuff, some of the things that happened in two thousand six are especially painful in the light of what's happened to all of the players since then. So yes, uh, Yahoo and Schmoogle go to war over a video sharing website, yes, uh you may have heard of it, a fairly young one at

the time, Yes, YouTube. Yeah. So Yahoo was a potential owner of YouTube. They they tried to purchase the company, and Google ended up outbidding them essentially yea. And so you think of how different the world would be if that had happened. Well, um, you know it a way you think about it, you sort of take take the

your current feelings about all the companies out. It's sort of fit more with Yahoo's uh package of services more so than Google, yah, because who was already in the They were the content people, yeah, content curation and creation um, and Google was more I mean they hadn't released a lot of their other products, so they were still very search engine. They were all web advertising and search engine

that was their business. But you know, the world was turning social that's that's why you had sites like Flicker and and YouTube, and there were all these new social websites like this, this other company that that. Yeah, who tried to purchase You may have heard of it. It sort of decided to go it alone, but at the time they looked like they might be a takeover time. Um no, but it does start with an oh uh flick. No,

they bought Flicker Facebook, that's the one. Wow. Yeah. And then it's one of those things where I went back over it and I remembered that this had happened and went, Wow, what if that had happened that two thousand six big year. Yeah, I remembered that happening. I didn't have the year for it. So ye, getting the traffic that they might have gotten from Facebook and or YouTube would have well, yeah, because their their market share for search at that point had

hit a pretty low point. They had fallen to the market and Google was at so you know, this is just six years after Google had come to Yahoo asking for money, and now they were, you know, really just thrashing them in the in the search engine space. And at that point Semuel decided to kind of clean house and he sort of he re organized a lot of the top level executives at Yahoo, which UH was sort of a stop gap measure. As it turns out, one of those people who left was Lloyd Brown, the guy

who was in charge of that media group. He left in in two thousand and six, so you know ultimately that that media operations UH initiative never went anywhere. It was only two years running before he had left. UM. But that leads us into two thousand seven, which is when the CEO resigns, and that was partly due to pressure being put on him by shareholders who were not happy with how much he was making versus how slowly the company was growing. And UM, actually we should point

that out. He was his salary was not that big. Um it was a dollar a year. Now when he at its height, he was making six hundreds thousand dollars a year on his salary, but by the time of two thousand seven, it was officially one dollar per year. Now, granted he had a had a few stock options, yeah, like seventy million dollars worth. UM, So don't feel too sorry for Yeah, it's not like he wasn't being compensated. It's just that his official salary was just a dollar,

so he steps down, and Young ends up. Jerry Young steps in and becomes the CEO, and UM and they hire Susan Decker to become the president of Yahoo. And UH. Also, Yahoo entered a bidding war with Google this you know, this happens every couple of years, apparently, UH this time to purchase an ad firm called Double Click, which you will probably recognize as one of the biggest advertising firms online.

All right, so now you get the guests. Who wins the bidding war And here's a hint, it wasn't Yahoo. So once again, at this point, Yahoo's playing the part of Indiana Jones and Google is playing the part of Bellach who every time Indiana Jones gets something in his grasp, Belloc swoops in and steals it. There's nothing you can possess that I cannot take away. He's left except that Bellock actually, you know, does much better in this than in this, in this scenario than he did and raised

the lust art. As far as I know, he doesn't melt in this scenario. Google seems to be pretty solid still, yep, yep. Well, people thought Yahoo was starting to fail and not be so not not be so solid itself, having a CEO, having a CEO resign because of shareholder pressure, and then be replaced by someone who is not a business guy. You know. Young wasn't Again, he was not known as a business leader. He was known as a techno technology expert.

So there was a confidence in Yeah, who was beginning to wane, well, not beginning, it was continuing to wane, probably in an accelerated rate. Yeah, and so somebody decided now might be a really good time to UH make an offer. Now granted a company behind the scenes, there had been offers made already between this company and Yahoo, but in uh in two thousand and eight, that's when I publicized a well publicized offer was extended to Yahoo

but ultimately not accepted. And that offer came from Microsoft. Yes, Microsoft got down on one knee in front of everybody at a sport sporting match and got on the big JumboTron and said, will you accept my bid? This is two thousand and eight, we're talking Steve Bomber Bomber strode in and eight three Yahoo employees and then said I will give you forty five million dollars for this joint that's billion with a B. Yeah, it was a billion billion, but Yahoo said, no, yeah, that was that was you

undervalue us. Go back and try again. I don't Yeah, it was that's wait, no, we'd like to partner with you for search, because Microsoft was coming up with the new type of search to replace their old type of search. Except you know, I think at first it wasn't being right, but it became being It wasn't long after that. And I imagine I think live search originally right, originally, yeah, but I think I think, uh, well, put it this way. If you're in on those talks, they say, hey, you

know we got this bing thing coming up. Yeah. Well in two thousand nine, uh yeah, so so yeah, they enter, they enter into a business relationship in the sense that Microsoft ends up partnering with Yahoo. Yeah, a long term business partnership, right, um, which we'll get into that. Uh. But in two thousand nine, another another tough year. Uh yeah,

who ends up shutting down geo cities. Yeah, so geo cities no longer a thing, millions of people lose their animated gifts and and yeah looping minis Oh man, I do not miss those days. Um and Young steps down as CEO because again, shareholder pressure was growing. I mean, he I remember those days too. There was a lot of criticism directed at Yahoo, and some of it was directed at not giving young a chance. But I mean, there's there are a lot there was a lot of

stress on both sides. And so, yeah, who ends up hiring Carol Bart's former head of former head of Autodesk. She did very well over there. She was known as a sort of a you know, a very ambitious, no nonsense, very savvy businesswoman, and that she might be the leader that they need. And she was willing to make some pretty big changes, some pretty drastic changes, uh the name of saving the company. And not all of the decisions were popular ones which would end up becoming coming back

to haunt her later. And you can argue whether or not her decisions were good ones or not, but they certainly weren't popular among the board. Um. And and also I think there was there's an argument to be made of short term versus long term results, and that a lot of the changes she was making were changes that if they were successful, we're going to take some time to pay off. And there's a problem in the world of business that if you don't get short term returns quickly,

you run the risk of alienating your supporters and foreshadow. Yeah. So in two thousand and ten, the company, a lot of people would say that, yeah, who was in decline. It is raking in a billion dollars of revenue a year, and somehow that's still in decline. I mean it's not it's not growing assass as it needs to essentially, it's what that boils down to. Yeah, but they still had

hundreds of millions of visitors. There's still one of the top visited websites on the entire web, which is even now you know, you think about that like it's it's gendering revenue, it's getting lots of eyeballs on the site, and yet it's still being considered a failure, which is you know, if you're comparing it with itself, right, it's more to do with the Yeah, it's more to do with what's going on behind the scenes that any of

its actual performance in the market. Although you could still say, well, yeah, but look it's it's search shares dismal compared to Google. Well, people, I think the thing is too for for public companies. People have a certain expectation to shareholders say Okay, you've made million dollars a year for the last ten years. When are you getting into six hundred million? You know

that it staying the same is not good enough. That people expect innovation, new to rules, new services, new growth, and even when you're doing great, you know, hey by by a lot of companies, UH standards, that would have been plenty of money. But for for Yahoo, people expected it to continue to grow, and so that was the problem. Two thousand eleven, things come to a head and the board of directors decides to fire Carol Barts. So she had some choice words for them. Yeah, some some ones

that we can't repeat on this podcast. This is a family friendly show. Um, Carol Bart's outspoken woman, very very blunt, and she was She was actually quite blunt about the

what happened with her being fired. She said it was she was fired over the phone, as I recall, right, I think it wasn't even in an in an in person meeting, and that she was very critical of the board of directors for Yahoo and was Um, she definitely had some choice words to say, most of them not repeatable on this podcast about her experience and uh, the

critical problems as far as the board was concerned. Include the fact that the sales growth had stagnated, that add sales growth was not not growing at the rate they wanted, and they felt that the deal that they had struck with Microsoft wasn't helping enough. That this this deal that was supposed to be a big benefit to both companies did not seem to be helping Yahoo the way it was supposed to, and so therefore it was a bad

business decision. Um bad business. So Barnes leaves and Tim Morse, who was the chief financial officer at the time, he steps in to serve as the interim CEO until they can find a permanent replacement. Permanent being um more than five minutes, yeah, but less fewer than thirty one days. As it turns out, Yeah, permanent is uh is Your mileage may vary for the value of the word permanent, because the next CEO hired in was Scott Thompson, who was a member of the popular UH comedy troupe Kids

in the Hall with Kevin McDonald and Thompson. Oh, all of my research is wrong. Now this is the president of eBay's PayPal group. Oh oh wait, no, I do have this information. Okay, So, apart from creating create funny characters like buddy, Uh this guy was I'm just kidding. I'm kidding, it's not that Scott Thompson. Fine, he he steps in, he becomes the new CEO, and at that that same time, or around that same time, Young actually

resigns from the board of directors. So he had not been CEO for a while, but now he actually kind of divorces himself from the company and says that it's his time to go and pursue interests that have nothing to do with you. Who so I washed my hands of you. Yeah, the co founder walks away. Uh. So

Scott Thompson becomes the new head of the company. And then by April of this year, the year we're recording this podcast, Yahoo comes out and says it's going to have to make some pretty drastic job cuts its workforce two thousand employees. Now remember back when it launched this ipo, there were forty nine of them. Now two thousand people

are at least two thousand people are going to get cut. Um. He also Thompson says that he will split Yahoo into three different operating groups, one of which is will oversee the media websites. That's essentially the consumer group, one that's

called the region group, which is responsible for revenue. And the third operating group is technology, which would be all the the systems running in the background that power Yahoo and UH and trying to develop those so that yeah, who can be competitive and not necessarily rely on licensing deals with other companies. Um. So he makes those those announcements in April, and then in May, Thompson has his own scandal to deal with. Yeah. I remember we were

talking about how shareholders expect certain things from the company. Well, one of the shareholders was a company called Third Point, Yeah, and a hedge fund, And the thing that they expected was that the biographical information of the CEO was accurate and that the degrees that he claimed he held he actually held, which is it turns out was not so much the case. Yeah, that that was tiny problem was that Thompson had on There was a securities filing that

listed one of Thompson's achievements was a degree in computer science. Uh. It's turns out to be a fictional degree due to an inadvertent error, according to Yahoo. Yeah, Yeah, whose claim was that it was just a mistake, like someone had just mistakenly attributed this degree in computer science to Thompson, and that that was it was an innocent mistake. It was not intentional. They weren't trying to mislead anyone. Third

Point was having none of it. Yeah, he does, in fact have a bachelor's in accounting, accounting different science or two different disciplines. As it turns out, can't account for that. Um, you're an accountant, account for yourself. So yeah, and his number was up because with six percent of the shares, h third Point was really pushing hard. And this wasn't someone who owns a single share of Yahoo. This was someone this was a company that Cloud had enough clout

to to at least raise a ruckus. Yeah, and they said we want to see Yeah, a ruckus is rationanigans can be called. And then it's get up the brooms. And he said, we want to see all of his credentials. We want a senior credentials. Yeah. And eventually Thompson actually eventually, not days later, Thompson agrees to resign from the position of CEO, and in fact there was some evidence to show that he was. The error wasn't inadvertent. Yeah, the

error was not an error. It was a calculated misstatement or a misstatement of the facts, or a fabrication if you prefer. There are a lot of different words we could use. Um, a fib would be another one we could mention. So yeah, yeah, he he got defibrillated and uh. And so from the time he became CEO to the day he resigned, that span of time was a hundred and thirty days. So uh. At that point, a man named Ross Levinson, who was the media group head, became

the interim CEO until they could find a replacement. And then in July of two thousand twelve, that replacement was named. And that is one of the stories that has given people a new hope. Another Star Wars reference again, Uh for Yahoo and that that new CEO Marissa Meyer, who was coming from the company that had given you who so many headaches in the past. Google. Yes, she, in fact, she was an employee number twenty. Yes, she graduated from wait for it, Stanford University. She's got a degree in

symbolic systems and a master's in computer science. This now Marissa Meyer. I've listened to her speak. We have videos about of Marissa Meyer on the Curiosity website because she's one of the experts that we have consulted for the Curiosity project. Marissa Meyer is she knows her stuff. I mean, incredibly intelligent, very well spoken, very charismatic person. So she's not just well versed in the technology that is the

foundation for today's web, she's also a people person. I mean she she has a charisma that some computer scientists, the stereotypical computer scientist might not necessarily possess. Uh yeah, perhaps, well, she was employee number twenty at Google and and had her choice. She had a smart gest board of offers waiting for her when she finished. She was and she was the first female engineer at Google, the very first

female engineer to work for Google, employee number twenty. She specialized if you want to know what her specialization was when she got these degrees, artificial intelligence. Interesting. I mean, and here's another thing she is. She's a month older than I am. One month. She is now the CEO of YAH who she holds these degrees. She is by far wicked, smart, way smarter than I am. And uh and I am. I have nothing but admiration for her.

Her accomplishments are phenomenal, and her her span of knowledge in her field is amazing to me. Yeah, she she has her work cut out for Frankly, but and some people have said that she is a little difficult to work with at times. But she's also the youngest CEO of a fortune company. She's you know, she's There are some people who say she's not tested in a leadership role of the scope, which you could. I mean, that's true. She has not had a leadership role of this size.

She's headed some major departments within Google. Uh she headed the search products and the User Experience department. She also then headed the local maps and Location services department, but she's never led an entire company, let alone a company that has had as public a history of problems and

issues as Yahoo. So there's it's not not to say that she is going to turn everything around and that she has the magic pill that's going to cure Yahoo's ills and make it a power player in the technology space again. But I've seen a lot more optimism, cautious optimism about Yahoo than I have in years. Oh. Absolutely, absolutely, Well, immediately after coming in and keep in mind, this happened in July. We're recording this in mid August, so she's been on the job about a month more or less,

and um. She immediately came in and began making changes to the corporate to the corporate culture there. She also made an announcement that got people uh talking in the sense of wow, she just became CEO and she's going to be on maternity leave before too long. It turns out she's priggers. Um but uh and yes, but people buy and large it's it's funny because uh. With as much scrutiny as Yahoo's ceo s have received over the past few years, Um, there is the question on many

news sites going can she pull this off? She's having a baby, And by and large they were the answers i've seen are yes, now, let's move on. That's why are you like worried about that? That's you know, well and well, some people might say that that would affect your judgment on what if you decide you want to stay home with the kid. Most people I've read about seem to think that she is absolutely capable of separating her work life from her home life and coming into

to Yahoo every day and making a differences. She seems like she's already taken charge pretty well. I think I think most of the doubts there. There are too possible sources for those doubts. One is just that Yahoo has had so tumultuous recent past and it's hard to think of anyone getting a grip on that and and getting things to calm down and turn around. Uh. And the other is a little bit more of a sexist opinion. I think that I don't really I think it's I

think it's uh immaterial, and I think that applies necessarily. Okay, well, there's maybe this is because I happened to work we both Chris and I work with some amazing women at How Stuff Works, some incredibly talented writers, editors, developers, some of whom are moms, some of many of whom are moms, and all of whom do a phenomenal job. So when you have that experience day to day, you're like, I

don't understand your question. Well, it's uh, Marissa Meyer is definitely a strong person for the role, uh, no matter no matter what other personal things are going on in her life. And I really don't think she's going to intentionally let the company, and I think she's a good person to lead them through the change. That's my personal opinion. So, um, I'm kind of excited. I'm one of those people who

likes to see competition out there. I think, YEAHO has a chance to uh to reinvent itself and stay relevant um in the years going forward and compete with with players like Facebook and Google on different fronts. So um, I'm I'm excited to see that they have a person

like her in charge. Yeah, yeah, definitely, and it will you know, it's gonna take some time for us to see how this shakes out and whether or not it ultimately pays off, but you know, it's it's nice to see some optimism for a change, so even if it

is of the cautious variety. So we will keep our eyes on the developments of Yahoo and maybe who knows, maybe uh in in a couple hundred episodes, we will revisit the company and have a whole new set of story used to tell about what has happened and some of the shenanigans and brooms that go on behind the scenes. And then the next six CEOs. Yeah yeah, that was five CEOs. Five years is rough? Uh All right, guys,

Well that wraps up this discussion about Yahoo. If you have suggestions for topics we should cover in future episodes of tech Stuff. You can contact us through email. Our address is tex Stuff at Discovery dot com, or let us know on Facebook or Twitter. Our handle at both of those locations is text Stuff, H. S. W and Chris and I will talk to you again really soon. For more on this and thousands of other topics. Is it how stuff works dot Com. Brought to you by

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