The Story of Yahoo So Far: Part 1

I'm untouchable. Okay, all right, well you know, don't take that as a challenge. Backtracking already. So today we're going to talk about a It's interesting. We're gonna talk about a company that, as Chris was saying before we start recording a few months ago, we might call this like a eulogy for a company that is on its way to to crumbling to pieces. But now there's actually a new hope. I'm wearing my Star Wars lego shirt and

I think that's where he got that fight. Um. So, yeah, this is something that people have brought up on a couple of occasions, and I don't know, we never really talked about it. I think maybe we haven't talked about

it yet simply because it was kind of sad. Yeah, it's the story of Yahoo and and what it is, how it became what it is, and it's it's rocky, rocky past because this is one of those companies where you know, there was a meteoric rise in this company and then a decline and then a sharper decline and then and an era that was marked with lots of of unpredictable change and uncertainty and now wait what Yeah, and then in two thousand twelve, Uh, just as things

were really looking pretty grim, there's now a little optimism at least about the possibility that this company could find it's it's footing again. And it it helps if we actually just start at the very beginning and just kind of work our way to present day. I think, yeah, yeah, and uh, like with many of our tech stories, and that's been people and companies. Um, there are these parallels, these weird uncanny parallels that pop up. So not just parallels,

but relationships as well. Yeah, it's funny because on a podcast where we were talking about a couple other guys in this similar role, We're gonna start this story with two guys who met at Stanford University in California and started a major web property. Yeah, but not that one. Another one. So one of those is David Filo and the other was Jerry Young And uh, I really like the websites original name. Oh, yes it was. It was what was it, Jerry and David's Guide to the world

Wide Web. Yes, that's a that's pretty pretty snappy. Yeah, well, they certain they wouldn't have been able to fit it in that jingle that you were just so accurately singing. Yeah, that would have been very different. I was so off, I don't think I even hit a single note. Thank you anyway. So, yes, Young and Violo at the time, we're both in the PhD program at Stanford University Electrical Engineering. That's correct, and uh, and they decided to start a

personal project. They were both interested in the Worldwide Web, which was still very very young. Yes, you know, they got to remember that the Web, in fact was maybe what like two years old more or less. There wasn't much of the web then, because the Web and the Internet are, of course, are two different things. The Web is built on top of the Internet, so the web is just one way that we access the Internet and

use the Internet well. So a ninety four there were some interesting websites that were around, and most of them were generated by either research facilities or students who were really interested in this new platform. There were a few companies that were kind of dipping their toe in the world Wide Web, but very few at this time. This

was the era where companies. If you you walked into the corporate headquarters of some major company and said, why don't you start a site on the Worldwide Web, you'll be one of the first, and they would go, first, what are you talking about? Second, why would we why would do that? Yeah? Why will we ever spend the time and effort to do that? What would we do there? Because you know, internet commerce didn't exist yet on at

least as far as the Worldwide Web entity. Uh, but you started to see some stuff like the BBS culture, the bulletin board system culture can seep in and and usenet culture as well. So this idea of groups of people who had similar interests forming communities online and building websites or at least a web page that represents that kind of interest, and Young and Filo both found lots of websites really in interesting, and then they started to

kind of curate this for themselves. Originally it was just for them, just for the two of them. Really, they were kind of creating these these categories of websites that they thought were interesting. And as the web grew, as more people began to add content to the web, these categories got larger and larger, so they started to break them into subcategories so that they could easily find content

that related to specific interests. And then they realized that their friends also thought this was a really useful tool, so they began to roll this out as more of a service. An idea of the web is this potentially limitless frontier, which means that all the content you could ever want could exist there, but finding it is going

to be tough. Yahoo, which is ultimately the name that they settled on, would be a service that would allow you to find content it that's relevant to your interests and so that you don't have to just you know, jump out into the World Wide Web and wander around

aimlessly hoping that you find stuff that's relevant to you. Well, again, this was you know, the search engines as we know them now didn't exist at that point, so this was This was one of those things where it just I think it just sort of seemed obvious to them that it was an opportunity. Um, so they dropped out of school, which is important to remember. Don't drop out of your PhD program kids, right, So unless unless you're going to become a multibillionaire. Well they did, they did take a

two million dollar investment. Well, and and they started thinking. They came up with the name Yahoo, which is technically an acronym, is it? Yes? Do you know what it stands for? Yet another hierarchical, officious oracle. Interesting that's according to the Yahoo website, by the way, because I would not have I would not have believed it had I not seen it on Yahoo itself. Okay, well that's that's funny because I read that they were really excited about

its definition. Yes, this is also true. They they I think the acronym was kind of a retroactive sort of thing. They liked the word Yahoo in the sense of the definition of it being kind of an uncouth or rude type of person, as in, as in the phrase get a load of this Yahoo? Yeah serious? Yeah, well I mean these yeah, these are these guys were sort of informal, Well, I mean it was the birth of the web, was

the birth of the web culture. And you know, those early days of the web people often were these guys. They often equate the early days they being people in general so vague. Some people referred to those early days of the webs like the the the digital equivalent of the wild West, like anything goes and no rules were defined yet, so anything was it was possible. Well, if I'm not mistaken, weren't weren't there titles the chief? Yeah, yes,

and uh. And in ninety four they also before they before the company had really become a company, it existed essentially on their own personal machines. Young had his His was named Akabono and Filos was called Konnashiki, and both of these were named after sumo wrestlers. Of course, none of that is a joke, that is all true. This is again informing you behind of the the personalities behind Yahoo and what sort of of thing. Yahoo started off as being versus what it would become, because it had

a very interesting evolution. It started off as this very quirky approach to curating information that's on the web, and I think that had a lot of appeal among people of around around the same age as young and flo and younger really the which age of people that we think of as being really Internet savvy and passionate about the Internet at the time. Back in the early nineties. Um so they start pushing Yahoo and by the fall of ninety four, this is not even a full year, right,

they started in ninety four. By the fall of ninety four, Yahoo had had the word of Yahoo had spread beyond Stanford, and it had become something of a go to site for lots of people. And in the fall of ninety four they had their first million hit day. So yeah, less than a year old, in the early days of the web when most people don't even know what the web is, it had its first day to hit over a million hits. Uh. That actually boils down to about

a hundred thousand unique visitors. So that meant that people would go to Yahoo multiple times in a day. So you know, a unique visitor is one person, that's that's who, that's a unique visitor, right, But a unique visitor can generate multiple hits by visiting the page several times. Uh. So that's the difference between those two. So a hundred thousand people, essentially generating a million hits on Yahoo within

the first year of it being a thing. And in in March, Uh, yeah, who made the step of incorporation so it became an official company. That's when Young and Filo decided to uh skidaddle from the world of academy. And they also hired someone to be the CEO. Yes, because Young and Filo we're not business guys. These guys were electrical engineer students. So they they said, you know, we need to get someone who knows the business side

of running a corporation. We can handle technical stuff like crazy, but you know, when it comes down to actually business decisions, we should get someone who really knows what they're doing. And so they hired a guy named Tim Coogle. And uh he was someone who came from Motorola. He had worked at Motorole. He was also a graduate of Stanford. That will not be the last time we've heard the name of that academic institution before the end of this podcast.

And uh and, like Chris said, they did also secure two million dollars in funding from Sequoia Capital, which, um seems small by today's standards, but you know that was it was a new thing, and the web was a young entity, and uh it was enough to get them going. They actually got a second round of funding in the fall of m and also they hired a guy named Jeffrey Mallett to be the chief operating officer. And Mallett came from Novelle. He was actually out of their consumer

division for a little product called word Perfect. I feel like I've heard of that somewhere, man, Okay, short tangent, just a short tangent people. Word Perfect is to this day my favorite word processing program I've ever used. Specifically, weren't well, We're Perfect five point one was great. We're Perfect four point two is what I cut my teeth on.

As far as word processing goes. It's sad to say that I still can remember the the keyboard shortcuts to do things like bold and underline spell check, and I have to stop myself from doing them whenever I'm using word although I guess technically I think there is a way I can set it so that those old key strokes are the same. You know, you can actually do that with some versions of words. Anyway, I don't dare do that for fear of becoming too dependent upon it. Anyway,

tangent over. So yeah, that that following they get their second round of funding, things are looking pretty good for this young startup. I mean again, it's starting nine looking up UH and in ninety six. I mean, this is lightning fast really when you compare it to some of the other UH tech companies that are out there, like let's say Facebook, for example, April, they launched their I p O initial public offering. At that time, they had forty nine employees and when they launched the I p O,

the stock price was valued at thirteen dollars a share. Now, Yahoo stock has had probably one of the most dramatic histories I've seen for a company that managed to survive some massive, massive problems. So remember this company launches well before the dot com bubble burst, because that that happened in two thousand one. Well, I would say that Yahoo's meteoric rise probably was part of what built the the tech bubble in the first place. It definitely helps itself.

It definitely helped precipitate the bubble bursting because the valuation of Yahoo got out of hand. At its highest from what I can tell, on January third, two thousand, stock was valued Remember it launched at thirteen dollars a share. On January third, two thousand, it was valued at a hundred eighteen dollars seventy five cents a share. Yeah, and keep in mind also that yah Yahoo stock, I think a split five times, so that also is something to keep in mind. But then the lowest it was valued

came just a year later in two thousand one. So in two thousand at its highest one dollars seventy five cents a share, at it's lowest four dollars five cents in two thousand one. That's obviously after the bubble burst, the dot com bubble burst, and this company that was worth a huge amount of money saw that value escape

in just a few months time. Uh. Currently, as of the recording of this podcast, which is in mid August, it's valued at fourteen dollars cents per share, so over what its initial public offering was, but nowhere close to its peak post splits post splits. Yeah, you have to figure that into but a hundred dollars less than at its peak is a big deal. But they were definitely Jerry and David were definitely onto something because within two years of their you know, being engineering students, all of

a sudden, they were multimillionaires, which is pretty cool. Yeah, you gotta you know, getting back to the mid nineties when this I p O goes out, Yeah, they were they were definitely riding high. I mean, their their company was a success, and they continued to build on it. They weren't you know, just curating content. They started to add more services. Um, they created the Yahoo dot com

personalized home page approach, the my Yahoo Yeah approach. So they sort of became one of the earliest portals because you'd get your news and your weather where you were very good. Yeah, a portal being like, you know, your your snapshot view of what is going on on the web and in the world on any given day, so go ahead, portal, you know, like a door. So it

was your door to the internet. Yeah, and this is very similar to what companies had been doing for a while the uh you know, we talked about it in our other podcasts, things like A O L when A O L was doing so you would get your connection to the internet through a O L and a O L would create this portal that was kind of again a snapshot, as a O L saw it, of what was going on in the Web and in the world, and that was your initial introduction to the Internet on

any given day, and then you could explore on your own as much as you liked. But this was sort of a starting point. Well, that's the same thing Yahoo was doing, and it was seeing a lot of early success with that. Yeah, the biggest the biggest difference here was that a O L was still proprietary in its own network and not hooked up to the Internet, while Yahoo was on the Internet itself. Yeah, it was. It

was browser based as opposed to computer based. Yes. And then also they started to introduce something that would become incredibly influential on the web, one of the most uh influential acts ever, I would say, which is that they really were pioneers with web advertising. They became a platform for web ads, and this is kind of the foundation for the way many companies make money using the web.

And there there there are several different ways to generate revenue on the Web, and some of it is involving like commerce, you know, essentially using the as sort of a catalog, the way you could argue Amazon does. Amazon also offers a lot of services that you can subscribe to either as a customer or as a corporate customer. Uh, they generate revenue that way as well, so they it's not just through being sort of a retail or catalog kind of approach. But web advertising is is a major

way that companies make money on the Internet. And Yahoo was again the really the pioneer in those early days of defining what web advertising is. In fact, y'all who would even eventually do studies that would help show a connection between web advertising and real world effects, so in other words, showing that web advertising can have an effect in guiding someone's consumer choices. Well, they were very effective at creating content that would get people to the website.

And it makes sense that, you know, you would be able to go up to a company who might want to advertise and say, look, I I know for a fact I'm going to have people on this page because I get fifty people to visit this page every day, and now you can advertise if you want to pay you one access to at max then uh yeah, and and and that was a powerful story to say, look, we have the we can tell you how many people looked at this, and if your ad is on this page,

people will see it, whereas if you put an ad in a magazine or on a billboard. You don't know if people, if their eyes ever even glanced across it, but we could tell you if they saw it or not, because we know if they came to the page. It's a pretty powerful story. Not everyone bought into it immediately, No, it actually took some time to really get traction. But

once once, there were some early success stories. That was that the right was on the wall, that web advertising was going to be the future for generating revenue on the web. Well, within three years, the total market value of the company was more than a hundred billion dollars, So it made some waves. So so one year before that they went ahead and established Internet guides in Chinese

and in Spanish. So it becomes a global entity. And in fact, we're going to have some interesting discussion about China and a little bit uh. In ninety nine, like like Chris was saying, the valuation of the company was over a hundred billion. That was also the year that Yahoo made two major acquisitions. I think we both of these were in our podcast about some of the bad

deals that have happened. One of them was Geo Cities, which seemed like a brilliant idea at the time, because that's where a lot of people had built home pages, and that was kind of the early days of when people would create a digital presence on the web. This is before blogging, it's before and anything like tumbler or social networks. So at the time, that was kind of how people thought, Oh, well, if I want to create something that's about me, I have to have a website.

Nowadays that's not the case. People use other platforms and then they you know, talk about themselves at length. That way, if you want to hear about me, follow me at John Strickland Twitter. There you go, um, because I'll talk about myself all day long. They also bought another company, and this was probably I think this was this topped

our list of bad deals, which was Broadcast dot Com. Now, Yahoo has a history of looking at ways of marrying other form of media with the web or getting into businesses that are beyond just curating content for the web or even generating content, and that included Broadcast dot Com. H Now, this acquisition did do something, uh, it made Mark Cuban a billionaire. Say it affected the sports the sports world substantially because it gave Mark Cuban enough money

to buy teams and give himself fine for it. It gave money to a real Maverick and then a lot of other matricks to um yeah, the the but but Broadcast, you know y'all, who ultimately was not really able to

do much with broadcast. It did absorb some of the technology that broadcasts had developed into other parts of Yahoo, but broadcast dot Com itself and the identity it had created ceased to be before much longer and it A lot of people cite the Yahoo Broadcast deal as one of the most short sighted, unwise deals, especially when you look at how many users were uh subscribed essentially to broadcast dot Com, because it was one of those deals where the amount of money paid per user was astronomical,

like it would have been cheaper to just go to every single person who had ever visited broadcast dot com and give him a check for a thousand dollars. That would have been less expensive than buying broadcast for what they did U. So yeah, that ninety nine definitely had a couple of questionable acquisitions in it, although again, really we have the benefit of hindsight at the time there was it don't seem quite so silly. Yeah. Again, this is when the bubble still inflating, right, The bubble was

not burst yet. People just thought that the web was limitless as far as not just not just for content, but for the possibility of making money, and that you know, no one really knew where the web was going, but everyone was really excited. So in hindsight we could say like, whoops, bad idea, but at the time no way of knowing. Well, yeah, who actually sort of gave rise to another similar but

not exactly the same type of website. Wow. Yeah, so you're talking about something a meeting that happened in two thousand, aren't you. Well, yes, but I was kind of going to preface that meeting by saying, um, people would visit Yahoo to find other websites. As a matter of fact, for a while, they had a print magazine Yahoo Internet Life. I remember it. You used to be able to see it on the news stand. Um. You know, my as

my father got into, uh getting online. He was a subscriber, so he could find websites, um and uh, and that was that was kind of interesting. One of the nice things about doing things the way Yahoo did was it was done primarily by hand. I mean, people would actually go online see what something was about, maybe give it a little right up, Hey, visited this website. It's kind of neat. You can do this and that and the other thing on it. Uh, but you know that doing

that my hand is time consuming. And this is when we started talking about the search engine UM, which would use primarily software. There were lots of them around that time, like Alta, Vista and hot Bot and UM. Another site started by two guys who met at Stanford University. Side that rhymes was Schmoogle, yes or or Google or Google. Yeah, that wasn't lost on me either. So yeah, Page and Brenn Larry Page and Sir Gay brend Um. So they

started after y'all who did. They started after y'all who did, And they took a different approach y'all who was all about curating data, yes, curating websites and kind of categorizing stuff. Google was a different sort of search engine where it was, you know, you told Google what it was you were looking for, It crawled the web and gave you the results that um that, according to its algorithm, were the most relevant to your search. And there wasn't really human

curation going on. It would just tell you whether or not what you were you found was relevant to what you looked for, right, and Paige and brend had approached Yahoo for with a request for some cash infusions early on in the days of Google. That was one of the different companies that they approached to try and get a little bit of support when they were doing their earlier work. And in two thousand, Yahoo made an interesting decision.

They decided to they they they saw the power of Google's search algorithm, you know, and and they admired it. And so Yahoo paid a licensing fee to Google for an agreement, a deal that would last four years that would allow Yahoo to use Google's search algorithm on Yahoo's site. So beyond just curating content for people by people, they would also use Google search algorithm to search the web for other content that wasn't necessarily something that a human

being had curated for you. And it was a in hindsight kind of a brilliant decision in a way, because it gave them the hour of Google's search and that augmented their human curate curated content and theoretically would bring more people to Yahoo. The only problem was that people started to realize that this Google powered search engine was exactly what they wanted, and some people began to just bypass Yahoo entirely go straight to Google. Google was such

a different experience because y'ah, who again is a portal? Right, you know you've got this this Uh, busy is the wrong word, but elaborate web presentation has lots of different elements to it. Google. We're all familiar with Google's homepage. It is stripped down. It is just the bare necessities, not unattractive, but not cluttered in any anyway or or there's no extraneous information. There's a search bar, there's a logo, and there's just a little bit of text and that's it. Yeah,

it's functional. So people would start to bypass Yahoo goes straight to Google and say, well, you know, I could just go here and find what I need. I remember these days, all right, I remember. I remember the days when I distinctly remember when I was part of a message board. Actually was the Snopes message board. I've been

on Snopes forever. Uh, but I remember people on Snopes saying, you know what, this Google surge engine is so much faster and so much more comprehensive than anything else out there. That's what I use and that's what got me interested in using Google. And that's um, I mean, I very much agreed. And so, Yeah, whose decision to license this technology may also have hurt Yahoo in the long run because people began to discover Google when otherwise they may never have heard of it. And also it you know,

who had sort of created a monster. Yeah, who had sort of you know, they've been a pioneer in the web advertising space. Google showed a fair amount of innovation in that space, uh, and would dominate it in such a way as to frighten everybody else for the rest of time. Yeah, I mean, it's phenomenal what Google did.

Google looked at what Yah who was doing and said, let's apply the same logic we did with our algorithm for search and create a tool that's going to give people who want to advertise on the web way more information and control and and analytics and they've ever had before, and we're going to do it better than anyone else. And that's you know, they you can argue how successful they weren't accomplishing that goal, but they definitely saw results

for one thing, just Google AdWords. They could tell you, hey, you know, we ran this ad, And we found out that if we ran the ad using this word as the trigger as opposed to this word as the trigger, we had a sevent increase in success. Like the like, how did you That's that's insane amount of control for an ad. You know, you've gotten down to the granular, granular level of control where you can scientifically engineer the most powerful AD possible using the material you have. That's

that's a story. That's incredibly powerful. Anyway, So, yeah, who ends up giving this boost to Google because they licensed the technology that will end up hurting them in the long run. A smart move that turns out to be a dumb one as well. In two thousand one, that's when the that's when the bottom fell out. That's the bubble burst. That's when that stock price plummeted from its

all time high to its all time below. I had forgotten too that before the bubble really had burst terribly that Yahoo really kind of had a chance to get eBay, yes, but didn't. Yes. Actually there's a lot of stories about yeah, who having a chance to do something but not doing it. They well that was when they didn't purchase eBay. Yeah, Yeah,

there's gonna be some more didn't down the line. But there's also at that point, so the the valuation of the company went from over one billion to around ten billion. That's enough. Okay, that's still quite a bit of money. Yeah, but still is a huge drop. Shareholders not happy. Well, the companies that didn't survive the dot com crash, by and large had poor business models. They weren't They weren't really based in reality and Yahoo, I mean advertising is

pretty well based in reality. You know, they weren't really suffering. They Yeah, that hurts losing it, you know, nine tenths of your value, But definitely it shook shareholder confidence severely, to the point where Cool ends up resigning. Yeah, and I mean that's not a big surprise. You're talking about such an incredible drop that it would have been amazing had the CEO not resigned and a new CEO steps in. Terry Simmel, who was came from a totally different world.

He did not come from the world of the web or technology. He came from the world of Hollywood. Um. He was a co CEO, which you know, you don't hear that too frequently. There was a co CEO and chairman of a little little media company called Warner Brothers, but not the Warners sister not. Yeah, so he was a co CEO of Warner Brothers. He comes on as the new CEO for Yahoo. Uh you know who also acquires a company called hot Jobs. I remember that. Yeah,

sort of a monster. Um yeah, as an online job posting service where you could search for jobs, uh and and post jobs online. Um so yeah, this was simil There were a lot there was a lot of speculation and a lot of skepticism that he would be able to affectly lead a company when he himself was admittedly not from the technological world. In fact, there were stories about how he didn't use email. I mean, he was just not a technology guy. But he did have an

understanding of how businesses work. Now that was not always, it was not always in a successful endeavor with Yahoo, but he did manage to turn Yahoo around from this this this rock bottom level that they had hit after the bubble burst, and he may manage to keep it afloat. And so in two thousand two he had a meeting with these those those two upstarts who were running Google, the company that was furnishing the search algorithm that Yahoo

was using. And in two thousand. Yeah, they were talking at that time about the possibility of an acquisition and how different would the world be if Yahoo had a acquired Google at that time. I mean, it's it's hard to think about because think about all the stuff Google does that's well beyond just search engines. And if y'all who had acquired Google, would that corporate culture have existed? Would we have would we have a driverless car made

by Google? Would we have you know, Google Project Glass? Yeah, I mean, not to mention just all the other stuff that Google does, Google Docs, and Gmail. I mean, a lot of this stuff would probably have been created at Yahoo in some form or another, but it definitely would have taken a different path. Well, Brin and Page could not come to any agreement with Simul, and that was partially because it was really hard to value Google. And it all depends on who you ask. How much money

was offered. I heard one billion, but then Page and Brand asked for three billion. I also heard that there was a three billion offer, but Page and Brend then said five billion. So it almost sounds Page and Brand kind of just didn't want to sell, like they felt that that was that might be the wrong choice. And then there's also the argument of maybe they were just trying to feel out how much their company was worth.

I don't know that all the details, and in fact, a lot of the information I found what conflicted with other information I found, So it's just speculation on my part at this point. But ultimately Yahoo did not purchase Google, and I know there was an entire article and Wired that said that that was the biggest mistake that Semil made throughout his tenure at Yeah. It was that he

did not jump on the chance of acquiring Google. Because Google continued to grow in popularity and in fact would ultimately dominate web search, and Yahoo's share of the web search market would start to shrink as Google's began to be the entire, the vast majority of web search. All the other little web search engines out there, we're reduced to just the tiniest user bases in comparison, at least in the United States. Yeah, yeah, in the units, that's

a good qualifier in the United States. You know, occasionally we believe it or not, we we go on a little long about subjects, and I think that's so, and that actually was the case with this episode on Yahoo. We ended up with so much material that we ended up splitting it into two episodes, um, which we didn't know at the time, so surprised, but UM yeah, so we're gonna wrap it up here and uh and you can tune in for our second episode on on Yahoo in the two thousand's um, so, so make sure to

tune in for that. Yeah, and if you have any suggestions for future topics that Chris and I should tackle and other episodes of tech Stuff, perhaps other topics so large. After we record it, we realized that's too long for any human being to endure. Let's split that up again. Us. Know, you can send us a message on Facebook for Twitter, are handled? There is tech Stuff hsw or shoot us an email or address is tech Stuff at Discovery dot com and Chris and I will talk to you again

about Yeah. Who is it turns out really soon for more on this and thousands of other topics. Is it how Stuff works dot Com Brought to you by the reinvented two thousand twelve camera. It's ready, are you