Lessons from Yahoo

How an early pioneer of the internet lost its way…

There is a famous corporate story that back in year 2000, Yahoo was on the verge of acquiring Google for about $3 billion. The deal finally fell through as Google demanded a valuation of $5 billion. Exactly 16 years later, Yahoo was acquired for $4.8 billion. At the same time, Google is the most valuable company on earth and has a market cap of (hold your breath) $740 billion. So where exactly did Yahoo lose the plot?

Losing the mail and search game…

At the peak of the internet boom, Yahoo was the most sought after website with the maximum page views. Hotmail had sold out to Microsoft and it was the only other player of repute in the mail game other than Yahoo. When Google started focusing on the search business, Yahoo almost dismissed it as a negligible opportunity. Over the next few years, Google built its business around its formidable search engine and virtually dominated the web. Yahoo Mail had little by way of unique offerings. In trying to become everything for everyone, the Yahoo mail ended becoming nothing for anyone. Google managed to leverage its search advantage to establish Google Mail (Gmail) as the virtual default email choice. In the case of mail and search, Yahoo was never able to focus sharply and build its value proposition. The result was that Yahoo lost out to Google which soon started to dominate user experience through its Chrome browser.

Losing on Cloud and Social Media…

Around the mid-2000s two new trends were emerging in the technology world. Amazon was driving the Cloud as a central pivot of computing and storage. On the other hand, Facebook was almost inventing the social media arena. Here again, Yahoo missed out on both these trends. Amazon was an early pioneer in seeing the potential value of the cloud and it continues to dominate the global cloud business today. The likes of Microsoft and Google, while losing out on the initial impetus, have managed to make smart progress and become serious players in the Cloud game. On the social media front, Yahoo did have some offerings which were too half-hearted and erratic. With Facebook, Twitter, LinkedIn and Instagram carving a niche for themselves in the social media space, Yahoo had little role to play and eventually phased out most of its social media initiatives.

Yahoo as holding company…

Ironically, Yahoo is not the first internet pioneer to lose the race. Others like Netscape, AOL have all become marginal players in the technology game. What Yahoo may end up becoming is a holding company for its stake in Yahoo Japan and Alibaba. Yahoo has had to pay a huge price for failing to adapt with the times, something Microsoft and Google managed a lot better. ©

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