10 years, Yahoo still searching
Filo remembers the days in 1994 when he and fellow Stanford
University doctoral candidate Jerry Yang would get together
with friends to conjure up big ideas for making a business
out of the Internet.
The group batted around ways to sell goods through the
emerging medium, but most of the ideas were scrapped.
After the meetings, Filo and Yang would retreat to a
trailer behind a computer research building on campus
and work on a side hobby that they named "Jerry's
Guide to the World Wide Web," a Web search directory
that would change their lives. A year later it would
be incorporated as Yahoo.
From hobby to commercial Web search directory to online
media powerhouse, Yahoo has endured many changes during
the past decade, riding a largely serendipitous wave
to emerge as one of the most successful progeny of the
dot-com boom. Survival has brought sweet rewards in
the form of booming revenues and profits, and a surging
But in one respect, Yahoo is today much the same company
that was born by accident in 1995.
Although insiders say it's no longer de rigueur to throw
things against the wall just to see what will stick,
the Web portal that wants to be everything to everyone
is still very much in exploratory mode.
"We never thought about Yahoo as one of those ideas,"
Filo said in an interview in advance of the company's
10th anniversary Wednesday. (Co-founders Filo and Yang
now both go by the title of "chief Yahoo.")
"We weren't thinking of Yahoo as a business."
Of its myriad businesses, Web search is the standout,
delivering a significant portion of the company's $3.6
billion in revenue last year.
Unlike rival Google, however, Yahoo is resting its strategy
on a full service approach, delivering as much of the
Web as it makes sense to offer to as many people as
possible. Its dizzying array of offerings run the gamut,
from online job listings to music videos to online dating
services, news, financial tools, instant messaging and
Web-based e-mail, just to name a few.
Much of today's most popular services were built during
the go-go years in the 1990s, when building audience
was the company's objective. The sense of idealistic
entrepreneurialism was also infused throughout the company
in its early days.
"I think we all believed we were going to change
the world, and I think we did," said Ellen Siminoff,
a former senior executive at the company who is now
CEO of Efficient Frontier.
Despite that success, it's no secret that Yahoo CEO
Terry Semel sees search revenue as a means to develop
new products and services. Although it's not certain
what those might be, the goal is crystal clear: Boost
ad sales by keeping Web surfers on Yahoo's services
"Semel has now built the economic base that empowers
him to be more adventurous to move Yahoo towards being
an Internet media company, whatever that turns out to
mean," said David Graves, a former senior executive
at Yahoo and currently CEO of NetcableTV.
Even if Yahoo is still improvising its next moves, former
employees say there is no mistaking the current operation
with the freewheeling days of the past.
Yahoo in its early years operated on the philosophy
that if you build it and it gets lots of clicks, keep
it running. This mentality fostered what most former
Yahoo employees interviewed for this report described
as a bottom-up approach to growing it business. Employees
were expected to foster new ideas, test them and then
"People had a lot more rope to go out and do more
innovative things," said one former Yahoo executive
who requested anonymity. "The downside was you
didn't coordinate with the rest of the company, and
nobody was holding a central road map."
Yahoo grew quickly, rushing toward an IPO in 1996 that
accelerated the dot-com boom when its stock exploded
on the first day and soared straight up from there.
Revenues also began pouring in, jumping from $19 million
to $1.1 billion by 2000.
But by 2001, there were signs that the age of innocence
was coming to a dramatic end. The dot-com stock market
crash in 2000 resulted in an overall drying up of venture
capital money, the main source of funding for the swarm
of Internet start-ups trying to go public. The ripple
effect eventually hit Yahoo, which attributed most of
its advertising revenues to exclusive deals with venture-capital-flush
Facing disenchanted Wall Street analysts, skeptical
reporters and a stock price heading toward an all-time,
single-digit low, Yahoo CEO Tim Koogle resigned. The
board brought in a controversial replacement--Semel,
a former studio head for Warner Bros. who had never
served as CEO of a publicly traded company and had no
While Yahoo's success was built off the backs of Yang
and Filo's search directory, search eventually would
come back to haunt the company. In June 2000, Yahoo
agreed to use Google's Web search technology in its
own search engine. Five years later, Yahoo has paid
a heavy price for Google's ascension. Google has entered
into many of Yahoo's businesses, such as free e-mail,
and Google remains Overture's biggest competitor in
Last quarter, Google reported $1.032 billion in revenue,
just shy of Yahoo's $1.078 billion.
"Search was a focus of the company, but we white-labeled
Google and called it a day," recalled one former
Yahoo executive who spoke on condition of anonymity.
Semel's seminal move, many analysts believe, came in
2003, when Yahoo acquired Overture for $1.7 billion.
Since acquiring the company, Yahoo watched its revenue
soar from $1.6 billion in 2003 to $3.6 billion in 2004.
"The question for Semel's first year and a half
was how to fix it," said NetcableTV CEO Graves.
"Paid search fixed it."
Yahoo's future could reside in new areas of growth that
are harder to break into for competitors but which are
much closer to Semel's expertise. Earlier this year,
Yahoo signed a lease to take over a sprawling office
park in downtown Santa Monica, Calif., in anticipation
of moving most of its content and entertainment operations
into the area.
The company has struck deals with major entertainment
producers such as Mark Burnett of "The Apprentice"
and "Survivor" fame, along with exclusive
rights to distribute two animated films from JibJab.
Both deals were lead by Jim Moloshok, a former Warner
Bros. executive brought in by Semel to strike deals
with Hollywood studios.
The company also hired former ABC executive Lloyd Braun
to head all of Yahoo's media and entertainment properties.
The hiring was considered by observers as another step
for Yahoo to become an online entertainment player,
opening up the possibility of creating their own content
Despite all of these changes, despite all the ups and
downs of the stock and its revenue, Yahoo believes its
roots remain the same.
"We never lost sight that what we knew from our
media background is that advertisers ultimately follow
the eyeballs," Dan Rosensweig, Yahoo's chief operating
officer, said in an interview.