Number
33
Yahoo! Inc.
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When the Web was still a primitive but tantalizing novelty for the few nerds and hackers clever enough to finagle early access, there was just one way to navigate its already vast and mysterious terrain: Yahoo! The wonderfully odd (yet strangely appropriate) exclamatory moniker quickly came to define the Web’s first “search engine.” It was a straightforward but artfully compiled online directory that attracted experienced as well as novice visitors. They could easily locate any type of site—or any specific one—and travel there instantly by means of a single mouse click. This may sound like standard fare today, but back in the mid-1990s, it was downright amazing.
Meeting a booming demand as it did, Yahoo! grew fast. The company went from a dorm room in 1994, to incorporation in 1995, to initial public offering in 1996. Regional and other highly focused offshoots, such as a kid’s guide, were added regularly. Customer conveniences, including news, sports and business headlines, e-mail and assorted online ser vices, chat rooms and message boards, electronic shopping and auctions, soon followed. Advertisers were signed to pay for it all, while the continually escalating traffic rapidly made it profitable—and even more of a standout in its field.
Today, the Yahoo! brand is one of the most established in cyberspace. Founders Jerry Yang and David Filo have each realized about $7.5 billion from the venture. Their firm, in which they retain active roles, now calls itself “a global Internet communications, commerce, and media corporation.” From headquarters in California and offices in Europe, the Asian Pacific basin, Latin America, and Canada, it serves nearly 50 million Web travelers each month and contracts with about 5,200 advertisers and partners who foot the bills…and then some.
And yet, as Yahoo! and the Internet both prepare for the new century, it is still running hard to maintain its place among powerful competitors, such as AOL and Microsoft. However, that incredibly extensive, and remarkably effective, Web directory still assembled primarily by human editors who apply a logic and execution all their own evolves as mighty new technologies impact its core.
Jerry Yang, born in Taiwan in 1968, moved to the United States 10 years later as part of the first group of immigrants permitted into the country after diplomatic relations were reestablished with China. He, his university professor mother, and younger brother wound up in San Jose. Although the kids were initially at a distinct disadvantage when it came to the language, they excelled at math from their arrival. In short order they also conquered English. By the time Yang graduated from high school he was class valedictorian (as well as student body president). He accepted a scholarship to Stanford, and in four years earned both a bachelor’s and master’s degree in engineering.
David Filo, two years older than Yang, was raised in Louisiana before earning his bachelor’s degree from Tulane. The two met in 1989 when Filo moved to Palo Alto to attend Stanford’s graduate school. Much like Yang, he pursued a Ph.D. in electrical engineering. Learning they shared a passion for sports, in addition to a few more technical pursuits, the pair became more friendly three years later while on a sixmonth academic exchange program in Japan. Upon their return, the campus was abuzz over the newly available World Wide Web and a software application called Mosaic that offered rudimentary access to a seemingly endless sea of computer files. Captivated, Yang and Filo decided to do some work in the new medium.
Their first effort combined Mosaic and a software program they concocted to amass and sort statistical data on players in the National Basketball Association. Yang also designed some early Web sites, including one dedicated to sumo wrestling. After about a year, the two were among those noticing how difficult it had become to negotiate the ever-growing online world. So, starting with a purely academic goal— locating research papers at universities around the globe—they built a program to organize Web sites into appropriate categories. The site they developed to showcase them, originally called Jerry’s Guide to the World Wide Web, went online in April 1994. It was soon renamed Yahoo!, which, according to corporate lore, stands for “Yet Another Hierarchical Officious Oracle.” Just as likely, though, the name was picked because it sounded goofy and had plenty of anti-establishment connotations.
As usage increased, Yang and Filo worked day and night to convert their system into a customized database that could be accessed by even more people. It originally resided on their own workstations—Yang’s “akebono” and Filo’s “konishiki,” (both named after sumo wrestlers). Before long their traffic was straining Stanford’s electronic infrastructure. The two began looking for someplace to relocate, and in early 1995 accepted an offer from Netscape Communications co-founder Marc Andreessen to move their files to larger computers housed at his company’s nearby Mountain View headquarters. To further emphasize that Yahoo! was now a serious business, the company incorporated on March 5 of that year. Along with employee number three, another student named Tim Brady, the founders also put together a business plan and began to seek funding.
One key to Yahoo!’s success, then as now, has been its incorporation of a human touch into the otherwise mechanical process of selecting and categorizing site listings. Another has been its long-standing decision to skip complicated (and computercrashing) graphics in favor of simple (and quick loading) basic text interrupted only by the banner ads that pay the bills. Yang and Filo also suspected from the start that Yahoo! could become much more than a directory or “search engine.” It could, they believed, become a major entry point for all Web visitors. Venture capitalists agreed, and Yahoo! picked up $1 million to put its plan in motion. Tim Koogle, who graduated from Stanford about 15 years before Yang and Filo and then ran a $400 million company called Intermec, met with the pair for a Sunday night interview at a brewpub in Mountain View. He accepted their offer on the spot to become Yahoo!’s CEO.
The team, which remains intact to this day, immediately set about making their company profitable. Nobody knew then whether an advertising-based business was even feasible on the Net, but they tried it for a quarter and it worked. In response, they decided to go public and prove that what they were doing could be very profitable indeed. On April 11, 1996, the company completed its initial public offering and raised an astounding $35.043 million.
Now it was time to see what Yahoo! really could do. Working with a disproportionately small staff—much like most Internet companies—they created features that drove more and more visitors to the site. They added regional and specialized guides, stock quotes and sports scores, recipes, and shopping. They acquired GeoCities, a company that lets individuals create personalized Web sites; Broadcast.com, a broadband technology that allows Yahoo! to transmit original shows such as FinanceVision (a live business program that delivers market news throughout the day); and Online Anywhere, which enables cell phones, Palm Pilots, and other electronic gadgets to access the Web.
As the founders predicted, Yahoo! has indeed become a top Internet portal. Every month, two-thirds of all online visitors click over to the site. Yahoo! has astutely leveraged these visitors by matching the banner ads they see with their personal interests and general demographics. Through such tactics, it has remained profitable since the fourth quarter of 1996. But even as investors clamor for a piece of the action, and its market capitalization tops $90 billion—higher than that of Ford or General Motors—Chief Yahoos! Yang and Filo, and CEO Koogle, must constantly seek new ways to keep it atop the cyber-heap.
The new millenium brought new challenges to Yahoo!, not the least of which accompanied long-time archrival America Online’s blockbuster announcement that it was acquiring Time Warner Inc. and thus creating the world’s largest entertainment and communications conglomerate. But even as other online competitors like Infoseek also teamed up with other traditional media companies such as The Walt Disney Company—providing access to deep economic and content resources, as well as a huge customer base—Yahoo! continued its strategy of partnering with many companies instead of buying a big one. In 1999, for example, it enhanced its e-tailing capabilities by teaming with Kmart to create BlueLight.com and offer online shopping and free Internet access to the brick-and-mortar chain’s millions of shoppers.
Having come somewhat late to online shopping, Yahoo! now pursues it aggressively. Rather than selling merchandise directly, however, it teams up with others (such as Kmart) and charges a fee for all transactions originating from its site. It has also hooked up with Ford to provide online services for the automaker’s future models, and with four specialized firms to tackle the potentially huge arena of business-to-business sales.
The tactics seem to be working, as earnings continue beating analysts’ expectations and share prices remain healthy. The company reported a record 680 million page views per day on average during June 2000, while the number of registered users worldwide passed 156 million. It has moved into new headquarters in Santa Clara, Calif., where the cubicles are splashed with purple and yellow. A classic Ford Fairlane in the same colors sits parked out front, and the conference rooms are all named for flavors of Ben & Jerry’s ice cream.
Like it has throughout its brief but influential history, Yahoo! continues reaching boldly for the future while keeping one foot planted firmly in its goofy, antiestablishment past.