The Downfall of Yahoo

I vaguely remember about Yahoo’s golden time (end of the 90s — 2000s), and I’m pretty sure I never had a Yahoo’s email account since I was born in the 90s (when Yahoo has its best year I was a kid turned to teenager) and I was never allowed nor did I have a resource (back then, internet is pricy compared to now) to use internet freely. So basically the only giant search engine & email account I know and I am used to is Google, which indirectly holds a large role in the downfall of Yahoo.

So, it makes me wonder, why did Yahoo fall so hard? How could a company which was such an internet darling become something that no one hardly use now? Losing from Google, which used to be a lot of smaller than them (Yahoo is already a valuable company when Google started). When I found out about this from my social media (either someone tweeted/facebook-ing about this):

My initial thought was:

Today must have been the result of years and years of poor decision making.

But why did this happen? What is the underlying reason of the decisions? So let’s try to walk through those years:

1998: Yahoo — Google Part 1

From what I heard, Yahoo was doing pretty well back then. Yahoo stood out from its early competitors such as Altavista & Looksmart. Up until now, search engine come and go, but Yahoo remains the same, still become one of the most popular search engine. Aside from its search engine, Yahoo already made a name on media content such as news and email.

Meanwhile, Google has only just started. Google was only meant to be a research project by Larry Page and Sergey Bin, nobody knows it could grow to something more. I get it why Yahoo refused to buy Google for $1 million because it was a gambling situation. Google wasn’t like the Google today and spending $1 million for a relatively new company is a very risky move. It is a logical decision.

2002: Yahoo — Google Part 2

In 2002, Yahoo gave $3 billion bid to Google, but nothing happened after Google made a counteroffer of $5 billion. It was two years before Google went to public. It was more than a decade before Alphabet (Google’s Parent Company) become the world’s most valuable business and around $568 billion.

For Google, it was a fair counter offer. Staff of Terry Semel (Yahoo’s then CEO) told the CEO that Google actually worth at least $5 billion. In my humble opinion, I believe this is a poor decision making. Eventhough Google’s revenue back then was only $240 million a year and Yahoo’s was about $837 million, quoting from Wired, the deal between Yahoo & Google would be a merger of equals, not a purchase because of “with Yahoo’s stock price still hovering at a bubble-busted $7 a share, a $5 billion purchase price would essentially mean that Yahoo would have to spend its entire market value to swing the deal.”

2008: Yahoo — Microsoft

Microsoft approached Yahoo in 2008 in their effort to compete with Google. Jerry Yang, who also Yahoo’s co founder, was the CEO of Yahoo at the moment. Yahoo didn’t bluntly decline the offer, Yahoo just had not moved toward accepting Microsoft offer for like months.

Microsoft’s offer (which is to acquire all the outstanding shares of Yahoo common stock for per share consideration of $31 representing a total equity value of approximately $44.6 billion) didn’t meet the expectation of Yahoo’s demand (Yahoo would not accept an offer below $37 a share). Back in 2008 I had just entered high school so I didn’t notice nor care about any of this, but when I was rereading the article from 2008 regarding this topic, it got me thinking. I do understand why Yahoo declined the offer, but on the other hand I also feel it is such a waste that the deal between this two didn’t happen.

In 2008, Google is already growing into powerful company and beat Yahoo in the term of search engine. Microsoft offer was basically an invitation to join forces to create technological powerhouse that capable to compete with Google. To be fair, Yahoo is Yahoo, it used to own the internet, so I could understand if there were parties who refused to see Yahoo only as an unit/part of Microsoft. But hey, Microsoft’s offer was generous enough. Microsoft 1st offer ($31 per share) was far above the closing stock price back then ($19.18).

And it all came down to this moment when:

In July 2016, Verizon winning the bidding war for Yahoo, defeat AT & T, Facebook and Google (funny how time flies and change things, right? Almost 30 years ago it was Yahoo who tried to buy Google). Yahoo is finally sold out at $4.8 billion to Verizon.

Many might blame Marissa Mayer — the recent CEO of Yahoo — and her weak leadership. I slightly agree with that opinion. However we have to realize this, Yahoo was already in dangerous position. She came to fulfill the hope to save Yahoo. But she couldn’t. Yes, she made a poor decision such as acquiring and buying several startups (oke oke, several is not the correct word. She bought & acquired 41 startup) who now we never heard anymore and didn’t make a significant revenue to Yahoo, but Yahoo is about to become shipwreck even before Mayer’s arrival, so we can’t put all the blame to her.

After analyzing these facts, I realize Yahoo mistakes weren’t because of the series of poor decision making. Out of 3 things above, the only time I am certain enough to tell that Yahoo made a poor decision was when Yahoo walked away after Google gave $5 billion counter bid. Hopefully this is not the end of Yahoo, and accepting the offer from Verizon could be the best decision and turnover for Yahoo.

What do you guys think? Did you think Verizon is wise to acquire Yahoo? Could Yahoo have done any better? Let me know.

Taken from my linkedin post:

https://www.linkedin.com/pulse/downfall-yahoo-gisela-semen?trk=prof-post

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.