Past and Potential Future of Yahoo

Business Studies

Yahoo!

Yahoo! is a U.S. based internet firm, known primarily for its' web search engine and related services such as Yahoo Groups, Yahoo Mail and the online publication of news, though Yahoo News. According to Alexa, Yahoo is the forth most popular web site in the world, behind Google, Facebook and YouTube, with 32.7% of its' traffic coming from the U.S. (Alexa, 2014). The firm is moving forward with the ongoing use of digital magazines to gain readers, and its' main source of income is the advertising revenues (Goel, 2014). The question that the company faces from many of the critics is whether or not there is a bright future, when the firm only has a 3.1% share of the digital marketing revenues, compared to Google's 33.24% and Facebook's 5.4% (Efrati, 2013).

When looking at Yahoo, the firm has a mixed history with achievements as well as challenges. The company was started in 1994 by David Filo and Jerry Yang, electrical engineering doctoral students, as "Jerry and David's Guide to the World Wide Web," becoming Yahoo later in the same year (WSJ, 2014). The guide was organized as a directory in a hierarchical format, differentiated from other guides of the times which were searchable indexes (Yahoo, 2014; Angel, 2002). The name yahoo came was an acronym for 'yet another hierarchical officious oracle' (Yahoo, 2014).

The directory was an immediate success, with Jerry and David realizing this business had a strong commercial potential, and in 1995 they incorporated the business, backed by Sequoia Capital, a venture capital firm that had successfully backed firms such as Apple and Cisco (Yahoo, 2014). The initial investment from the venture capital form was almost $2 million (Yahoo, 2014). The second round investors included Reuters, and in 1996 the firm made its initial public offering (IPO) (Yahoo, 2014). In 1996 the firm started to expand the services significantly, launching personalization on Yahoo.com, adopting to the users interests, gaining a first mover advantage (WSJ, 2014). By the end of 1999 the total market value of the firm exceeds $100 million (WSJ, 2014).

It may be argued that in 200 the firm made a mistake which cost them dearly, instead of developing their own search algorithms, they licensed Google's for a period of 4 years; this agreement increased exposure for Google, and many web users started to go straight to Google (WSJ, 2014). By 2001, this mistake, along with the dot com bubble saw the firms' market value plummet to $10 million (WSJ, 2014). The CEO was replaced, and the firm undertook a more aggressive approach towards advertising, in 2003 they partnered with AC Nelson, and increased the services to users, such as Yahoo maps, and start increasing internal content, such as through in house bloggers (WSJ, 2014).

Yahoo has subsequently sought to develop and innovate with the way advertising was supported; in 2004 the firm develop 'behavioral targeting' facilitating advertisers ability to target ads at users based on their behavior, and 'smart ads' started to appear in 2006, where the appearance of an ad could vary depending on both the users behavior and their location. However, the firm fails in a bid to purchase Facebook and was outbid by Google for the purchase of You Tube (WSJ, 2014). In 2008 the firm signs and agreement with Microsoft for an ad-search partnership (WSJ, 21014)