Yahoo! Inc., one of the original pioneers of the Internet, has announced that it was seeking “strategic alternatives.” Translation: Up for sale, at a deep discount. This year will likely mark the end of Yahoo as a stand-alone company, as management dissects the firm and sells off the pieces. How did it come to this?
Back in 1994, an enterprising surfer could actually visit every site on the World Wide Web in a single day. But the Internet was exploding, and two Ph.D. students at Stanford University recognized the need to organize and catalog the ever-growing list of websites. Jerry Yang and David Filo began curating a diectory, “Jerry and David’s Guide to the World Wide Web,” which they soon renamed “Yet Another Hierarchical Officious Oracle” or Yahoo!
Photo — Please put this mug shot of Chris Hopkins of Barnett & Co. in our system to use every other Wednesday when it will run with his column.Yahoo was not the only player but soon dominated the space, attaining a stock market capitalization of $140 billion by 2000. It was at this point that cracks began to develop, as the company lost its footing and made a series of poor decisions.
For its first few years, the database of Internet destinations was maintained by an army of human researchers. Unable to keep up with the geometric expansion, Yahoo recognized the need to replace people with automated search algorithms. Rather than develop its own, the company contracted the work to another relatively unknown startup firm called Google in 2000. That turned out to be a fateful mistake. The company belatedly created its own search engine four years later, practically a generation in Internet years.
In 2005, Yahoo made a fortuitous investment of $1 billion in a Chinese e-commerce company called Alibaba. In 2012, Yahoo sold half of its stake back to Alibaba for $7 billion. The value of those shares today is $26 billion. Oops.